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What can businesses learn from subscription service cancellations?


James Malia, UK MD at digital gifting company Prezzee

James Malia UK MD at Prezzee - Business Express
James Malia, UK MD at Prezzee

The rising cost of living is undoubtedly shaping consumer behaviour at present, as many will be looking at how much they spend in certain areas and questioning how they can cut back. It’s no surprise then that recent figures suggest entertainment subscription services are being hit hard, with Netflix alone revealing it lost 200,000 subscribers in Q1 2022 and expects to lose a further 2m by the end of Q2

It’s not just Netflix feeling the pinch though as a Kantar report highlights the entire UK video streaming market has shrunk, with the number of households paying for at least one subscription dropping by 215,000 quarter-to-quarter. 

This goes to show that although we’ve been living in a subscription economy for years now, with consumers buying into having everything from TV and movies to food and drink available at the click of a button, it’s also something that’s very easily cut. Especially when times are tight and providers don’t give them a reason to maintain their loyalty. 

This is something businesses should be contemplating very seriously right now, as even their most loyal customers may be about to cut ties to save money.

Avoiding the potholes…

Direct to consumer businesses, from retail and hospitality to entertainment and travel, will inevitably suffer more from the spike in living costs and it’s therefore these types of organisations that need to start focusing on how to retain customers. Why? The Temkin Group reports that companies which earn $1bn annually can expect to earn, on average, an additional $700m within three years of investing in customer experience.

It is of course easier said than done in the current climate but what businesses can’t afford to do is ignore the problem and hope it blows over. As the giants of the subscription service boom have highlighted, even industry leaders aren’t immune to consumer spending cuts. Even worse would be for businesses to increase prices to pass on inflation increases to the consumer. Doing so will almost certainly result in customers turning away in their droves due to feeling unappreciated and, in some cases, like nothing more than numbers on a spreadsheet.

So what should businesses be doing to combat the cost of living crisis, support consumers and increase customer loyalty?

…and driving customer loyalty

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Businesses should be aiming to fix the roof before it’s raining – take a proactive, rather than reactive approach, to increase customer loyalty. It’s all well and good realising you’re losing customers due to the cost of living and then trying to win them back with offers, but a proactive loyalty scheme will have already planted the seeds for retention long ago.

Take the example of a family considering where they could cut back on their monthly spend. They’ll likely draw-up a list of where money is being spent and ring-fence certain outgoings as untouchable – they’ll still need to pay their mortgage or rent and continue buying food for the household every week. It’s the leftovers which are vulnerable. A business on that list which may have been close to the chopping block, may be saved by a realisation that it sent a £10 gift voucher to say happy birthday a few months ago. They may not have even spent the voucher yet, but that memory of being rewarded when other companies didn’t do so goes a long way.

The trick is to provide customers with meaningful rewards at a time that matters, even if they aren’t expected. A brand that delivers on customer experience and exceeds their expectations when it comes to rewarding loyalty is much more likely to continue succeeding, even when money is tight.

Strategic partnerships

It may seem counterintuitive to suggest but for those businesses that have already fallen foul of the cost of living crisis, now might be a good time to consider entering into partnerships with streaming services to attract customers back. 

If estimated subscriber losses for Q2 are close to the reality, that leaves a lot of consumers without a service they’ve enjoyed for years – most through necessity. Take mobile phone providers, for example. Those that offer two-years of Netflix, Spotify or Disney+ with a contract have a strong point of difference, allowing consumers to remove that cost from their monthly bills without losing the service. One company retains a customer while another benefits from their loyalty.

Retention over acquisition

In the current climate, retention should be where brands focus the majority of their efforts. Acquisition of course comes with increased revenue but that counts for nothing if the once loyal customer base has left after feeling unloved during a time when money is tight and spending decisions have to be made.

On the other hand, focusing on rewarding loyal customers in the moments that matter actually goes a long way to supporting acquisition naturally. Word of mouth goes a long way, so if customers tell their friends and family they’ve received a loyalty bonus from a business, they’re increasingly likely to look into the company themselves. The little touches really can go a long way. It’s the companies that get this right over the coming months that will thrive through 2022 and beyond.

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