Why Silent Cancellations Can Kill Your Business

by Richard

 

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Silent cancellations will slowly bleed your business dry while simultaneously drawing your attention away from bigger problems. Why? Because nearly everyone likes life to be easy. Whether you’re running late and cutting across traffic, looking for a quick bite to eat and heading through the drive thru, or planning a weekend getaway, people are always looking for the path of least resistance.

This is especially true when people have recurring subscriptions to different services. The path of least resistance while your account is in good standing is to stay subscribed – great news for you! The path of least resistance when your account is in arrears is to leave it that way and move on – not so great news. This turns out to be a gigantic problem, because it’s nearly inevitable that most customers will have an issue with their bill processing at some point.

You might be thinking, “What’s the big problem? It’s just the occasional account that will be fixed with a quick reminder email.” That’s possible, but it’s important to realize that the issue isn’t just that a single account has gone bad:that single apple might just spoil the whole bunch.

A Symptom of Customer Ignorance

If a customer silently cancels their account with your company, it’s bad. What’s worse is that it’s a symptom of a much larger issue: the customer doesn’t understand the value they’re getting from you. If the customer knew how much money they were saving, or how valuable your service is, or how their life is improved by subscribing, they wouldn’t let their account go stagnant.

This may seem small at first, but it really is the tip of the iceberg. If this customer doesn’t understand the value, that means you’re not actively communicating it. If you’re not actively communicating it to one customer, that means there’s a good chance that other customers are just as ignorant. If other customers aren’t aware, that means that this silent cancellation that seemed insignificant is actually the first of a creeping wave of cancellations.

This is why it’s so important to address this issue as soon as possible. Unless you do something about it, every month that goes by means increasing numbers of silent cancellations, which spiral out of control quickly.

Irreversible Loss

Every product in the world has a very specific addressable market size. Even the largest technology companies that have billions of users have an addressable market size defined by people who have access to the Internet. These types of numbers are used in calculating the total market potential for many companies.

Now, it’s probably safe to assume that you’re working with a smaller number of customers than the Internet giants. Let’s say there are 1000 people who would theoretically want to purchase your product.

Hypothetically, let’s say that you lose a customer through a silent cancellation. The first thing to realize is that it’s going to be very difficult to win them back. As we addressed earlier, the path of least resistance is the one people normally take. Even when they get an email from you notifying them of an issue with their account, the easiest option is to hit the Archive button and move on with their lives. Some customers will fix their account, and some won’t. Those that don’t fix their account will decrease the addressable size of your market.

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What this means in concrete terms is that while you started with 1000 potential customers, you now have 999. One-by-one, they tick away. It’s not linear though – with every customer you lose, you lose potential referrals and potential opportunities to cross-sell them on other products or services. It’s a ripple effect. These are dollars that you could have kept if you had proactively managed your customers’ success, but now they’re dollars that aren’t going to be returning anytime soon.

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No Two Cancellations Are Alike

You might wonder whether silent cancellations are worse than regular cancellations. Unfortunately, the answer is yes. Compared to regular cancellations, silent cancellations are missing a number of features.

If we look at the anatomy of a standard cancellation, there are a few elements that stand out. First, the cancellations are proactive. Second, there is a conscious intent behind the cancellation. Third, there’s typically some warning that the cancellation is about to happen. When you move from a standard cancellation to a silent cancellation, you lose each of these elements. Sadly, these losses are substantial.

Loss #1: Proactivity

When a customer decides to cancel their account, they do it actively. This means that they see the account they currently have, decide they don’t want it anymore, and then take steps to end the account. Compared to silent cancellations, this is surprisingly great: it provides a real metric of dissatisfaction that can be used to make changes in a product. This is contrary to silent cancellations, which at best are a signal that your customers are apathetic.

Loss #2: Intent

When a customer decides to cancel an account, the decision is usually based on clear reasoning. It might be that they’re unsatisfied, or it’s too expensive, or they’ve started using a competitor. Whatever the reason, there’s an opportunity to learn from their dissatisfaction and make changes before the cancellation is finalized. This is regrettably unavailable with silent cancellations.

Loss #3: Early Warning

Lastly and most importantly, regular cancellations provide an opportunity to communicate with your customer. When a customer begins to take steps to cancel their account, you can intercept them before the account is truly closed. This is the opposite of a silent cancellation, which can be unexpected and has already happened before you had any idea it was happening.

Distracted by Incremental Gains

Regardless of the type of cancellation, each cancellation needs to be addressed in some fashion. If a company doesn’t have an automated system in place to reduce the number of silent cancellations, you’ll be stuck manually figuring out a solution for each silent cancellation.

On a practical level, this means that time is being wasted treading water and keeping customers around rather than using your time to grow your business. Instead of building new features, designing marketing campaigns, hiring great new employees, or the thousand other things you can be working on, you’re spending time playing whack-a-mole with a problem that should have an automated solution.

While each time you reconvert a silent cancellation into an active account seems like a victory, it’s more like a draw. You’ve saved a customer, but by focusing on incremental gains you’re setting yourself up to lose ground on a larger level.

The Final Prognosis

Unless you begin to take the initiative and work to prevent silent cancellations, you’re going to be in for a world of hurt. You’ll find yourself with fewer customers, with less insight into what customers want, with time being unnecessarily wasted, and with a slowing growth rate. To be concise, there’s only one prognosis when silent cancellations are shrinking your customer base: the death of your company.

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