140 characters isn’t enough to reply to the inquiries about the impact of automatic renewals on our business. Because of this I thought I would write-up a quick post with the backstory, how we’ve implemented automatic renewals, and perhaps some closing thoughts.
Let me be clear. Automatic renewals are not some sort of new business technique that I’m sharing with you. I’m not under some sort of delusion that I am revealing some little known revenue boosting secret. The fact of the matter is that WordPress businesses, like my own, have been behind the curve in a lot of commonly held practices. This is just one of many.
How it all began
A little over three years ago I was at Pressnomics 2 with my business partner. It was our first ever business conference and we went to it with absolutely no agenda. When we got there we heard about all the people who were trying to make deals and partnerships and felt like we were really unprepared for such conversations. That was all during the first day, but by evening we had regrouped and started thinking a little more strategically. The pursuit of the big thing was in full swing and I can honestly tell you that there are relationships that we have today because of that change of thinking. But that’s not the point of this post.
In a dinner conversation the topic of renewal rates came up and we were al lamenting over how poor our own rates were. Some as low as 7 percent with the outliers only getting to about 30 percent. It wasn’t long before I had a conversation with another business owner who was boasting 80 percent renewal rates for their product. Their secret? Recurring automatic renewals.
While that is a little of an oversimplification, it was clear that most in the WordPress space were oblivious to this concept or at least had written it off for technical or philosophical reasons.
A three-year journey starts with a single step
The next morning I made it my mission to put a bug in Pippin Williamson’s ear about these renewal rates I was hearing about. Most of you already know that he’s the creator of Easy Digital Downloads, the e-commerce solution that we use for Ninja Forms. I thought I might have to nag to get him to see how important something like this might be, but I didn’t. He was instantly onboard. In fact, that very afternoon we started noodling around with the idea. An idea that took about 2 years to complete.
On April 15th, 2016, we configured Recurring Payments, an EDD add-on and switched all Ninja Forms products to subscriptions.
Please keep in mind that we’ve only had a half month of renewals coming in so far. Even though, I would love to share what I’ve been seeing.
- 16,700+ subscriptions created in the year leading up to renewals
- 4x increase in renewals (19.93% to 79.73%)
- $1,500.00 (2.3x) increase in refunds (statistically insignificant, but also still very early and I expect this to increase which will also decrease our renewal rate a bit as well)
There are plenty of other numbers like the number of cancellations and failed payments, but even with this small sample size we can see that this was a significant move for our business. I am already creating some testing models and forecasts based on this data and I will refine it as the numbers have a larger sample size to validate it.
The short of it is that with only 15 days of auto renewals, April was our best month ever and it contained our two highest weeks, days, and weekends.
How are we handling recurring subscriptions
As I have stressed a few times, we are only half a month in so I don’t consider ourselves experts at this. I do think that results are pretty dramatic and thus our imperfect implementation below might help as a basic starting point on which we can all improve.
The initial set-up
There are plenty of settings and configurations you can tinker with, but here is our set-up from a conceptual point of view.
- Automatic renewals should be on by default and there should not be an option to opt-out at checkout. Automatically recurring subscriptions are how you sell your products now.
- We offer an incentive for not cancelling the subscription. For us it’s a 50% renewal discount. Manual renewals are at full price. You certainly don’t need to do this, but my opinion is it makes the proposition easier for the customer.
- Disclose very clearly that your products are subscriptions with automatic renewals. We do this on the individual product pages along with our Terms and Conditions.
Leading up to renewals
Once the above is set-up it’s time to wait for the renewals to start rolling in, but there are some things you should have in place to make the process as smooth as possible.
- We send two emails notifying the customer of the coming renewals with instructions on how to update their payment details as well as how to cancel if they so desire. We send one at 30 days and 2 days prior to their renewal date. The goal here is to remove any unwanted surprises. No matter how much you disclose that your products are subscriptions, not all customers will expect the automatic renewal. It’s also a good idea to use this opportunity to tell them the benefits of their subscription, although you should be doing this throughout the year.
- If they have already canceled their subscription we run them through the normal manual license renewal process of 3 emails leading up to expiration. This could certainly be tweaked to incentivize the manual renewal, but at this time we’re not doing that.
- We prepared our team for the increased requests pertaining to renewal refunds, failures, and general questions. Expect an increase on these tickets. They are actually very easy to handle, but you will get a bump.
In my estimation this is a bare minimum set-up. Books could be written on this topic, in fact, they have been. I’m not claiming to know anything at all about the best way to handle this process. I’m only sharing how we have it set-up at the very moment of this writing and how it’s been working for us. You can expect that in 6 months there will be a lot of changes in our own process and I’ll be sure to share those as well.
Are you set-up with automatic renewals? How’s it going for you so far? What tips would you recommend?