Customer churn is an important metric that highlights how many of your customer bases decided to no longer use your product and/or service, during a certain period.
Churn rates will tell you if your customers are staying or going, and this can guide your efforts moving forward.
What drives customer churn?
Aggelos Mouzakitis, CEO & Growth Product Manager at Growth Sandwich joined us as a guest on the Product Marketing Insider podcast about his experience and expertise with customer churn:
“In my view, there’s only one driver of attrition rates. I know it might sound very theoretical but I wish people would deeply empathize with this one reason.
“It’s a very, very nasty thing. And the one reason that causes it’s that expectations aren’t met the way that our users want them. Or, another way or solution meets their expectations more, or better.
“As product marketers, we tend to focus a lot on fancy metrics, buzzwords, and complicated concepts. But, at the end of the day, when a customer cancels his or her subscription, there’s only one reason: there’s an expectation that’s not being met.”
Why is low customer churn important?
Many companies pour their blood, sweat, and tears into understanding the ins and outs of customer churn, and why it’s a fundamental part of their business operations.
And with good reason; as we alluded to earlier, customers are a vital cog in ensuring the wheels of a business keep on turning, and although the odd customer may slip through the net here and there when a company loses a lot of customers, they hemorrhage money, and that’s never a recipe for success.
Is churn good for business?
While the emphasis is often placed on how to reduce churn, losing the odd customer can spur companies to explore new ways to improve their products and customer success model.
Moreover, customer churn supports companies in leaving behind customers who can be tricky to manage, or don’t bring much value to the business.
What is churn analysis?
This data can be used to identify why your customers are leaving, and to develop strategies to reactivate customers, or reduce them altogether.
How to calculate customer churn
While churn can be a blessing in disguise, at times, the aim of the game is to achieve a high customer retention rate.
In this article, we outline why it’s important, and outline further methods you can use to calculate your customer churn.
What is a good churn rate?
On average, churn rates for a SaaS company sits in the region of 3-8% per month, while the average annual churn rate is 32-50%.
To minimize the threat of churn, it’s imperative that you speak with your customer and continually develop your product to make it stand out in an increasingly competitive market.
How to spot signs of upcoming churn
In an ideal world, your customers’ loyalty will remain intact, but customer attrition is part and parcel of working life - it’s impossible to please everyone.
However, that doesn’t mean you can’t remain vigilant and keep your eyes open for potential signs that a customer could be set to leave. You also need to do your utmost to understand your customer base and earmark what influences their buying habits, as explained by Aggelos Mouzakitis, CEO & Growth Product Manager at Growth Sandwich:
“When it comes to the customer’s expectations, it might seem like an obvious thing to discuss. Expectations aren’t met, so people leave. But it's not always an obvious thing.
“When customers knock on my door and tell me, ‘We have a retention problem’, what they don't realize is that churn, low marketing performance, or other fundamental problems, aren’t really the problems. They're the symptoms. It’s the reflection of the real problem.
“When you see people canceling, this isn’t the actual problem. This is the way that the problem is actually reflected in your numbers. So, you need to deeply understand why people do what they do, fix the thing that causes the problems, and then go back and check churn.”
What is a churn risk?
These signals are indicators that your customer is going to leave your business. This could be seen through a drop in overall user activity, a decrease in feature or service subscriptions, or low customer satisfaction.
“There are a couple of things that you can monitor in order to understand that there’ll be churn.
“Negative feedback is a vanity metric. A customer that gives you negative feedback doesn't necessarily plan to leave. For example, Ryanair has been voted the worst airline in the last seven consecutive years but everybody's still using it. This highlights that negative feedback doesn't always correlate with customers leaving.”
While Aggelos makes a valid point, it’s still good practice to develop a customer feedback strategy to address and resolve problems faced by customers that are on the cusp of leaving your business. Here’s a simple strategy that you can follow to avoid customer attrition:
- Identify which customers would have the most effect on your business if they left.
- Use personalization tactics to reassure your customers that you care about their service to prevent them from leaving.
- Ask your customers questions through surveys, polls, or interviews focusing on what issues they have with your product, what they would like changed, and what would persuade them to stay.
- Listen to the complaint properly and acknowledge it as a serious problem for your product or service.
- Where appropriate, change, refine, and improve your product based on this feedback.
Customer support tickets
Customer support tickets are a term used to describe the interaction between the customer and the service representative. They are typically used to resolve problems with the service or product to improve the user experience.
However, as Aggelos explained, customer support tickets shouldn’t necessarily be viewed as an indicator that your customers are preparing to seek pastures new:
“Customer support tickets don't necessarily mean your customer is going to leave. But churning the activity definitely means that something’s wrong, and you need to do something. The reason I'm saying that is that it's quite easy for us to be swamped among all these metrics and numbers.
”Develop a support ticket system that allows you to maintain a list of all common problems your customers may be experiencing with your service. You can then use this to implement a plan to improve the product and business. And, importantly, contact potential ex-customers about remaining a part of your company.”
You can create a system by using support ticketing tools to manage, organize and easily locate the conversations you have with your customers.
Here are some of the most popular tools to use:
- HubSpot Ticketing Software
- Zoho Helpdesk Ticketing System
While Aggelos explains that both feedback and customer support tickets are helpful signs to identify and work on in order to avoid customer attrition, he argues that they aren’t the most effective.
Activity churn is when a customer stops using a product but forgets to unsubscribe from the content. They couldn’t use the product for months and then notice that money’s still being taken from their account, so then they decide to unsubscribe.
Monitor your product analytics
Aggelos Mouzakitis, CEO & Growth Product Manager at Growth Sandwich outlined things you can do to avoid customer attrition, especially in terms of activity churn:
“The time that the customer decided to leave can actually be spotted within our product analytics because this customer started declining activity, increasing tickets, and showing signals that something is going wrong. This is, in my opinion, the best thing that we can monitor to prevent this from happening.
“When churn happens, a signal should be implemented that’ll reach out to our customer success team to proactively see if something’s wrong, get the feedback, and perhaps pass the feedback to the product team. This is one of the easiest and fastest things that we can do.
“In my experience, prevention can actually save almost 30 to 40% of the churn that you actually have. So we have one first layer which is prevention that can work if you just monitor activity churn.”
Types of customer churn
Involuntary churn is when a customer’s access to a product or service is ended by the company itself.
For example, if payment methods can’t be processed, or the customer is violating the terms and conditions of their contractual agreement, these are typically considered suitable grounds for the company to bring an agreement to a close.
As the name suggests, the customer is involuntarily ending their association with the company, and the decision is taken out of their hands.
Voluntary churn is when the customer stops using the product or service on their own accord. This can be attributed to factors such as poor service quality or financial reasons.
What are the causes of customer churn?
Whether a customer churns voluntarily or involuntarily, a root cause can always be attributed to why they’re no longer a part of a company’s client base - a customer doesn’t just decide to leave with no good reason.
Let’s explore a selection of reasons for customer churn.
Nailing your pricing strategy isn’t only important for a successful product launch, it’ll contribute a great deal to pleasing the customers who are a part of your target market.
In many ways, pricing is tricky, because everyone’s bound by varying degrees of financial boundaries.
However, you can get the golden nuggets of information you need by speaking with your audience, understanding their respective budgets, and helping you create a product that A) will solve their problem, and B) won’t break their bank account.
If prospective customers believe your product is overpriced, then they’ll seek a lower-priced alternative, and you’ll be left kicking your heels, while your competitor benefits from poor planning.
That said, it isn’t only overpriced products you need to think about. If you release an offering and it’s ludicrously cheap, this can make them think twice about whether your product is credible, and they may be tempted to pay marginally higher prices with another provider to secure a product they perceive to be of higher quality.
Poor customer service
Have you ever bought a product, encountered technical difficulties, and experienced a thoroughly forgettable experience when you’ve sought help?
If so, you’ll be familiar with one of the main reasons so many companies experience high levels of customer churn.
Bringing an awesome product to the customer is just a piece of a pretty large puzzle. You can have the greatest product on the market, but if your customer support network is appalling, this’ll have a profound impact on user experience, and before you know it, there’ll be here one minute, and gone the next.
Ask yourself: if a customer experienced a problem and needed technical support, could they get the help they need quickly, efficiently, and practically?
If you’re unable to answer with a resounding ‘yes’, then go back to the drawing board, and start from scratch, because poor customer service is a surefire way to secure high churn rates.
Lack of customer engagement
The customer journey doesn’t end when they hand over your cash and receive your product or service; companies need to show a vested interest in engaging with their customers to create an emotional bond between their brand and their clientele.
When brands engage with their customers, this makes them feel special, and prompts customers to buy on a more consistent basis and promote a company’s products and services on a broader scale; it’s an essential element of a successful strategy.
When companies don’t engage with their customer base, people have no emotional ties with the organization and this makes the decision to seek an alternative far easier than if they’re being treated well.
You wouldn’t want to be somewhere where you don’t feel welcome. If it isn’t good enough for you, why should it be good enough for your customers?
Your product doesn’t deliver
Patience is a rare trait amongst consumers; customers want and expect immediate gratification. It may be a bitter pill to swallow, but if your product isn’t up to scratch, you’re running the risk of losing custom.
Ultimately, a customer purchases a product to solve their pain point: if their eyesight is bad, then they’ll buy a pair of glasses, if they’re bored of watching the television and need something else to entertain them, they may buy a book, if their car’s too small for the family, they’ll head to the dealership and buy a new one. It’s a perpetual cycle that’s showing no signs of slowing.
When a buyer has a problem, signs up for your product, and it doesn’t tick the boxes, they jump ship and look for something that does do what they expect it to - it’s one of the biggest contributors to customer churn rates.
Flaws, glitches, and bugs
Customers buy a product to make their life easier and from a business perspective, to improve their levels of customer service.
For example, social media scheduling tools offer two-fold benefits to companies, as they allow teams to deliver content en-masse and save time, whilst also keeping their customers up to date with key developments.
When there are technical issues with a product or service, however, this has a domino effect; the provider suffers, and customers relying on the service can lose trust, prompting them to perhaps seek an alternative, to avoid a repeat occurrence.
Your product’s deemed a luxury
When the purse strings need tightening, key stakeholders sit down, consider their outgoings, and make a list of what to keep, and what to sacrifice.
Unfortunately, for some companies, their products don't survive the cull, and they’ve deemed an unnecessary expense that can be chopped from the monthly bill.
Why is it important to reduce customer churn?
Many advocate the notion of attracting new customers is much trickier than keeping hold of existing clientele.
Once you’ve done the hard work in getting them through the door, reducing churn is essential, as you may well find yourself in a position whereby it’s extremely difficult to win customers back, if they slip through your grasp.
The reboarding process is considered notoriously difficult and is also an expensive process for a company.
How to reduce customer churn
Act on customer feedback
Sure, it’s the biggest cliche in the book, but you need to put the customer’s needs first; if they’re not happy, you’re leaving yourself susceptible to higher churn rates.
You mustn’t make decisions based on assumptions; speak with your customers and validate your thoughts. By communicating with customers, they’ll see you’re putting their best interests first, increasing morale, and brand loyalty.
Whether it’s customer advisory boards or focus groups, make the most of customer insights to gain an understanding of what your customer's thoughts are now, and where you can improve your products in the future.
And feedback isn’t always based solely on what you didn’t do right. For example, the customer feedback may reveal that your USP didn’t catch the attention of your audience at all, and they preferred another feature, in which case, your brand positioning and messaging can be tweaked, accordingly.
Acting proactivity, as opposed to reactively, allows you to rectify potential hiccups before they happen, instead of picking up the pieces further down the line.
Incentives attribute value to your customers, and in turn, enhance overall satisfaction.
As we mentioned before, winning customers back is hard. Rewarding your customers for using your product suits both parties: they’re often enticed by the freebie, and you keep them out of the clutch of your competitors.
For example, have you ever gone to McDonald's over Burger King because you’re one stamp away from a free coffee, despite the fact Burger King is down the block, and McDonald's is a 10-minute walk away?
In that case, you’ve first-hand experience of the powers of customer incentives.
[Company X] has a brand-new range of products you may be interested in.
Click HERE for more information.
[the company X team]
Boring, generic, impersonal; were your first impressions of this email the same as ours? 🥱
Let’s try this on for size, instead:
We’ve checked out your previous purchases, and have picked a few brand-new products from our range that we think you’ll love!
And because we’re in a giving mood, here’s a 20% discount code for you to save some cash, but be quick - this offer expires this weekend!
Your friends at [company name]
By addressing the recipient with their first name, including tailored product suggestions for the customer, as well as an incentive of a limited-time only voucher, the second email is much friendlier, less generic, and feels as though a person is talking to the customer, whereas the first draft could well apply to anyone in the database.
Customers are interested in relevance; if they’re targeted with products that aren’t appropriate for their age, demographic, price budget, etc. then the likelihood is they’ll focus their attention on companies who take the time to learn about what they want, and more importantly, deliver it to them.
Impersonal messaging suggests your company hasn't taken the time to learn about the customer and their requirements, and customers will feel like another face in the crowd.
Identify the problem
Ultimately, an action plan must establish where things began to unravel for your company, and why the person decided to take their custom elsewhere.
Sometimes, companies can be embarrassed about reaching out and asking churned users why they’re not happy with the product or service provided, but so long as you approach the customer the right way, many will be happy to reciprocate and provide feedback to help you identify your flaws.
Use your findings
There are times when companies find out information and decide to ignore it because it isn’t what they want to hear.
Develop a thick skin, listen to criticism, and use the feedback and findings to improve your future strategy. After all, what’s the point in looking for an answer, only to hide from the truth?
Share your knowledge
Customer success teams play a critical role in establishing an understanding of how customer churn is affecting a business, yet you need to ensure that every team across the business is informed of your findings.
Always be sure to share insights, and communicate essential information to enhance your offerings. For instance, if it becomes clear a particular product feature has flopped, it’s fundamental to communicate this to your product team so they can learn from their error.
Similarly, if the customer has churned because they aren’t happy with the standard of service from your sales team, consider internal training to equip them with the level of expertise they need to provide a seamless customer experience.
Go above and beyond
Regardless of your customer’s core reasons behind investing in a product, they’ll always appreciate getting more than they bargained for.
Additional services offered at no additional cost can make the world of difference in convincing your customers you’re the right fit for them and that you have their best interests at the forefront of your mind.
For example, a customer may enroll in a webinar on OKRs. Why not send them a complimentary eBook to supplement their learning?
Small, yet significant details such as these will go a long way to building trust and confidence amongst your customers, and they’ll be inclined to stick around for much longer.
Customer churn is a problem within the business that isn’t going away anytime soon. However, if you understand it, prepare for it, and introduce relevant measures, the impact on your business can be managed, via cross-team collaboration.
How to apply customer churn strategies
No matter what the margin of increase may be in your customer churn, every time a customer is lost, this is disappointing.
Fear not though, for, there’s a plethora of ways you can proactively try to reengage lost customers and get them back on side.
Price your product appropriately
Mastering the psychology of pricing is tricky because not everyone has the same budget. However, you can get the golden nuggets of information you need by conducting customer and market research, understanding their respective budgets, and creating a product that A) will solve their problem, and B) won’t exceed their budget.
If customers believe your product is overpriced, they’ll seek a lower-priced alternative, and you’ll be left kicking your heels, while your competitor benefits from your poor planning.
That said, it isn’t only overpriced products you need to think about. If you release an offering and it’s too cheap, this can lead people to believe the manufacturing of the product isn’t up to scratch, and they may be tempted to pay marginally higher prices with a rival company.
For example, value-based pricing is a method whereby you set your price based on how much different customer segments believe your product’s worth. Consequently, the price you charge can vary from customer to customer or segment to segment.
Value-based pricing accurately gets to the bottom of what your customers are willing to pay. While it could be argued that competitor-based pricing does this because customers are willing to pay for their product, value-based pricing puts your potential customers at the heart of that journey as well as differentiates you from your competitors.
Improve your customer service
You can have the best product on the market, but if your customer support network is poor, this’ll have a profound impact on user experience, and before you know it, your customer’s head will be turned.
Ask yourself: if a customer experienced a problem and needed technical support, could they get the help they need quickly, efficiently, and practically?
If you’re unable to answer each of these questions with a resounding ‘yes’, go back to the drawing board, and start from scratch because poor customer service will more often than not have one outcome: sky-high churn rates.
Hold internal training sessions to improve knowledge among your team. If they don’t know how your product works, why it’s different from the competition, and how to support the customer, customer service will suffer.
Engage with your customers
You must establish an emotional bond between your brand and your customers.
When you engage with your customers, this makes them feel special, prompting a greater propensity to buy and promote a company’s products and services on a broader scale.
Customer engagement is an essential part of a successful product marketing strategy.
If you don’t engage with your customer base, you’ll sever the emotional ties between you and your audience. Taking steps to engage with your audience won’t go unnoticed; they’ll see you attribute value to your customers and will be inclined to continue purchasing your products instead of your competitors.
The small things really do go a long way. You could consider setting up an automated birthday email with a discount code, for example.
Not only will you put a smile on the face of your customer, but you’ll also benefit from added sales, albeit at a discounted price.
Conduct competitive intelligence
Competitive intelligence enables you to learn from your competitor’s mistakes and improve in areas where they may be better than you.
When conducted properly, competitive intelligence will help you:
- Develop new products and features,
- Identify gaps in the market,
- Uncover trends, and
- Market and sell your product more effectively.
Competitive analysis helps you develop a deeper understanding of market dynamics so you can find and fulfill customer needs. The more you know about competitors, the more equipped you’ll be to not only match but surpass their efforts, earmarking yourself as the leading product on the market.
To make the most of competitive intelligence, you need to communicate your findings so that your teams can use the information to develop and evolve your offering. Results are useless if you keep them to yourself - you need to share the knowledge.
With so many different ways of sharing information, we spoke with Matt Powell, Product Marketing Manager at Docebo, to get an insight into how competitor intel findings are shared at his company:
“I don’t think there is a silver bullet for effectively sharing competitive intel - it’s completely dependent on the realities of your business. I do, however, think that it’s all about creating a culture internally in which everyone is as actively involved in gathering and sharing competitive intel as possible.
“That’s a big behavioral change when it becomes less about having one or a few people gathering and sharing intel, and instead of extending it as a responsibility of everyone in the revenue organization. That’s when good things start to happen - the activity becomes more collaborative and is focused on problem-solving rather than just information sharing.
“We share our intel on a team-to-team basis leveraging our competitive intelligence platform to develop regularly cadenced newsletters. They’re good and they’re actionable, but we find the juicy stuff is the intel that happens in real-time. But, I’ve found the most effective way to share intel and have great conversations in the flow of work around competitive intel is through Slack.
“Our company is a big-time Slack shop - everything happens there. However, there was a lot of good intel being lost in the scroll of conversations. To combat that, we turned it into an opportunity by installing a two-way integration that allows us to send competitive intel to our CI platform directly from Slack.
“This has been a bit of a game-changer in making sure that as much information as possible isn’t lost. The great thing about these kinds of Slack channels is that the intel is only the tipping point, the conversations that happen in the threads afterward generally end up being the context you need to make the intel actionable.”
Segment offers for VIP customers
Resist the urge to adopt a ‘one rule for one, one rule for all’ approach and keep your customers close, and your VIP customers even closer. They’re the ones who are buying the most products, singing your praises the most, and providing the most lucrative loyalty.
When you’re discounting products, you can increase your conversion rate by introducing segmented offers based on your customers’ preferences.
Create customer profiles detailing their buying habits based on previous purchases and use this information to offer discounts that are relevant to each customer.
Reward them with exclusive content, vouchers, invitations to special events - whatever you need to do to show them you appreciate their custom. Do that, and they’ll continue coming back time and time again.
Conduct CABs sessions
A Customer Advisory Board is a group of existing customers brought together regularly to advise your company on forward-facing feedback on your product and strategic direction.
CABs allow customers to share best practices and foster community-building and networking among peers, whilst also deepening relationships with your company executives and product leaders.
They can take the form of in-person events, onsite or offsite, online, and/or a combination of them all.
Nobody can offer better feedback on customer experience than actual customers, and CABs sessions can be critical in helping you reduce customer churn. They offer a perspective into the mind of your target market, presenting opportunities in areas you can develop to further enhance your product and hone your services.
Our CABs certification explores the fundamentals of the area, offering the chance to learn from Bree Bunzel, Head of Global Product Marketing at Dropbox.
Enroll now and enjoy 3+ hours of expert tuition from market leaders from the likes of LinkedIn, Asana, and Zendesk.
Improve your competitive intelligence research
Using insights gained from competitive intelligence can help you significantly reduce future churn.
Our guide to competitive intelligence outlines the fundamentals of CI, including:
- Common types of competitive intelligence.
- The teams that are responsible for the process.
- Competitive intelligence challenges.
Plus much more…
Setting up the process to reduce customer churn and improve retention
Increasing customer retention by 5% could increase your profits by anywhere from 25% to 95%.To reiterate the point we made earlier, retaining customers is significantly cheaper than finding new ones, and your accountant will be glad of the consistent, more predictable income.
It doesn’t just affect your bottom line though. Customer retention has all kinds of benefits:
- Advocacy: If customers like your company, they’ll do the marketing for you.
- Information: Engaged customers are more likely to leave feedback on how you can improve.
- Cross-selling: An existing customer is more likely to explore the rest of a company they trust.
Eve Brill, Senior Head of Product Marketing at Farfetch, discussed the importance of keeping customers close and outlined simple strategies to drive retention.
Setting up the process to reduce customer churn
1. Track and tackle churn by stage
Early stage (0-3 months): Early stage customer churn is based on product adoption. People who churn here are typically unable to get set up and aren’t using the tool or are using only a small part of it.
To combat early-stage churn you need to look closely at the user experience. Make sure you have relevant training guides, and 1:1 support and there aren’t UI confusions that are throwing people off. Poll cancellations and see where people were getting stuck. Consider hiring some outside testers to run through the onboarding process with a set of fresh eyes.
Middle stage (3-12 months): Next, you have middle stage customer churn. Typically this is due to a lack of business impact from the software or service.
To combat this stage of churn you need to make sure you are checking in with customers and making sure they are seeing progress towards their goals.
Many companies stop paying attention to customers unless they directly raise issues after the first few months. This is a mistake. Instead, invest in getting a pulse on how your customers are doing throughout the first year and middle stages.
Late stage (12 months or later): Finally you have late stage customer churn. This occurs because people found a better alternative, they didn’t see the software/service scaling with them, they got burnt out or they experienced a series of bugs or issues that made them upset.
To avoid this churn, make sure you are always focused on upgrading your accounts and growing them. Accounts that are upgrading aren’t churning, consider what additional value you can add to all customers, and celebrate their loyalty.
When customers cross a year, two years, or three years, continually let them know how much you appreciate them, a personal gesture here works wonders.
2. Reduce churn by building and optimizing engagement
Customers who are active in your social communities and who are active on the software are less likely to churn.
So when new sign-up rolls through, start with engagement right away. Send them a personal video email or schedule them on a 1:1 Zoom call and get that human touch established right off the bat.
Then, invite them to join the Facebook community, and ask them questions about their business and their goals. The more you get the customer sharing, the better off you will be.
With each customer, you have the opportunity to go beyond just selling them a product and producing a relationship, if you do this, you invest the time to get human with them when they run into snags they will be less likely to just jump ship.
3. Focus on leading indicators, not lagging indicators
There are certain metrics, like Monthly Active Users (MAU) and Net Promoter Score (NPS) that are early predictors of things to come.
MAU and NPS are examples of leading indicators because they diagnose problems months before they come to fruition. For example, if your customers aren’t using the software (MAU % is low), then they are set to churn and revenue will take a hit when they do.
If you want to tackle churn, you need to get ahead of the game, so look each week at how people are using the software, and when you see low usage, reach out to these people and try and help.
4. Focus on annual contracts (a double-edged sword)
This one is pretty simple, if you lock a customer in for 12 months it is going to help improve retention in some way. I think annual contracts make a lot of sense and provide stability for businesses.
Many businesses, from Hubspot to Infusionsoft have talked about how they cut churn specifically through this focus. That being said, it can also mask or delay problems.
If your NPS is very low (i.e. your customers aren’t happy) then shifting to annuals could lock people who are unhappy into paying for a service they don’t want, which can explode into a PR nightmare. So it makes more sense to focus on addressing the underlying core issue for these customers and ensure they are happy to be using your product.
5. Focus on niche-specific collateral
If you sell a software/service that works with many different industries it is imperative that you develop training guides, manuals, and assets for the individual industries. Think about the customer experience, the more you can leverage exactly what other similar businesses have done and seen success with, the better off you will be in solving their problems.
Specifically, try to set up onboarding emails that are tailored to the industry of the new customer. Try and build a “Getting started for [insert industry]” guide that you give to companies based on their industry.
Have support reps who welcome new customers with a personal video saying, “Hello, I am one of the experts here on the team for B2B marketers, I would love to hop on a call”.
That way you get them engaging more with the team, which will improve retention and they feel more confident in meeting with the team because they have the sense that the team member will be able to support their specific needs.
6. Aligning compensation plans to churn goals can be key
Salespeople will follow the guide rails of their comp plans. If they get paid just for closing business, they will seek to close anyone and everyone and that can potentially spike churn.
At Hubspot, sales reps were initially paid after accounts crossed thirty days. If you look at retention rates for the first 90 days they are incredible and then after month five they spike up directly after!
Of course, that wasn’t what Hubspot wanted, so they had to retool their compensation structure. The moral of the story is that you need to give both sales and CS (Customer Success) a clear incentive to retain customers and have it built into their compensation.
Churn is a challenging problem that constantly is changing. You might have a technical bug that causes high churn for one month. Another month a competitor could aggressively bid on your keywords.
Another month your customers are struggling to onboard with the new UI you just released. There is never a one size fits all approach.
But using some of the methods above, you can start to isolate where you are running into problems (early vs. late stage for instance) and what you need to do to keep these businesses onboard.
Be human, be authentic, go above and beyond and always remember. Finally, automate processes, but not relationships.
How to reactivate churned customers
Aggelos Mouzakitis, CEO & Growth Product Manager at Growth Sandwich gave his insights on what product marketers can do to reactivate churned customers:
Lay the foundation first
Carry out user interviews
“After the cancellation survey, though, we need to recruit a sample of these people for user interviews. Now, there’s a specific process that you need to follow for that.
“First, let's agree on something - you need to pay for it. It's not free. These people aren’t happy with you. They just decided to stop giving you their money so you need to give them something and that something is money. I definitely promote giving them money, not kind gestures, it’ll slow you down, just give them money, do your interviews, and move forward.
“In my opinion, the best incentive that you can give is Amazon vouchers because it's easy. You don't have geographic barriers, you don't have any other costs, you just put the money into Amazon and give a gift card- and everybody has Amazon. So, you recruit these people for interviews, you do a very good interview, you ask the right things.
“But most importantly, you are trying to understand:
- What are the expectations that aren’t met?
- What were they planning to do with your solution?
- What was the outcome that they were expecting to have?
- What were the expectations that weren’t met?
- What dissatisfied them?
- What are they going to switch to now? And why?
“All of these questions that we're discussing at the moment need to be paired with ‘why’. The interviews will give you the depth of understanding and the analysis and the cancellation surveys will give you scale. You need both.
“These are the two tactics that I can share with you as a product researcher, I'm sure there are more. But I'm speaking from the perspective of the researcher.”
Have a good cancellation survey
“The first thing that you can do is have a very good cancellation survey.
“Of course, you might think this is obvious, but what's not obvious is how this needs to be done. Let me give you a very quick example of a cancellation survey that I was working on with a client, that seems to be right, but in reality, was wrong:
“We were asking customers: ‘what’s the solution that they’re going to switch after us?’ And we’d give them a couple of options. We’d give them this tool, another tool, some other tools, and they’d pick. After 5000 cancellations, we had some data of where our customers were going.
“The problem is we already knew where our customers were going. We knew our biggest competitors. What we didn't know is what each of these competitors represented in the mind of our customers who have left every time.
“That was the critical thing, the reason behind the switch. That's a little small tip on how you need to build a ‘job to be done’ driven cancellation survey to actually give you an insight. Now, first thing, as I said, we have a cancellation experience. Part of that definitely needs to be a cancellation survey.”
Send out a targeted email campaign
Campaign #1 - new products or features
In an ideal world, you’ll have a reason behind why your customer left and you can match those explanations to new email campaigns.
For example, if customer B left because your tool didn’t let them annotate videos in-app, introducing and announcing that feature could be the only nudge they need to re-convert.
If you don’t already have these details, or your new launch doesn’t directly resonate with the reason you’ve got, it might still be worth including select churned users in the release. You never know, it might provide a game-changing revelation.
Remember: don’t bombard ex-customers with emails about every little feature update week in, week out in a bid to get them back on board. This’ll probably ruffle their feathers and send them to the dreaded unsubscribe button.
Also, don’t forget to differentiate the wording of your campaign from what goes out to current customers. Blanket approaches aren’t effective; people want to know you’ve done your research and know their circumstances.
Campaign #2 - offer something awesome
Just because they’re not paying for your services anymore doesn’t mean you can’t still support them. This will help:
- Keep you on their radar,
- Show off your expertise, and
- Demonstrate you still care about them.
With this type of tactic, think bigger than your standard 500-word blog post. Articles are great, but you want something that’s going to leave them thinking “why did I ever leave this company?!”
Something rich, in-depth and unique is going to help you do that.A couple of ideas to get you started include a:
- eBook, or
Try to be strategic by tying the topic into why the segment left, too.
Campaign #3 - your monthly newsletter
Admittedly, this one will be a little tricky if they’re not already subscribed - not many people leave a company and then sign up to their newsletter, but that doesn’t mean you can’t try.
If they’re already signed up, or you manage to get churned users on your email list, use this as another opportunity to keep yourself front-of-mind and provide valuable content.
If you segment your newsletter database you could even offer a little incentive to give them a nudge in the right direction.
Offer an incentive
Incentive #1 - deliver a bespoke demo
Sometimes people need to see before they believe and a free, live demo of how you’ve resolved the reason behind a user’s departure will go a long way in doing that.
For this one to work though, you need to go in with a targeted and customizable mindset. Sticking with the video annotation analogy we already gave, an email like this would do the job:
We were really sorry to see you leave us X months ago and we just wanted to let you know we now offer what we were then missing.
Videos can easily be added and annotated on any device, all without any extra cost, and you can see other people’s actions in real-time.
We’d love to show you how this all works in practice and would like to invite you to a free, one-to-one demo. If you’re interested, you can book a time and date that suits you here.
Let me know if you have any questions and hopefully, we’ll hear from you soon!
And then repeat that process for each of the different causes of churn.
Incentive #2 - give a discount
Whether it’s a one-time sign-up discount or a percentage off their monthly subscription, money off is one surefire way to get people’s attention.
Just make sure to do the maths so you don’t end up losing money - after all, no one wants customers who cost them more than they make.
Incentive #3 - offer them a freebie
We mentioned demos being a great way to show people how you’ve evolved, but giving them a freebie (i.e. one month free) surpasses that.
If you’ve delivered what you’ve promised and they see and experience those improvements first-hand, your chances of getting back into churned users’ good books will undoubtedly shoot right up.
Expand your net
If you only focus on the email you risk a) losing people to spam filters, and b) limiting your opportunities. You can only email people so many times - do it too much and you pee them off, do it too infrequently and they might not reconvert.
So, leverage other channels like social, mobile, targeted display ads, snail mail, and telephone conversations. Also, be sure to approach reactivating churned users the same way you would a brand new customer.
The channels you choose might also make up part of your customer segmentation process. For example, if you have info on a customer’s preferred communication medium you could segment your base by reason for departure and chosen contact method.
New to segmentation? Tamara Grominsky, Chief Strategy Officer at Unbounce is an expert in the area and shared her knowledge in a recent AMA. She also delivers our Segmentation Certification, unpacking the nuts and bolts of all things segmentation.
Also, remember, that customization is key. Yes, you might be targeting churned users the same way as fresh prospects in the sense of marketing tactics, but the tact needs to be different.
For example, let’s say you set up a Google AdWords account, add remarketing tracking to your website and start displaying ads on the sites previous customers visit. Instead of showing them something generic like: “We’re offering a 10% discount if you sign-up before midnight.” Say: “Come back and we’ll give you a 10% discount if you sign-up before midnight.”
How to measure your success
One way to measure how effective your efforts are is by creating control groups and analyzing the difference in terms of reconversion rates.
For example, you could send 10% of your segment nothing and the rest of your planned activation tactics and evaluate the results of each approach.
Remember to factor in the different reasons for churn as some causes will be inherently more difficult to reconvert than others, and this could skew your numbers.
For example, someone who stopped using your service because their business’ budget got sliced in half is less likely to sign the dotted line again than someone who left due to a lack of feature (that you now have).
For this reason, it’s probably best to segment your groups by related reasons for churn. That way, you’ll get a more accurate reflection of your reactivation activities without other factors getting in the way.
Mark Whistler, Senior Product Marketing Manager at Signal Al, shared his experience:
"I try to have a loss call or email conversation with all churned clients and as part of that conversation I've asked if they'd be willing to speak to our product team in the future as part of development exploration.
"They're then put into a document and tagged with their key areas for leaving and contract renewal date with the new provider. We've seen success in converting churned clients back onto our platform by then involving them in the 'product/roadmap' development process.
"Customer churn is a problem within some businesses that aren’t going away. However, if you understand it, prepare for it, and introduce relevant measures, the negative impact on your business can be mitigated.”
Our official certification program, Product Marketing Core: Certified features 11 modules and 10+ hours of learning, focusing on the fundamentals of the PMM profession. Within the syllabus, we explore tried and tested retention tactics.
Sign-up, get certified and keep your customer base intact.