No matter what industry you’re in, data analytics should be an integral part of your business. Today, data is one of the most sought-after resources in the world; some say it’s even more valuable than oil. In the information age, industry leaders like Amazon and Facebook have leveraged data to dominate their respective industries.
Whether you’re looking to target new clients, streamline internal operations, or improve customer service, data can be used to gain invaluable insight and produce real results.
Businesses can use data to improve their tools and services for the end user. In short, data reveals customer needs based on the way products are used, so businesses can modify their products accordingly.
However, much of the data available continues to be untapped. In 2018, software company SnapLogic produced a report looking at how well organizations manage and use data. According to the report, businesses are only using 51% of the information they collect and generate.
In addition, data is only used to make 48% of decisions. The report suggests that as a result, businesses are missing out on $5.2 million in revenue.
The power of data and its potential for increasing profits is well documented. Another 2018 study, released by real estate company Digital Realty, looked at the potential benefits of data analytics on a national scale.
According to the report, businesses in the United Kingdom are only extracting 58% of their data’s value. It also indicates that if companies in the U.K. fully harnessed that potential, they could contribute an additional £52 billion ($65B approx.) to the national GDP.
Data analytics can be especially beneficial to subscription businesses. Access to a wealth of data points—such as why customers unsubscribe, or which pricing options/discounts are most attractive—can be used to help strengthen marketing efforts, provide existing customers with a better experience, and optimize your billing processes.
Here’s how to leverage your data throughout each stage of the subscription lifecycle, from acquisition to retention and billing.
1. Acquire new customers with data-driven marketing
Today’s marketers know that data can be used in a variety of ways to draw in customers. A business can track marketing campaigns and replicate those with the most success. Market research data is also a vital part of many a business’s go-to-market strategy.
Sales data can be used to determine which discounts to expand based on conversion rates. Similarly, customer data can inform future decisions by revealing which packages and pricing options are most popular with new customers.
Another clever way to use your data to attract new customers is to strategically release your subscriber data to the public. Music streaming subscription service Spotify has done this in several marketing campaigns, playing into the current spotlight on big data while also conveying a fun and humorous brand identity:
“Dear person in the Theater District who listened to the Hamilton Soundtrack 5,376 times this year, can you get us tickets?” read one billboard.
An analysis of the campaign by market research company YouGov labeled Spotify’s efforts a success. YouGov assigns scores to companies based on criteria like brand awareness and media mentions. According to the report, Spotify’s Ad Awareness and Word of Mouth Exposure scores increased by 5 and 16 points, respectively.
Using data to show potential customers how subscribers are using your service is a great way to showcase what you have to offer.
2. Reduce churn by identifying issues and improving personalization
Retention is a fundamental requirement of the subscription lifecycle for any SaaS business. After all, there is no recurring transaction and revenue if the customer leaves. Growth from newer sales is often difficult and capital intensive, making customer retention all the more vital to success.
One way to start addressing churn rates is to first identify which month of the lifecycle is producing the most cancellations. You can also use sales data from individual customers to determine if a client’s sales activity is increasing or decreasing.
This can provide you with insight into when and if action should be taken. By leveraging your data, you can determine not only when to intervene, but also discover the reasons behind customer churn.
Many subscription businesses that look at their sales by activation cohort find their sales drop in the second month. This could be because customers tend to unsubscribe after their introductory period expires. With this information, companies can act to improve customer satisfaction and ensure fewer customers cancel in the second month.
Dollar Shave Club has dominated the men’s shaving market for a number of years, beating out long established, one-time payment shaving essentials companies. Part of the business’s success can be traced to data analytics efforts over the years.
In 2014, the company launched an effort to better understand the data they were collecting on the success of email promotions, the impact of changes to their website, the volume of customer help requests, and customer churn. Once they harnessed the power of this data, they were able to address the issues it revealed.
In one area, they discovered that shipping errors were hurting customer retention. After using this information to improve the shipping process, overall retention improved.
Using your sales data to determine when subscribers are cancelling can help you intervene sooner.
Another case study of a subscription business using data to address customer churn is beauty box provider ipsy. Subscription boxes like ipsy are designed to introduce customers to new products. There’s a risky element of surprise with these subscriptions: customers can feel disappointed if they don’t receive something they like.
This disappointment is one of the main reasons people unsubscribe from subscription boxes. However, ipsy uses data derived from subscriber profiles, product reviews, and billing records to personalize its boxes and ensure customers are satisfied with what they receive.
As a result, ipsy has reported retention rates higher than 80 percent. Ipsy also has more subscribers than its top competitor Birchbox. Monitoring sales to see what your customers are buying lets you give them more of what they want.
3. Use data to optimize the billing process
At the end of the day, the success of your data transformation efforts depends on the efficiency of your billing processes.
A data-driven marketing strategy is only as successful as the number of people who fully complete the checkout process. Use your data to discover any roadblocks in the billing process that might be turning consumers away.
After an engaging marketing campaign brings a potential customer to your website, what’s holding them back? Based on your website data, you should be able to determine at which point new prospects are abandoning the purchase process. Make sure there are no glitches in the signup process, and identify ways to simplify checkout.
Similarly, look for ways to streamline your recurring billing processes to ensure there are no hiccups that could hurt your retention rates. One of the biggest issues subscription services face is handling outstanding payments. To better resolve these payments and optimize the retry schedule, historical data can help determine which methods have been most effective in the past.
One of the ways businesses work to retain customers with failed payments is through dunning emails. Data can be used to improve your dunning management system, determining which emails are most successful so you can replicate them.
Some banks now require a two-step verification process that can lead to billing failure. Data-based machine learning can help optimize your dunning management system by differentiating between credit cards and the banks associated with those cards.
With machine learning, you can acquire more information about why some transactions fail. Use this knowledge to better communicate with customers and retain them.
Machine learning can also be used to address fraud by automating the detection and prevention process. Data can be used to create a list of billing actions that correspond with fraudulent activity and target potential threats. With this method, businesses are able to collect and analyze data to identify future risks and address them accordingly.
Putting data into action
These examples demonstrate the importance of monitoring and analyzing data at each stage of the subscription lifecycle. In order to produce results, however, your data has to be complete. Earlier this decade, software provider ServiceSource suggested that $1.4 billion in recurring revenue had been lost as a result of incomplete data, missing data, and poor analytics.
Keeping track of all of your data is impossible without the right tools. You need versatile functionality that allows you to do everything from segmenting data sets to analyzing long-term sales trends. Only with a full picture of your data can you gain the most actionable information.
To achieve this, you need a robust subscription management and recurring billing platform that will help you monitor and analyze every step of the subscription lifecycle. The right fintech addition to your technology stack can ensure that you are leveraging your data to make informed, growth-oriented business decisions.