Should marginal cost in subscription services be a factor in determining customer engagement?


A colleague of ours recently canceled her digital subscription to a well-known newspaper. She was relatively happy with the product, but didn’t feel that the money was justified, especially given all the other subscriptions she already had.


When she called to cancel, she was surprised to find that the ‘customer retention’ team was not that interested in learning why she wanted to cancel, and did not try and find a solution to keep her as a customer.


On the one hand, I can understand the company’s rationale. What companies don’t want to do is condition customers that threatening to leave a service is a sure way to get their costs reduced.


But on the other hand, the company did lose a customer that was possibly mostly profit for them. What I mean is that the marginal cost (the cost of producing an additional unit of service) to that newspaper to have her as a customer was probably quite low. Their cost doesn’t go up dramatically between the 750,000 customers and their 750,001. Which means that of the $20 she was paying each month, most of that went directly to the bottom line.


All of this is not to suggest that this company does not have a sophisticated analysis driving their customer retention program. I’m simply saying that it is surprising to me that, given the economics of what we can safely assume is their cost structure, they didn’t even try to retain her.


Josh Brackett

CEO Sinousia

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