Subscription fatigue
CSPs and MSPsSubscription Service Providers

Why do DTC businesses lose customers?

3 Mins read

DTC (direct-to-consumer) companies are constantly looking for ways to keep their customers engaged. Many companies are now using a DTC framework – where no third-party retailers or wholesalers are involved, to offer their products and services. This allows customers to have a better experience and gives the merchant more control. This framework that involves subscription of services provides added benefit of predictable, recurring revenue to the businesses. This makes it popular with both customers and businesses.  

However, as more and more companies offer these services, the landscape becomes more crowded and there is an increased chance of customers switching over to competitors resulting in a higher customer churn rate. In the below graph, you may see how consumers with more devices and subscriptions have felt tech overwhelm during the pandemic. 

overwhelmed customers

Image source 

In this post, we’ll explore what subscription fatigue is, why DTC customers quit due to subscription fatigue, and what you can do about it. 

What is subscription fatigue? 

A subscription business model is a type of recurring revenue model in which the customers agree to pay a weekly, monthly, or yearly fee in exchange for products or services. It allows customers to renew their subscriptions after a certain period and allows the company to rely on customer relationships to create a regular stream of income. 

Subscription fatigue is when people don’t want to spend money on subscriptions because there are too many choices. Reports say that an average household overshoot its subscription budget by 10% with more than half of them being concerned about the rising cost of multiple subscriptions.  

Churn is a big problem for companies, but it is not always possible to stop it. As a company that sells subscriptions, it is important to keep churn rates within a healthy range as compared to other companies in the industry. There are many ways to reduce churn, such as identifying the early signs of fatigue and understanding what drives people to cancel their subscriptions. Below is an example showing churn for paid video services among the younger generation in the US. 

Customer churn rate

Image source 

 Some factors that lead to subscription fatigue in a DTC business are: 

  • Subscription saturation: When people get too many bills to pay, they often feel overwhelmed and decide that cancelling is easier than dealing with the hassle. 
  • Costs become a concern: Subscription services are becoming more and more popular, but many people raise concerns regarding the costs that get added up from too many subscriptions. According to a survey, 36% of customers who cancel their subscriptions cited costs as the reason. 
  • Value for money: Quality and innovation are the keys to success in subscription-based businesses. If subscribers feel that businesses are not keeping up with what they offer, then there’s a good chance these customers will move on to another service provider or even cancel altogether! 

How DTC businesses can address subscription fatigue and customer churn with RackNap 

  • With its simple yet powerful subscription billing automation platform, RackNap helps subscription businesses to reduce subscription fatigue by resolving the billing complexities and improving customer experience. Healthcare businesses, the media and communication industry, educational organizations, IoT, and cloud-based service providers, all can leverage RackNap’s end-to-end automated subscription billing module. 
  • RackNap enables DTC businesses to provide a wide range of flexibility to the customers. It supports different billing models like free trials, one-time charges, fixed-price subscriptions, usage-based billing, custom pricing models, and billing cycles. In addition, it empowers businesses to offer different discounts and promotions.  
  • RackNap has an admin panel for businesses to monitor their sales and billing. And at the same time, it also has a customer panel for customers that enables them to manage their subscriptions. 
  • The admin panel has interactive dashboards that provide more visibility into customer actions. It enables the management to improve customer experience by quickly processing refunds, adding credits, renewing services, and creating a single custom invoice all with a single click. 
  • The customer panel enables customers to update their profile details, get a complete history of transactions, and upgrade, downgrade or switch their subscription plans easily. It also provides them with self-service options to help them take quick decisions. All this help feel customer more empowered.  
  • RackNap also enables businesses to monitor their marketing campaigns and provide analytical insights into customer behavior, which helps businesses provide only the valuable services and improve customer experience. 

Subscription fatigue is a real issue for many businesses. This can be a big problem for companies that rely on subscription-based revenue models. As a company that sells subscriptions, it is important to keep churn rates within a healthy range. RackNap helps subscription businesses reduce subscription fatigue by resolving the billing complexities and improving customer experience. Request a demo today to see how the RackNap platform can benefit your business! 

Also read: How best to retain your customers?

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