Understanding Membership Churn (& How To Reduce It)
Reader Disclosure Membership churn affects your bottom line and a significant proportion of it is preventable! Get tips on how to reduce member churn and recover failed payments to keep your revenue rolling. Keeping existing members is more important than getting new ones. After all, marketing your site and onboarding new members is time-consuming and expensive. If new members leave shortly after they join, that’s a lot of wasted effort. A huge mistake many membership site owners make is investing the majority of their time and money in advertising and marketing to acquire new gmembers. But acquisition can cost up to 25 times (yes, TWENTY-FIVE!) more than retention. So understanding why members churn, and taking necessary steps to prevent it should be a top-priority! In this guide, we’ll show you how to create a strategy to prevent membership churn and recover failed payments (one of the greatest causes of churn). These are two of the most powerful ways to protect your site’s bottom line. To start, we’ll go over why maximizing retention is so important. Why You MUST Reduce Membership Churn It can’t be overstated: reducing member churn is critical to your site’s success. To really paint a picture of just how important it is, I want yo run you through a few hypothetical scenarios. 1. Ongoing Losses Let’s say your membership costs $49 a month and you have 250 members. That means your site is bringing in a solid $12,250 per month or $147,000 per year. But what happens if just five members cancel each month? That’s only a 2% churn rate, which might not seem like a big deal. At first glance, losing $245 per month doesn’t seem catastrophic. But over a year, that adds up to $2,940 in lost revenue. And that’s before factoring in how much more you’ll need to spend to replace those lost members. Now, imagine a 5% churn rate (12-13 members per month). That’s a monthly loss of $637, or $7,644 per year – money that could have gone toward growth, marketing, or even paying yourself. Membership churn compounds, and the more you ignore it, the harder it becomes to sustain long-term revenue growth. 2. Higher Cost Per Head Remember that statistic: acquisition can cost up to 25 times member retention? Let’s take a closer look at how that’s the case. Say you spend $80 on ads, promotions, and sales efforts to bring in each new member. That means your Customer Acquisition Cost (CAC) is $80 per member. Now, let’s go back to our membership pricing – $49 per month. If the average member stays for two months before churning, you’ve only made $98 in revenue from them. Initially, that seems like a profit, right? But once you subtract your $80 acquisition cost, you’ve barely made $18 per member. And that doesn’t even account for operating costs like hosting, software, and support. Now, imagine you reduce churn and extend the average membership lifespan to six months. That same member is now worth $294 in revenue – turning your $80 acquisition cost into a serious return on investment. When member churn is high, you’re constantly running uphill, spending money just to break even. But when retention is strong, every new member adds to long-term, sustainable growth. 3. Leaky Rebills Not all churn is intentional. Sometimes, members don’t cancel, they just fail to pay. Their credit card expires, their bank declines a charge, or they hit a temporary cash crunch. This is called involuntary churn, and it’s a silent revenue killer. So your 250 members paying $49/month,generate $12,250 in monthly revenue. Now imagine 5% of those payments fail each month – that’s 12-13 members missing a payment, resulting in a $637 monthly loss or $7,644 annually. And here’s the kicker: many of these members don’t even realize they’ve been cut off. They might have every intention of staying subscribed, but if they miss a payment and don’t renew manually, they’re gone. Now, consider what happens if even half of those failed payments were recovered with a simple automated email or card update reminder. That’s thousands of dollars back in your pocket without having to acquire a single new member. With those three examples alone, hopefully now you can see the very real financial cost of membership churn. But there are more reasons too: 4. Slow Growth Membership churn counteracts new customer growth. If you’re adding 1,000 new customers per month but losing 800 to churn, your actual growth is minimal. Sustainable growth happens when retention is strong. 5. Fewer Referrals Loyal members refer others, but churned members don’t. High retention fuels word-of-mouth marketing, while high churn can lead to negative reviews and reduced trust. 6. Operational Inefficiency Constantly replacing lost members is inefficient. High membership churn can strain your support team, marketing budget, and product development, forcing you to focus on damage control rather than innovation. How To Prevent Membership Churn So now we know why membership churn is an important issue for your site, let’s talk about some of the most effective strategies to prevent it. Make Your New Members Feel Welcome You never get a second chance to make a first impression, so it’s vital your relationship with new members starts on the right foot. An automated welcome message is an excellent way to make sure it does. MemberPress has a handy automated welcome-message feature that lets you greet new members and start the orientation process right away. READ: How to Write a Killer Welcome Message Your welcome message should include things like… Links to your best content Helpful documentation Next-steps instructions Support information Bring Existing Members Back to Your Site With so many demands on your members’ attention, it’s easy to understand how they might forget about your product. It’s your responsibility to remind them, especially when you add new content or launch a new feature. Be sure to send out an announcement whenever you have news. It’s a great way to bring existing members back to your site and remind