Unlocking the secret to sustainable subscription growth in the wellness industry
Payment recovery from involuntary customer churn is the ultimate strategy for enhancing annual recurring revenue, cutting operational expenses, and growing customer lifetime value.
Most health and fitness companies are laser-focused on acquiring new subscribers. While this is understandable, overreliance on acquisition threatens long-term growth and profitability.
An acquisition-at-all-cost mindset leads to high customer acquisition costs (CAC), low customer retention, and a continuous need to acquire new customers to maintain revenue. Focusing on retention is the key to breaking free of this vicious cycle.
Why retention is a gamechanger for subscription brands
222%
increase in customer acquisition cost since 2013
25-95%
Profit increase from a 5% boost in retention
Retention is your most powerful growth lever. It’s more cost-effective, efficient, and profitable than acquisition. Here are the stats to prove it.
1. Retaining subscribers is more cost-effective
Customer acquisition costs are through the roof across industries. According to a study by SimplicityDX, CAC jumped 222% between 2013 and 2022. Increasing your focus on retention will offset acquisition costs by extending customer lifetime value (LTV). Moreover, repeat customers spend 67% more on average than new customers.
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2. It’s easier to sell to repeat customers
This shouldn’t come as a surprise, but selling to repeat customers is easier than selling to new customers. This is because they’ve already used your product or service and have built a relationship with your brand.
But how much easier is it, really? According to a Salesforce article, the odds of turning a first-time browser into a buyer are just 5-20%, while the likelihood of turning an existing customer into a repeat buyer is 60-70%.
3. Retention has better ROI
Retained customers purchase more and have higher order values, both of which increase LTV and revenue. According to Bain & Company, a 5% increase in retention can boost profits between 25% and 95%.
Boost subscriber retention by stopping involuntary churn
Involuntary churn
[in-ˈvä-lən-ˌter-ē]
When a legitimate payment transaction fails, and the subscriber’s recurring order is canceled—even though they want to stay subscribed.
The best way to boost retention is by stopping involuntary churn due to failed payments.
Involuntary churn occurs when a legitimate payment transaction fails, and the subscriber’s recurring order is canceled—even though they want to stay subscribed.
It’s estimated that 50% of overall churn is caused by involuntary churn due to a failed payment transaction and that subscription-focused organizations lose a minimum of 10% of their revenue annually because of it.
Impact of failed payments
10%
loss in subscription revenue
50%
of total churn
$440B
in lost revenue annually
There are myriad strategies to minimize failed payments, but most increase operating costs and frustrate subscribers. For instance, Butter has seen enterprise brands hire call centers to contact subscribers repeatedly. We’ve also witnessed merchants send annoying emails and text messages, regardless of the type of failed payment—including instances of fraud.
A better solution is to use a dedicated payment recovery solution.
Powered by advanced machine learning (ML) technology, Butter analyzes payment data to uncover recurring payment issues and ultimately recovers that would-be-lost revenue without requiring subscribers to update their card information or recurring orders. Leading brands like Fabletics, MasterClass, Whoop, and Dr. Squatch trust Butter to retain subscribers, extend customer LTV, and drive profit.
MasterClass recovers 27% more revenue with Butter
Increase in recovered revenue
Boost in invoice recovery
Decrease in refunds
About MasterClass
MasterClass is a streaming platform that provides consumers with insights, tools, and lived experiences from top experts, including master trainer and fitness personality Joe Holder. Digital subscriptions account for the majority of the business' annual revenue.
The Challenge
MasterClass had a better-than-average industry churn rate thanks to an in-house team of retention experts. However, after analyzing their subscriber journey, the streaming platform saw an opportunity to optimize further.
MasterClass’ solution was to partner with a dedicated payment recovery platform. Working quickly, MasterClass piloted two different recovery solutions. Then, they tested Butter’s recovery solution and never looked back.
“Butter’s data-science approach made sense,” said Chris Nichols, MasterClass’ VP of Growth Analytics, Insights, and Data. “We had another solution but were curious about what Butter could deliver.”
The Solution
Why did MasterClass choose Butter? Unlike other solutions, Butter’s machine-learning-powered solution analyzes payment transaction metadata to determine the most effective strategy for each category of failed payments. The result is a highly impactful individualized approach.
Just as important, Butter’s solution self-optimizes for continual improvement. Over time, subscription businesses like MasterClass see improved results without investing additional resources.
See MasterClass’ expanded case study for more insights
Dr. Squatch boosts monthly recovered revenue by 11% with Butter in 5 months
Increase in monthly recovered revenue
Invoice recovery rate
(vs. industry avg. of 15% for DTC brands)
Boost in authorization rate
About Dr. Squatch
Dr. Squatch is a natural men's soap and personal care company that has grown its sales 15x over the last five years. Subscriptions, which make up a third of the company's total direct-to-consumer business, play a significant role in this growth.
The Challenge
When Dr. Squatch identified that 25% of their overall churn was due to failed payments, they embarked on a mission to address the issue. However, they discovered that solving the challenge required extensive payment expertise.
Why? Every transaction is associated with 128 pieces of data and more than 2,000 error codes, making it nearly impossible to determine the actual cause of a failed transaction without a dedicated payment recovery solution.
The Solution
Dr. Squatch thoroughly evaluated various solutions, assessing factors such as use, effectiveness, and cost. After careful consideration, they selected Butter in part because of the platform’s machine-learning-based capabilities.
Unlike other solutions, Butter’s ML technology doesn't just retry failed payments. It analyzes hundreds of data points associated with each transaction and uses this information to determine the most effective retry strategy for each payment. This unique approach drives optimal recovery at reduced costs and significantly increases payment success and recovery rates.
