the goose

Sign up 400 people each paying €25 a month and retire.  That’s the name of my game.  Well not really.  As the ever so clever (and annoyingly correct) Caelen pointed out in his latest Bizcamp tour de force – it is not quite that simple.  Churning milk makes you butter and churning customers make you penniless – eventually.  Subscriptions have a lifetime and eventually people will ebb away little by little unless I maintain and enhance the services we offer them.  So how do we avoid churn?  Well, we don’t.  We mitigate it.  There are several approaches but for this blog post I’m just going cover payment methods and how they effect churn.

Not all methods of payment methods are created equal when it comes to reducing churn.  Here is the top five as far as I am concerned in reverse order:

5.  Paypal: Not everyone can get their head around Paypal but for the tech crowd pretty much everyone has an account.  This is a plus and a minus.  For those used to using Paypal it makes it easier for them to sign up.  On the down side, it also means that they are that much more used to canceling subscriptions.

4.  Credit Card: I use Worldpay for credit card processing and their Future Pay program is simplistic but does the job.  More importantly, while you can cancel your subscription via the Worldpay system – people aren’t as used to it and they generate weird and wonderful login details by default that no one remembers.  Of course people can still email us to cancel but it just means they have to look us in the virtual eye before signing off.  It is somehow much easier to cancel via Paypal where there ain’t that human interaction.

3.  Laser: Again using Worldpay we can process Laser cards.  Laser cards have a slight advantage in that more people have Laser (debit) cards than credit cards and some prefer to have it debit straight from their account.  Many people ask, can you debit it straight from my account.  This is basically what a laser card does.  Plus Laser payments don’t incur interest that credit cards do which reduces the psychological pain too.  The only drawback is that I’ve noticed Laser cards tend to have shorter expiry date.  Correct me if you know better.

2.  Standing Order: Standing orders are harder to process.  There is a manual process involved but the great thing is they don’t expire as do Laser and Credit Cards.  Expiring cards is a major issue.  It requires people to make their whole buying decision all over again.  Standing orders don’t do this.  I actually sell a PHP library that will validate account numbers if you want to collect account details online and post them a pre-printed standing order form.  This will increase the likelihood that people sign up.  Of course, it is a lot harder to get one of these set up but I’m talking about about churn here – not shopping cart abandonment rates.

1.  Direct Debit: La creme de la creme when it comes to low churn rates are direct debits.  This is actually something my old man advised me to try and collect about 8 years ago when I was starting out.  I wish I had listened more carefully.  You can read the Irish Payment Organisations guide to Direct Debits to get a better idea of how it works.  They also have a list of software providers that can help you integrate the service.  Direct debits are great. They don’t expire, you can change the amount your bill each month and they live a lot longer than credit, debit or paypal agreements.

Hold on a sec?  Aren’t you conning people by making it more difficult to unsubscribe?  Well – yes and no.  I always unsubscribe anyone who emails me asking to quit their subscription, straight away and without question.  However, there are many times when people unsubscribe in the heat of the moment.  Some of them come back later looking to re-join but it can be socially awkward to do so.  I like introduce a switching cost to prevent spur of the moment un-subscriptions.