hold arrow

Existing Customers Are Often Your Best Customers

1 min read · 64 views Bong-Geun Choi Jan 11, 2023

A business’s best customers are often its existing customers.  Therefore, retaining existing customers is vital, particularly during tough economic times.  What are some ways that subscription economy companies may retain customers?

 

As the World Churns

Churn is the rate at which customers stop doing business with a company.  It is calculated by comparing the number of lost customers to the total number of customers at the start of the period.

 

According to payments and commerce consulting company PYMNTS, 62% of subscribers plan to review their subscriptions in the next six months due to the economic crisis.  Some 38% have already canceled a subscription to cut costs.[1]

 

What strategies may companies employ to reduce churn?

 

Improved Customer Experience

PYMNTS noted that 54% of customers said that one bad experience would cause them to cancel a subscription, and 67% said they would switch brands if they had a better experience with a new provider.  Therefore, it is important to focus on the consumer experience.

 

Focus on Billing and Cancellation Policies

According to PYMNTS, consumers are frustrated with the difficulty of managing their subscriptions.  They found 45% of consumers say that subscriptions are too difficult to cancel and that 51% would keep subscriptions if they were easier to cancel and manage.

 

Payments and Billing

We have highlighted that customizing the payment options for consumers is potentially a key differentiator for subscription economy companies.[2]  Allowing consumers to decide the payment method they find most convenient and when to pay for the subscription may be key to reducing churn.

 

Better billing systems can also reduce churn.  For example, churn may be caused by subscription cancellation due to credit card expirations. 

 

Cancelation Policies

More transparent and flexible cancelation policies might also help to retain subscribers.  For example, allowing a subscriber to temporarily pause their subscription if they encounter financial difficulties could improve the consumer experience and reduce involuntary churn.

 

Unhiding Hidden Fees

PYMNTS found that 51% of subscribers have incurred unwanted or hidden charges. These may include an accidental sign-up, forgetting to cancel a free trial, or unwittingly joining memberships that renew automatically.  Getting hit with these unwanted charges can make consumers more hesitant to sign up for the company’s products or services in the future.

 

The Customer Experience is Key

While there are factors outside of a company’s control, such as the economy, much can be done to retain customers.  Improving the consumer experience would likely go a long way in reducing subscription churn.

 

Subscription economy companies that can deliver a positive consumer experience may be poised to outperform those who don’t and to better weather difficult economic conditions.

 

The Fount Subscription Economy ETF (SUBS)

The Fount Subscription Economy ETF (SUBS) seeks to provide investment results that, before fees and expenses, generally correspond to the total return performance of the Fount Subscription Economy Index.  The Index was designed to measure the performance of companies engaged in the business of providing subscription services, i.e., companies that sell products or services for recurring subscription revenue.

 

SUBS may present an attractive vehicle for individuals to gain exposure to companies offering subscription-based pricing models.


 


[1] All data sourced from: Minimizing Subscription Churn Through Improved Customer Experiences, PYMNTS Subscription Commerce Tracker Series, November 2022

[2] Please see our blogs “Are Payments the Key to Subscription Success” and “How Subscription Companies May Navigate Economic Uncertainty


 

Bong-Geun Choi

Chief Economist

bchoi@fountinvestment.com

More Posts

What the Future May Hold for the Metaverse

1 min read · 28 views Bong-Geun Choi Jan 20, 2023

How the Metaverse May Reshape Retail

1 min read · 83 views Bong-Geun Choi Jan 02, 2023

Are Subscriptions the Future of Social Media?

1 min read · 103 views Bong-Geun Choi Dec 22, 2022

Metaverse Trends to Watch During 2023

1 min read · 101 views Bong-Geun Choi Dec 22, 2022

Investors should consider the investment objectives, risks, charges and expenses carefully before investing. For a prospectus or summary prospectus with this and other information about the Fund, please call 855-425-7426 or visit our website at www.fountetfs.com. Read the prospectus or summary prospectus carefully before investing.

Exchange Traded Concepts, LLC. serves as the investment advisor to the Funds. The Funds are distributed by SEI Investments Distribution Co., (SIDCO) 1 Freedom Valley Drive, Oaks, PA 19456. SIDCO is not affiliated with Exchange Traded Concepts, LLC. or Fount Investment Co. Ltd.

Risk Disclosure:

 

Investing involves risk, including possible loss of principal. There is no guarantee the Funds will achieve their stated objectives. In addition to the normal risks associated with investing, international investments may involve the risk of capital loss from unfavorable fluctuation in currency values, differences in generally accepted accounting principles, or social, economic, or political instability in other nations. Emerging markets involve heightened risks related to the same factors, as well as increased volatility and lower trading volume. 

 

The Funds’ concentration in an industry or sector can increase the impact of, and potential losses associated with, the risks from investing in those industries/sectors. For MTVR, the Fund may be concentrated in the entertainment and interactive media & services industries. The entertainment industry is highly competitive and relies on consumer spending and the availability of disposable income for success, which may cause the prices of the securities of companies to fluctuate widely. The prices of the securities of companies in the interactive media & services industry are closely tied to the overall economy's performance. Changes in general economic growth, consumer confidence, and consumer spending may affect them. MTVR may also be subject to the specific risks associated with metaverse companies. These risks include but are not limited to small or limited markets, changes in business cycles, world economic growth, technological progress, rapid obsolescence, and government regulation. Smaller, start-up companies tend to be more volatile than securities of companies that do not rely heavily on technology. Metaverse Companies may rely on a combination of patents, copyrights, trademarks, and trade secret laws to establish and protect their proprietary rights. There can be no assurance that these steps will be adequate to prevent the misappropriation of their technology or that competitors will not develop technologies that are equivalent or superior to such companies’ technology.

 

For SUBS, the Fund may be concentrated in the software industry. Technological changes, pricing, retaining skilled employees, changes in demand, research & development, and product obsolescence can affect the profitability of software companies causing fluctuations in the market price of company securities. 

 

Both Funds are subject to communication services sector risk, which can involve the same risks as being concentrated in the software industry. Network security breaches, potential proprietary or consumer information theft, or service disruption can negatively affect companies’ stock prices.

 

The Funds are non-diversified. The Funds are new and have limited operating histories for investors to evaluate. New and smaller funds may not attract sufficient assets to achieve investment and trading efficiencies. In addition to the normal risks associated with investing, investments in smaller companies typically exhibit higher volatility. 

0 MTVR · SUBS
MTVR · SUBS