The Risk of Reactive Customer Retention

Not all Netflix news is about programming. The business world is talking about Netflix’s US subscriber count seeing a drop for the first time in, well, ever. Customer irritation over pricing caused some Q2 trouble for Netflix⁠, but the company isn’t in a unique situation.

Subscription businesses of every size and industry are vying for customers with a lot of options at their fingertips and increasingly savvy tastes. A retention strategy designed around today’s customers has never been more critical.

In a webinar on customer retention trends, Guy Marion – GM, Chargebee Retention (formerly CEO, Brightback), and Crazy Egg General Manager Suneet Bhatt talked about retention tactics, and how retention strategy looks different for B2B, B2C, and hybrid companies.

Understanding customer behavior is at the heart of doing retention right. Guy and Suneet discussed the drivers behind B2C and B2B purchases, and why understanding these elements can help improve retention.

B2C purchase drivers

• Smaller purchase price
• Greater competition and more options
• Less research before purchase
• Less friction between the “chooser and user”

B2B purchase drivers

• Typically larger investment
• A finite number of competitors
• In-depth research before purchase
• More friction between the “chooser and user”

With low pricing and less overall impact of B2C products and services, consumers tend to give purchases less consideration. If a purchase doesn’t work out, there are usually a number of other options a customer could use to fill their need. And there’s little standing in the way of making a change, given that fewer people are involved in a purchase decision.

In contrast, B2B buyers are spending more money, so research and education become a larger part of the consideration. However, once a purchase is made, multiple stakeholders make cancellation a more complex process.

Knowing that customers have low consideration, B2C companies are doubling down on reactive retention tactics like excellent customer support. According to a survey we conducted in 2019 –

56% of B2C companies say support is a top retention priority compared to 14% of B2B companies.

Education and training is a top retention tactic for 34% of B2B companies with only 5% of B2C companies indicating it’s a high priority.

Reactive approaches to retention aren’t enough

In the case of Netflix, the company assumed a price increase wouldn’t impact retention. In truth, they lost 126,000 subscribers, which led to the largest one-day decline in the company’s value in the last three years. While pricing changes may be inevitable, a proactive approach to engaging with customers and gathering data about their price threshold can prevent excess churn.

Other proactive retention strategies offered by Guy and Suneet include:

• Increased pre-sale education
• Free trial offers
• Extended times for trials and pilots
• Better onboarding experiences
• Offers to stay made at the point of cancel
• And offers tested on customer segments like plan type and billing terms

Check out all the retention tips from Guy and Suneet (including Crazy Egg’s approach to saving price-sensitive customers) in our on-demand webinar recording: 6 trends changing customer retention.