Three Shades of Churn: Active, Passive, and a New Emerging Type
May 16, 2023
Churn is a term that has become synonymous with the challenges faced by subscription-based businesses. Traditionally, churn has been categorized into two main types: active and passive. However, a new, nuanced form of churn is emerging, reflecting the complex dynamics of customer behavior and engagement. Let's explore these three distinct types of churn and delve into the implications of this evolving landscape.
1. Active Churn
Definition: Active churn occurs when a customer consciously decides to cancel a subscription.
Dissatisfaction with the product or service
Attraction to a competitor's offering
Changes in personal preferences or needs
Implications: Active churn can provide valuable insights into areas for improvement, customer needs, and market trends. It requires strategies focused on customer satisfaction, product innovation, and competitive positioning.
2. Passive Churn
Definition: Passive churn refers to the unintentional loss of customers due to failed payments, often resulting from expired cards, insufficient funds, or other technical issues.
Inadequate payment retry strategies
Lack of communication about upcoming card expirations
Technical glitches in payment processing
Implications: Passive churn may seem less alarming than active churn, but it can have significant impacts on revenue and customer satisfaction. Addressing passive churn requires intelligent payment processing, timely communication, and a focus on customer experience.
3. Passive Leading to Active Churn: A New Category
Definition: This emerging type of churn occurs when passive churn (e.g., failed payments) leads to active churn. For example, a dunning email about a failed payment may prompt a customer to proactively cancel their subscription.
Negative communication related to payment failures
Customer reevaluation triggered by payment issues
Frustration with payment processes
Implications: This new form of churn highlights the delicate balance required in communicating with customers about payment issues. It underscores the need for empathy, transparency, and strategic timing in payment-related communications.
Naming Challenge: As a relatively new concept, this type of churn is still awaiting a standardized name. Whether it's coined by industry leaders or emerges organically, this new category represents a significant development in the understanding of churn dynamics.
The three shades of churn—active, passive, and the emerging passive-leading-to-active category—reflect the multifaceted nature of customer engagement and retention in subscription businesses. Each type requires a unique approach and offers different insights into customer behavior.
The emergence of this third category signifies the evolving complexity of the subscription landscape. It calls for a nuanced understanding of customer psychology, communication strategies, and the interconnectedness of various churn drivers. D2C and B2C subscriptions teams can reduce churn with FlyCode.
As the industry continues to evolve, recognizing and addressing these different types of churn will be essential for sustainable growth, customer satisfaction, and strategic innovation.