How Ad Injections Contribute to Customer Churn for Subscription Box Companies
August 14, 2019
by Tirtza Giles
If your eCommerce business operates on a subscription model, there are few problems you want to avoid more than low customer retention. That’s not just because it costs more to acquire a new customer than to keep an existing one (although it does), and it’s not just because returning customers spend more than new customers (although they do). It’s not even just because studies show that increasing customer retention by 5% can increase profits by more than 25%.
It’s because your business model is uniquely dependent on long-term customer relationships.
The online experience you offer shoppers is a key factor that can make or break your customer retention efforts. But for eCommerce companies across the board, the reality today is that you don’t have full control over that experience. During 15-25% of all visits to online stores, customers are exposed to unauthorized ads. It’s called Customer Journey Hijacking (CJH), and it’s undoubtedly limiting your ability to keep your customers – in other words, contributing to customer churn.
This post will explain what customer churn is, why it is especially threatening for companies that rely on eCommerce subscriptions, and how Customer Journey Hijacking contributes to it.
What is customer churn, and why is it such a critical issue for subscription box services?
Churn refers to losing customers who had previously been patronizing your business. Specifically, it can be calculated as a percentage of customers who left during a particular time frame. For example, if you started 2018 with 500 customers and ended it with 470 customers, your churn rate for that year is 6%. Churn rate can be calculated in other ways, too. For example, you could calculate it based on the value of business lost rather than by the number of individual customers.
It’s important for all businesses to aim to keep their churn rates as low as possible, but this goal is particularly crucial for subscription-based services.
One reason that the market for subscription box services has exploded in recent years stems from the business value of ongoing customer relationships. Online marketing is becoming increasingly competitive, which results in higher customer acquisition costs. When you’re fortunate enough to land a new customer, it’s more cost-effective to make sure they keep coming back than it is to acquire more new customers – and it’s even more cost-effective to get them to pay for a recurring service than it is to try to upsell them on additional products.
But there’s another side of the subscription box model that is important to consider: Subscription-based businesses have a harder time winning back churned customers than traditional businesses. In a regular transactional business model, the customer can just passively stop purchasing from you, but canceling a subscription requires active intent – the customer has to explicitly communicate their desire to end the subscription. And it’s easier to lure passive transactional customers back than it is to get customers to regret canceling their subscriptions.
The benefit that subscription box companies stand to gain by maintaining customer relationships, combined with the risk of losing a customer forever, makes it critically important for them to offer a winning customer experience. And that is precisely why Customer Journey Hijacking is such a threat to their business model.
How does Customer Journey Hijacking wreak havoc on subscription box websites?
If you have a subscription box website (or any other kind of eCommerce site), many of its visitors are exposed to unauthorized ads through Customer Journey Hijacking. Yet, because these ads are displayed using malware running secretly on those consumers’ digital devices, many retailers have yet to realize how their websites actually look to visitors whose devices are infected with this malware.
Worse yet, the vast majority of consumers are unaware of Customer Journey Hijacking – leading them to believe the injected ads they see on a company’s website are coming directly from that company. In fact, in Namogoo’s survey of more than 1,300 online shoppers, just 3% of respondents said that if they see a pop-up ad while visiting an eCommerce website, that means they have a bug on their own computer. Meanwhile, 78% said that if a retailer’s website has injected ads leading to other websites, that would be either “likely” or “very likely” to negatively impact their view of that retailer.
Adding to the problem of CJH is the content of these injected ads. Namogoo’s large-scale CJH analysis has found that 60-65% of all injected ads on eCommerce websites promote similar products offered by competing online stores. An additional 10% promote adult websites, while another 15-20% advertise for online gambling and other gaming sites.
Making these ads particularly troublesome is the fact that they are targeted toward each individual user, maximizing the chances that a particular shopper will click on them. Here’s how it typically works:
- Malware is secretly installed on the user’s digital device. In most cases, this happens when they download free software such as a mobile app or browser extension.
- The malware tracks the user’s online activity, building a personal profile reflecting their shopping preferences and habits.
- When the user visits an eCommerce website, the malware automatically displays injected ads selected based on the user’s profile. (Alternatively, this ad injection can occur via WiFi hijacking, exposing even users who have not downloaded malware to the risk of CJH.)
How are subscription box companies responding?
As awareness of Customer Journey Hijacking grows, online retailers of all types are increasingly realizing what an impact it can have on their bottom line. As a result, many of these eCommerce companies have started using intelligent solutions to block injected ads.
One company taking on Customer Journey Hijacking is the iconic subscription box brand Dollar Shave Club. After realizing what a threat CJH posed to its business model, this enterprise turned to Namogoo to stop injected ads from stealing away its customers. Working with our platform, Dollar Shave Club has improved its customer experience while boosting its overall conversion rate by 4.6%.
“We understood the potential impact to our sales just by seeing how these [injected] ads were pointing our customers to other sites,” explained Jason Bosco, Dollar Shave Club’s VP of Engineering. “Most customers are not technical enough to understand that these ads were not actually coming from us, and the poor user experience they were causing was harmful to how these customers would perceive our brand.”
As subscription box businesses become increasingly aware of the full impact of Customer Journey Hijacking in the future, we expect to see more and more companies follow Dollar Shave Club’s example – stopping injected ads, improving their customer experience, and overcoming a key factor that contributes to customer churn.
How are injected ads on your eCommerce website contributing to customer churn, reducing your conversion rate, and hurting your total revenue? To see the impact of Customer Journey Hijacking on your business, you can get a free website analysis.