Case Study – Now NOT To Handle A Membership Site Cancellation (And What To Do Instead)

As you know, a Membership Site, SAAS or some kind of business where people pay monthly subscriptions is usually seen as far more valuable than one where people make one off purchases because the income tends to be more reliable. You can start off each month knowing roughly how much you will earn based on the previous months’ income, plus new subscribers and minus cancellations.

In addition to buyers being happy to pay a higher earnings multiple for subscription business than for other businesses, banks like lending for subscription businesses and Venture Capital investors are more comfortable funding them if you want to raise capital

That’s why one of your main goals is to keep existing subscribers happy with great content and/or services, while doing everything you can to attract new subscribers.

Of course you are going to have attrition because people will cancel their subscription for a whole bunch of reasons, and you are never going to know why unless you ask them. Even then, some people aren’t going to tell you the real reason. They just aren’t.

How NOT To Treat Your Membership Site Members

With this background, I thought I’d share an example of how NOT to respond to somebody who cancels their subscription to your product or service.

As you know, I am an active trader and I’m a member of a number of large trading and investing Facebook groups. My own Facebook group has about 3,400 members, with around 800 of them active participants.

I’m always on the lookout for products and services to help other members with their analysis and trading education, and when I find something truly worthwhile I share it in my group and sometimes in other groups where that is allowed.

For the last few months I’ve been subscribing to a trading service from a guy who thinks very much like me. He’s had pretty good results overall, and I was relatively happy with the updates he was sharing.

Thing is I prefer to do my own analysis, and the outside influence from him was becoming more of a distraction than a benefit. So yesterday before my next month’s payment was due, I cancelled my subscription.

A few minutes later, I received this message from the owner (I’ve redacted his details to protect his identity):

Membership Site

As you can see, his message is highlighted and reads, LOL you let the volatility get you didn’t you? Probably overleveraged too?

Now sending a message like this to someone who’s been a trader and investor in markets for over 25 years is about as arrogant and condescending as somebody can be. It is the sort of thing that can undo months or years of goodwill with just 12 words.

I was pretty shocked, but here’s the initial reply I sent back:

membership Site

I was initially just going to move on but after getting over my initial shock that somebody who knows nothing about me could make such a ridiculous and uninformed assumption based on zero evidence, I thought this might be a teaching moment that could help him in the future.

Here’s the message I sent a few minutes later:

Membership Site

As you can tell, I was a little pissed off but I wanted to point out it’s not a good idea to make assumptions about why people do anything. There is never any upside to doing that, there is only ever downside.

A few minutes later I received this reply:

Membership Site

I was speechless…

So Let’s Pull This Reply Apart And Examine It Step By Step

In the first line he writes: “I’m pretty sure I hit the nail on the head”. So right up front he is calling me a liar. So far he’s off to a great start if he wants to lose any future business from me.

In the next few lines he doubles down: “I need to get rid of novice emotional traders. You folks are just too draining, always needing babysitting during every correction, always overleveraging despite my best efforts to stop you from doing that.”

The arrogance and patronising superiority dripping from these few lines is breathtaking. He is saying that anyone who cancels their subscription, regardless of the reason, is a stupid, clingy newbie who isn’t worth his time.

Nice…

Then he brings it home with this clanger: “Better to just clean out these people. I can’t teach them and I can’t prevent them from destroying their portfolios no matter how hard I try.”

Talking down to one person like this using terms such as “You folks” and “these people” is never going to endear them to you. As you can imagine it’s more likely to infuriate them.

Again, there’s zero upside to doing this.

I didn’t reply back because any further correspondence seemed futile at that point.

So What Can You Learn From This?

1. Only Good News By Email

Only ever use email for GOOD News. If you have to share bad news or something negative with somebody else, do it in person, on the phone, over Skype, Zoom or some other way you can do it personally.

That way people can hear your voice inflections and tone, (and potentially see your body language and other non-verbal cues), and you can deal with misunderstandings immediately so things don’t go pear shaped.

There are countless ways an email message can be mis-read, misunderstood, misconstrued, or mis-interpreted which can turn an innocent communication into a relationship destroying disaster.

Remember, only Good News by email

2. The customer is always right (even when they are a pain in the arse or wrong)

There are going to be numerous occasions when you’d like to unload on a customer or client because of something they said or did. The way to handle it is NOT to write a message like the one above and then blast it back while you are angry or emotional.

By all means, you may want to write a message expressing your anger and frustration and why the customer is wrong, why he is a moron or why she is a complete dumb-arse. That’s fine.

The important thing to remember is once you’ve pounded out a message like that, walk away, take a breath, calm down, and then DELETE it.

Then either leave the issue alone, contact the person personally, or write a more constructive message (more on this below).

It doesn’t matter what type of business you are in, but particularly if you have a Membership Site, SAAS or other subscription business, losing a customer can end up being very expensive.

Second And Third Order Consequences

We always have to consider the second and third order consequences of every decision we make, so let’s do a hypothetical example based on the situation we’ve been discussing.

After receiving the message pointing out my character flaws and explaining how I suck as a customer, what are the potential Second and Third order consequences that could come from that?

Probably nothing positive, that’s for sure.

If the person receiving a message like this is an angry keyboard warrior (which I am not) your reputation could be trashed online to the point you may not be able to recover. Social Media has given everyone a megaphone and some people just love to spread bile, hate and negativity wherever they go.

I’m sure you know what I mean.

A disgruntled customer can:

  • Leave a negative Google Review which can permanently destroy your reputation
  • Trash talk you in Facebook Groups, on Instagram, Snapchat, YouTube and any one of dozens of other Social Media sites. Depending on how determined they are, they could potentially reach millions of people with a negative message about your business and there’s often nothing you can do to stop the bleeding. You could find yourself ‘Cancelled’ with no recourse. If the mob comes for you they don’t care about facts or logic or inclusion or diversity or anything like that. They just want you destroyed.
  • Report you to all types of overbearing Government Regulators who love prying into the affairs of businesses looking for any kind of potential malfeasance so they can prosecute and shame you
  • Burn through hours of time for you or your customer support people in an effort to rectify their grievance, regardless of how minor it may be

As I said, there is plenty of downside. No upside.

On the other hand, by finding our exactly why a customer cancelled their subscription (or asked for a refund), you have a great opportunity to remedy any issues and reactivate a subscriber or sell them something else, either immediately or in the future.

What Are The Potential Second Order Consequences?

First up, a reactivated customer is going to immediately start paying you again, and for a digital subscription business such as a Membership Site the cost of adding one more member is basically zero. The entire amount is profit because you have no marketing or fulfilment costs. It’s probably the closest thing to free money you can find.

Next up, a happily reactivated subscriber who feels heard and appreciated is likely to share their positive experience on Social Media and could potentially generate a lot of new subscribers for your business.

Let’s Do Some Numbers

Let’s do some basic numbers based on a $50 per month subscription being shared with members of my own Facebook Group.

To start with there’s $50 per month which equals $600 per year from my subscription.

Then if I share the service with my 3,400 Group members and over time 5% of them decide to join, it could lead to $600 per year multiplied by say 170 members = $102,000 per year

Third Order Consequences

But it gets even better when we look out further.

If we apply a multiple of 5 times revenue to this amount to work out the increase in the business’s value from reactivating this one customer and gaining their referrals, we get $513,000. This increase in the business’s value is an true asset that can be leveraged even further.

In our trading example, let’s say the owner goes to a financier or bank and has a line of credit approved for 50% of that $513,000 which is $256,500.

As we all know, the stock market has a habit of rising for periods of time and then crashing every few years. The great thing is traders and investors know that after every crash, the market always recovers and eventually makes a new high.

What if our trader waited for the next crash and then ploughed the $256,500 in funds from the overdraft into stocks that are now worth half the price they were a few months ago or even less, knowing they will eventually recover?

This Can Become A True Wealth Building Opportunity…

Now this is only one option for leveraging the increased value of the traders business just by being good to customers and not being an arsehole when somebody cancels their subscription.

Other options could be bringing in Venture Capital partners to fund future growth, or selling part of the business to generate a bit payday, or creating a Hedge Fund, or any number of other ideas.

A Better Idea

So now you’ve seen the potential opportunity of NOT burning customers with sanctimony and condescension, what would be a better option for working with a subscriber who cancels their membership?

What if we started by thanking the subscriber for their previous business, found out why they cancelled (or why they asked for a refund), and then went out of our way to restore and even strengthen the relationship?

What might that look like?

Well, it could start with an email saying something like this:

___________________

Hey Rocky,

First of all I’d like to thank you for being a subscriber for the last 6 months, I truly appreciate your business.

I noticed you’ve just cancelled your subscription and I wanted to reach out personally and make sure everything is okay. I try really hard to make the newsletter as helpful as I can, and I apologise if the things I’ve been sharing didn’t suit your needs at the moment.

So I can improve the newsletter and make it more relevant for you, I’d really appreciate you letting me know what made you decide to cancel your subscription today.

Please be as frank and honest as you like. I truly want to know how I can improve the service to meet your needs.

To let me know why you cancelled and what we can do to improve the newsletter, please hit reply and share your thoughts.

Thankyou again for giving us a try,

Warm regards,

Rocky

P.S. I’m really serious about hearing back from you, and I will read your feedback personally. Please hit reply right now and let me know what made you decide to cancel and how we can improve.

___________________

Not everyone is going to reply, but many people will. When you hear their feedback you (or somebody on your team) can work with them to personally overcome any issues and in many cases reactivate them again.

Maybe you could offer them a bonus for coming back on board, or a reduced rate, or personal coaching from somebody on your team, or extra training and support. Whatever they need, offer it to them if it’s within your power.

Remember, every subscriber you reactivate is potentially worth thousands, tens of thousands or even hundreds of thousands of dollars to you over time. Make people an irresistible offer to reactivate their subscriptions and watch the cash roll in.

I hope you have found this post helpful, and if you have any questions, feel free to post them in the comments below or get in touch using the contact page.

Thankyou for reading,

Warm regards,

Rocky

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