What would you say is one of your most important job responsibilities?
If you answered “managing churn,” you’re far from alone — 78% of customer success professionals told the Technology & Services Industry Association that addressing churn is a key aspect of their long-term strategy. Keeping customers happy is practically half the job description.
While that's no surprise, what comes next might make you do a double take: Less than half of those experts are using customer churn as a key performance indicator.
Because when you’re working to prevent churn from happening, measuring it won’t do you any good. Instead, by predicting customer outcomes, you can step in and stop the endless game of whac-a-mole.
What your customer success team needs to know about churn
Instead of treating churn as a fire to be put out on sight, what if we could tell you how to keep the flames from starting in the first place? Think of it as taking the week-old newspaper off the kitchen counter prior to turning on the stove.
Before we get too deep into things, it’s important that we all agree on what customer churn actually is — and what it isn’t.
At its most basic, customer churn is what happens when a user cancels their account. However, you’ve probably heard it go by a few other names, such as customer attrition, turnover or defection. If you see any of these phrases, just know it all means the same thing.
Although losing customers means some amount of revenue has been lost, what customer churn isn’t interchangeable with is the phrase “revenue churn.” Revenue churn is the amount of revenue lost over a period of time. So if only a single account leaves but it's one of the most valuable customers in your portfolio, revenue churn is about to look a little scarier than customer churn.
Still with us?
All you need to remember is that whenever you see us say “churn,” we’re only talking about customers leaving.
Now that we’ve got that covered, let’s break down the two types of churn you’ll see during your career as a customer success manager:
Your team did everything right. Product adoption went off without a hitch. Your main point of contact was engaged and keeping you in the loop when it came to updates at their company and changes to their strategy.
So why did they leave?
Traditionally, teams would write off this sort of account as an example of unavoidable churn. Something happened on the customer’s end that meant the situation was out of your control.
Good thing we aren’t a traditional bunch here at UserIQ.
For an explanation of why unavoidable churn isn’t really unavoidable, we’ll turn it over to customer success expert, Lincoln Murphy:
“You’ve heard this — and probably said it — the only acceptable churn is from ‘death, marriage or divorce.’ I don’t agree with that sentiment anymore,” said Murphy. “Those traditionally accepted reasons for churn were identified at a different time. Customer success was not a strategic advantage as it is today.”
In fact, we’ll take one more page out of Murphy’s book: Anytime you find yourself saying churn is unavoidable, put a dollar in a jar and buy your team a meal with that later.
As we’ll get into in just a second, once you know which customer data to look at — and how to use it — you’ll find that almost all churn is totally avoidable.
This customer seemingly matched your segmentation and should have found value in your software. What happened?
Well, the operative words here are “seemingly” and “should have.”
Avoidable churn is the red flag that signals something isn’t right. This could mean there’s a gap in your team’s success strategy, the product itself or even the buyer personas you’re targeting. It’ll be critical to evaluate your processes early and often to figure out what’s going awry.
Not sure where to start? You’ve come to the right place.
Performing a churn analysis on past accounts
OK, so a customer has churned. What comes next? Step one: Give yourself a second to take a breath and remember you’re still an expert when it comes to customer success.
At its most basic, a churn analysis is an evaluation of the customers you've lost. Think of it as a bit of reverse engineering. By investigating the cause of churn and going through a user's behavior before they left, your team will uncover some important clues — including how you can prevent the same situation from repeating itself down the road.
Although it may be tempting to close the folder and write off a churned account as a battle lost, the insights these users provide can be invaluable when it comes to improving your customer retention rate. As Bill Gates has put it, “Your most unhappy customers are your greatest source of learning.”
As you begin to work your way through churned accounts, your team should try to answer the following questions:
Was it a poor customer fit?
When a user churns soon after they completed onboarding, it may mean they never should have been a customer in the first place. If you begin to notice most churn occurs early on in the customer lifecycle, it's time to regroup up with marketing and rework your buyer personas.
Although winning an account can feel good at the moment, attracting the wrong user will only serve to raise your customer acquisition cost over time — and take your focus away from the right ones.
Did it come down to a faulty feature?
Look through the support tickets and help requests a churned customer put through. Did they steadily tick upwards and then fall off once the customer made the decision to leave?
Think about the software you use every day to do your job: If you ran into the same issue again and again, how long would it take you to find a replacement? Your product should provide value for your customer — what it shouldn’t be is a point of frustration.
Creating a feedback loop between your success and product team will be important when it comes to keeping your users’ needs at the heart of your software.
How long was this user with your SaaS company?
A common misconception across the SaaS industry is that longer you have an account, the less time you’ll have to focus on them.
However, this couldn’t be further from the truth.
If you discover users are churning after years of working with your company, it’s time to start gathering customer feedback from your brand advocates. As your customers’ companies and their strategic needs evolve, your product should grow alongside them. Whether that means developing new features or providing additional support, your team can’t afford to ignore your long-time users.
As you continue to perform a bit of detective work, you’ll quickly uncover some key patterns across your churned accounts. Once you gather all of this data, it’s time to put it to work.
Learning from customer data
Your churn analysis is equal parts art and science. Getting a more subjective view of your customers’ journey through the lens of your success team is crucial, but it’s just as important to get the objective data as well.
As you analyze user behavior, you’ll find certain metrics pop up across the board when it comes to customer satisfaction. By measuring these over time, you’ll know whether an account is trending downward — and when it’s time for you to step in.
While every team will have their own success metrics, we recommend using the following as a jumping off point:
- Annual churn rate: This is your benchmarking tool to see whether or not the strategic changes you’re making are working. Although your churn rate won’t give you a granular understanding of your customers’ expectations, it will help you get the bigger picture.
- Net promoter score: Happy customers are often your most loyal customers. If a user consistently rates themselves as a detractor on your NPS survey, it’s time to reach out and understand where the frustration is coming from — and what you can do to help.
- Engagement: Are you getting the cold shoulder? While it may be an individual account issue, it could also come to the timing of your campaign and the channels you’re using. Create lifecycle maps to better understand which content your users respond best to.
If you don’t have the tools to perform predictive analysis, step one is to find the software that makes the most sense for your own team. We recommend taking a look at our buyer’s guide so that you can navigate the market like the pro you are.
So, now you’ve performed a customer churn analysis and found the predictive indicators to watch for when it comes to at-risk accounts. It’s finally time to bring it all together to create your very own churn prevention strategy.
Applying changes to the customer experience
As you’ve likely realized, setting out to “reduce churn” won’t be all that easy. As a lagging measure of customer success, you can’t change churn once it already has happened.
Well, unless of course you have a time machine.
What you can do is find the drivers of churn and address them to improve the end-to-end customer experience. Over time, what our own team has seen is that the biggest obstacle in the user journey is also one of the earliest: onboarding. When users never see value in your product, churn is inevitable.
However, it’s one thing to understand why customers are leaving. It’s an entirely different challenge to figure out how you can step in to prevent it.
Good thing we’re about to break down exactly how you can do just that.
For a better understanding of exactly what this process looks like, we're switching our success hats for a second here and moving to sales. Don’t worry — we promise you won’t be making any cold calls during this exercise.
Let us introduce you to the subject of today’s master class in customer success: Proposify. This software helps users to build a more scalable sales process from initial design all the way through final sign-off.
The team as Proposify originally used a product-led onboarding strategy, providing users with a freemium trial until they were ready to take on more features. However, from a business standpoint, they saw that the percentage of users who signed up for a trial and actually stuck around an upgraded to a paid account was concerningly low.
When they analyzed their sales funnel, Proposify’s success group found just over 14% of users who signed up for a trial were actually completing the onboarding steps. As they worked to understand why users left so soon after the trial period, the team quickly realized the two major problems in their initial onboarding strategy:
- The product walkthrough did plenty of telling but not a whole lot of showing. It was clear users were experiencing information overload.
- Rather than letting users create a real proposal, the product required them to start with a test one, turning off prospective customers who wanted to hit the ground running.
Although Proposify’s original onboarding process took only six steps, it became clear that by sparing users’ time they were sacrificing depth and quality.
So, they got to work.
Proposify’s new onboarding strategy is entirely guided by their past users’ behavior. Now, customers can create and send a real proposal on their first walkthrough, and the software allows them to explore features on their own time. And, when they lose their way, engaging animations and interactive notifications guide the user back on course.
Although the change was relatively recent at the time Proposify wrote this study, the company had already seen promising results. Free users who completed their walkthrough were over 700% more likely to become a paying customer.
Long story churn: Preventing churn won’t be as simple as saying you want to stop customers from leaving. Instead, you’ll need to uncover what makes them want to stay and exactly what your team can do to offer them more value.
Getting started with your churn prevention strategy
With the right data and custom success software in hand, your team will have everything you need to cut churn and provide a one-of-a-kind experience for your users. Just remember to take on a proactive approach to churn that predicts your customers’ needs rather than simply responding to their frustration.
End the guesswork, drive adoption and cut churn. Schedule a demo with UserIQ today.