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Retention is in the details - Relational vs transactional commerce

The key to any long lasting relationship is good communication. Business relationships, friendships, marriages – you name it. Learning how to properly communicate so that thoughts and feelings are understood and validated is key.

Traditionally, businesses operate under a transactional relationship model with their customers – the primary goal is to advertise, attract visitors, nurture through a sales funnel, and convert. Once that conversion is made, all attention is shifted to the next customer. If businesses can do that enough times, they become profitable.

With DTC businesses, and specifically Shopify subscription first businesses, the best brands are embracing the shift towards relational commerce. While the initial goal is still a purchase, the nature of subscriptions keeps the line of communications open.

Connecting with your customers, forming a bond, and creating a sense of community is now paramount to running a successful business. Big companies have developed entire branded communities around loyal customers using their products, such as Nike+, Lego Ideas, or Starbucks Rewards. It’s good business. Energized communities create a network of influencer marketers advocating for your business.

We’ve previously highlighted the importance of building your own digital neighborhood during ChargeX 2019, but let’s focus on engagement at an individual level. How do you create engaged and loyal customers who won’t churn out of their subscriptions? By empowering your customers with actionable options in their Customer Portal and educating them through notifications.

Let’s pause for a moment, I’m sure you’re thinking, “Notifications don’t seem like a great place to nurture the relationship between your brand and your customers. What’s so special about an upcoming charge notification or a credit card declined notification?”

The answer is quite simple: Optimizing your customer touchpoints allows you to provide genuine and memorable interactions.

What is a touchpoint exactly? It’s any moment you can interact with your customer. From sending out a welcome email when a customer first signs up to a notification their credit card is expiring – any chance for your brand to speak with the customer is a touchpoint.

Empowering your subscribers to take positive actions boosts retention. Autonomy allows subscribers to feel more like a participant than a passenger, an informed and engaged customer will continue to grow LTV and lower churn. Sound too good to be true? Keep reading, we’ve got the data to back it up.

Let’s dive into actionable touchpoint strategies to boost retention. The data used in this analysis was collected from over a year’s worth of transactions across a significant set of merchants using Recharge.

Here are our three top takeaways on how optimizing customer touchpoints impacts retention.

Insight 1: Actions = Retention

Customers want choice, they want options, they want to feel like they are empowered to customize their subscription. The numbers showed that when they have those opportunities and use them they are more likely to stay around longer. Here’s the data:

retention

15% lift in retention when customers take an action, any action.

The left chart shows when customers upgrade to a more expensive product or downgrade to a cheaper product, retention increases. The specifics aren’t important, rather it’s the knowledge that when a customer chooses an actionable option in their Customer Portal they become less likely to churn.

On the right side, no action by customers proves to be a bad thing. These are disengaged customers that either don’t know how to manipulate their subscriptions or just choose not to. Either way, they are more likely to churn than those who consistently take actions in the portal.

What kinds of actions can customers take? Skip, swap and pause were all included in our data findings. These features should all be considered as best practices when looking at lowering churn.

Here’s how some top DTC brands incorporate these options into their Customer Portals.

On the right handside of their Customer Portal you can see how wellness brand, Moon Juice, offers their subscribers the ability to skip, delay, and edit their monthly subscription.

moon juice

Perfect Keto, a ketogene supplement company, offers subscribers a skip option as well as the option to add a one-time product to upcoming shipments (bottom left of their Customer Portal).

perfect keto

Dropps, who sells eco-friendly laundry detergent pods, offers the ability to edit, stop, swap, or delay active subscription products.

dropps

The overall goal is to empower your customers. Some of these merchants offer total control while others offer minimal ways to adjust, but the point is to have your customers engage and increase retention.

Insight 2: Engaged customers stay longer

Let’s talk about lifetime value.

We’ve heard concerns that LTV would drop if subscribers were granted options like pause, delay, or skip in the Customer Portal. But that’s not what the data says.

Instead, our data shows that engaged customers (those who take actions in their Customer Portal) stay around for more than twice as many subscription periods as unengaged customers.

ltv

The top red line in this chart shows the retention rate of customers who are engaged. The bottom yellow line shows the retention rate of customers who are not engaged.

You can see that the yellow line (non-engaged customers) crosses the 50% threshold at 5 months while the red line (engaged customers) crosses the same 50% threshold at month 12. That’s an extra 7 months of retention and LTV growth.

When we look at customer actions with skip and swap options comparing active subscribers with churned subscribers, we see the same result:

customer actions

There is a high correlation between engagement and a customer’s subscription status. Customers with active status have more skips and swaps associated with them.

Obviously it’s great that engaged customers stay around longer, but what does this mean in terms of revenue? Are they spending more money with your brand? This leads us to our third insight.

Insight 3: Active customers spend more

spend more

Typically, customers who will churn out do so after their first 3-4 charges. An engaged subscriber tends to spend more money over a longer period of time with the merchant.

Now that we all agree that customer engagement with your brand is valuable, let’s bring our focus back to the beginning and talk about optimizing your customer touchpoints. How can you foster an engaged customer base? Keep reading.

Touchpoints: Connecting, educating, and establishing rapport

We’ve talked about the value of having an engaged customer but the key to their engagement is their awareness of the actions available to them. This is why each customer touchpoint is so valuable for long term LTV growth.

Touchpoints can often be overlooked but their value shouldn’t be. Any chance you have to speak to your consumer is an opportunity you should optimize to flex your brand voice, connect with your customer and educate them about your products and services.

Let’s focus on the first, and often overlooked touchpoint: an insert in the first box your customer orders from you. Unlike emails that can get missed or caught in a spam filter, the first order has a guaranteed 100% open rate. What better place to make a genuine connection with your customer and to educate them about your product and their options as a subscriber? They’re bringing your product into their home for the first time, that’s an important milestone.

Recharge’s very own Marketing Manager, Chase Alderton, talked about his unboxing experience for his first order from Tiege Hanley, a men’s skincare brand:

The first box had a few cool things. One was an insert showing me how to use their product, it had a different sized dot showing me how much of each product to use every day. Second, was a hand signed note… ‘Hey Chase, thanks for being a subscriber, we’re excited to have you join the community.’

That’s a really cool touchpoint that people overlook because it’s not digital.

Chase Alderton, Marketing Manager at Recharge

For ecommerce companies, one of the most important things when interacting with your customers is finding the right balance between establishing a brand voice and making a human connection. A helpful tip to achieve this is sending emails directly from a person’s email account in your company as opposed to a generic marketing@yourcompany.com.

Subscribers across the board get excited to see an email in their inbox from Jack/Jill at Company X. They’ll reply to that account directly with questions or express their delight after a sale. This establishes a rapport, a conversation between brand and consumer, not being a faceless entity that supplies a product or service: Relational vs transactional commerce.

Another important and often overlooked touchpoint is highlighted by Kristen La France, Senior Content Marketer at Shopify:

Another touchpoint I’ve seen a lot of brands could work on, is an email between order and shipment. It’s a time where your customer has made the commitment to be a part of your subscription.

They want to receive your product and they’re really excited about it, so fill that time with some value. Give them some product education so that when they get it, they know what they should do with your product so they actually use it, run out of it, and need more the next month.

Kristen La France, Senior Content Marketer at Shopify

These are just a few examples of how to optimize touchpoints. Consider adding value to all sorts of communications including:

  • Welcome email
  • Confirmation of shipment
  • Feedback surveys
  • Upcoming order renewal
  • Order confirmation
  • Credit card declines (often there are multiple of these)
  • First and subsequent box order inserts
  • Surprise and delight products
  • Special offers

Think about those touchpoints next time you’re sitting down to plan out your upcoming marketing strategy or do an audit of your current automated notifications. Optimize your touchpoints, educate your consumers, and empower them to boost retention and grow LTV.

And they lived happily ever after

It’s what all good relationships are made of – loyalty, passion, and churn-reducing ecommerce strategies. Alright, that metaphor doesn’t fully land but the numbers don’t lie. Our data shows that engaged customers, those that take actions, benefit your bottom line. Any action these subscribers take in their Customer Portal (other than cancelling) is considered positive, increases LTV, and makes them less likely to churn.

Last piece of advice: cherish those touchpoints with your customers. They are opportunities to deepen your brand’s relationship with your subscribers and educate them on how to be an engaged user of your product and their subscription. Do all that, and at the end of day you both will be walking off into the sunset together, happy with your mutually beneficial partnership.