“The key is not spending time, but investing it” Stephen R. Covey, an American author once said. He could not have been more correct because in today’s subscription-driven economy, this quote rings truer than ever. Companies offering services like SaaS, streaming platforms, and subscription boxes are shifting their focus from mere customer acquisition to retention marketing. This approach emphasises investing in long-term customer relationships. With customer acquisition costs rising and markets nearing saturation, 95% of U.S. households already subscribe to at least one streaming service, according to a study by Kantar, the ability to retain and engage customers is now paramount. “Per INMA Benchmarks, in the past five years median churn rates for digital-only subscriptions have stayed below five percent, and I interpret this as proof of people’s demand for quality journalism and the strength of news subscription products. This year is likely the best since the pandemic in terms of demand for news, as it is driven by big news events across the world like elections affecting 4 billion people, including in India, and large sports events such as the Olympics or cricket championships,” Grzegorz Piechota, researcher in residence, INMA, told BrandWagon Online.
A business imperative
Retention marketing is no longer optional for subscription services. “Per INMA Benchmarks, based on 243 news brands worldwide, the median monthly churn rate for digital-only subscriptions in Q2, 2024 was 3.9%. When compared to cross-industry benchmarks by a software vendor Recurly, this is lower than the average churn rate across industries at 4.1%, and a significantly lower rate than of streaming services at 6.9%,” Piechota mentioned. SaaS companies, for instance, see a dramatic difference in retention rates based on Average Revenue Per Account (ARPA): high-ARPA businesses achieve retention rates exceeding 85%, while lower-ARPA counterparts may only manage 63%, according to a report by ChartMogul. For streaming services, the stakes are even higher. With 95% of U.S. households already subscribing to at least one platform, retaining users is crucial in a market where acquisition potential is diminishing, Kantar reported.
“Our estimates of churn rate in the industry range from 30% – 45%. The churn rate has been a challenge for the industry for some time. Consumers seek maximum value in limited consumption periods, as SVoD is still in the early stages. Churn rates differ for cohorts, and consumers who have been through one-two churn cycles tend to invest more trust and share of wallet with us. We have been consistently improving churn rates by strengthening the content pipeline (a recent example is 13 titles in 13 weeks on ShemarooMe for Gujarati language consumers) and by better analytics/retention marketing,” Saurabh Srivastava, chief operating officer, Digital Business, Shemaroo Entertainment Limited, said. It is believed that as the churn rate significantly impacts the lifetime value of consumers, the focus on it has to be razor-sharp, given that consumer acquisition costs are a challenge for OTT players..
To combat churn
The monthly churn rate, a key performance indicator for subscription businesses, has become the Achilles’ heel for many brands. To counteract churn, businesses are increasingly leveraging technology to craft personalised and seamless customer experiences.
Streaming services like Netflix and Spotify rely on AI-powered recommendation engines to keep users engaged. These engines analyse user preferences to suggest relevant content, which helps increase the likelihood of users returning to the platform. “We are fully aware of the benefits of leveraging AI to better manage our retention. It will help predict churn with greater accuracy, build personalised experiences based on user behaviour, allow delivery of exclusive tailored content and recommendations, identify at-risk customers and proactively intervene with targeted offers and incentives. We also foresee use cases where AI can positively optimise marketing campaigns, deliver chatbot support and improve overall customer experience,” Vitasta Kaul, chief marketing officer, Hoopr. ai, a music licensing platform, said. SaaS companies are adopting automated campaigns to address specific stages of the customer journey. For example, timely reminders, onboarding tutorials, and tailored promotions ensure that customers stay connected to the service. Furthermore, the subscription economy thrives on convenience. Platforms that offer intuitive and glitch-free interfaces retain users longer. Streaming services that allow multiple profiles or easy downloads often see a measurable boost in customer satisfaction. Many subscription boxes and streaming services offer exclusive content or perks as retention tools. However, this can lead to reward fatigue if not balanced carefully, as customers may lose interest when rewards diminish. “Content exclusivity is key to the subscription model – users will not only pay for an ad-free experience, but exclusive and premium content also drives consumers to pay. By analysing user engagement and feedback, we determine which types of content resonate best with our audience, allowing us to curate future releases effectively. Across our multiple pipes, the content strategy is carefully designed to cater to both AVoD and SVoD consumption,” Srivastava said.
The pros and cons of retention marketing
Retention marketing offers a host of advantages, but it also comes with challenges. For brands, the benefits include reduced customer acquisition costs—retaining a customer is up to five times cheaper than acquiring a new one—and the ability to foster loyalty and long-term profitability. On the flip side, over-reliance on incentives such as discounts or rewards may result in diminishing returns. Consumers, while benefiting from personalised experiences, may express concerns about data privacy as businesses use advanced analytics to track behaviour. “The thing with discounts is that it works every time, but overuse leads to decreasing marginal utility as well as destruction of price point and value. So, we do use discounts for limited periods and campaigns, and they do help us win back consumers on the verge of churning out. At the same time, if you have a big title coming up and if you target a campaign on users due for renewal, the numbers are favourable. We see the latter as more sustainable,” Srivastava said.
Behavioural studies usually show that regularity of consumption, measured by the number of days or aggregated time spent consuming content, is the best predictor for someone churning. “Apart from engagement and average churn rates, news publishers usually track also so-called survival rates broken down by cohorts (e.g., people who subscribed in January vs. February, or people who got a trial vs. people who did not), and calculate the lifetime value of subscribers. Lifetime value is a measure of how much money a subscriber is worth for the company over the lifetime of the subscription. Companies may calculate it, for example, for three years. They used this metric to understand how much money they can spend on promotion or servicing that subscriber,” Piechota added. Adtech platforms, too, face pressure to evolve. They must now offer sophisticated tools that predict user churn and optimise engagement, ensuring their relevance in a landscape increasingly dominated by retention-focused strategies. “Conscious and continuous investment in CX programs that prioritise retention just as much as customer acquisition can help address churn. SaaS strategies that focus on nurturing in-depth product usage can work well, such as building excellent support and account management teams, offering robust integrations with other ISVs, putting together a customer education toolkit that provides self-help guides, customer case studies, how-to videos, tip sheets, etc., and creating online and offline peer forums to engage and learn about how to derive the maximum value from the product,” Anand N S, VP, revenue acceleration, Zoho Corp., added.
AI and the future of retention
From what is understood, artificial intelligence is at the forefront of retention marketing. Predictive churn models, sentiment analysis, and real-time personalisation are becoming standard practices. For example, AI-driven chatbots provide instant customer support, reducing frustration and improving satisfaction. Behavioural analytics allow brands to tailor marketing messages, ensuring relevance at every touchpoint. Looking ahead, the integration of augmented reality (AR) and gamification into retention strategies holds promise. AR can offer immersive experiences, particularly for e-commerce and subscription services, while gamification mechanics—points, rewards, and milestones—keep users engaged over longer periods. “Primarily, we use AI in customer recommendation engines, which help tailor content suggestions based on user preferences. We also use AI for responding to customer queries, especially through chatbots, to manage customer interactions more efficiently. In terms of marketing, we leverage AI to track how customers are interacting with our app and website. This helps us refine our strategies and enhance the user experience. Currently, AI plays a key role in managing customer touchpoints through our app and web platforms, as well as in delivering personalised messaging and recommendations,” Sukhpreet Singh, corporate head of marketing, Dish TV and Watcho, commented. While there are many new cases for AI, brands are actively testing these for various partners to explore how they can be implemented across the entire customer lifecycle. However, the current benefits from AI mostly lie in the field of customer engagement, personalisation and improving overall interactions on the digital platforms, he added.
As markets saturate and competition intensifies, retention marketing is no longer just a tactic; it’s a necessity. Businesses across subscription models—whether SaaS, streaming, or gaming—must invest in strategies that prioritise customer engagement and loyalty. By leveraging AI, creating personalised experiences, and maintaining a balance in incentives, brands can retain their competitive edge. “As publishers grow their market penetration, they will increasingly convert subscribers who are not heavy users of news. Therefore, they might expect to see higher churn rates for those new converters. This requires a robust anti-churn strategy that includes effective on-boarding of new subscribers, activities nurturing the value of subscriptions, offering upgrades and bundling with other services, and working with payment vendors to avoid payment failures,” Piechota added.
The subscription economy thrives not on the quantity of its subscribers but on the quality of their engagement. In the words of Stephen Covey, the focus is not just on time spent but on how it’s invested—ensuring that every interaction strengthens the bond between brands and their customers.