Churn Rate

How do you reduce churn?

By now, we have talked a fair amount about churn. Yesterday, we even talked about how a mere 5% churn, if month-on-month, can pretty much flatten out your growth. Today I came across a graph that pretty much visualizes that scenario. Take a look:

churn

So, by now, we pretty much understand churn bad, hulk sad!

Yesterday, we briefly touched upon the two main reasons why your customers churn out, and we isolated the scenario where it is in your control to take actions to reduce churn. So lets get on with it.

Bad customer service is a sureshot path to churn

The most prominent cause behind customer churn is a less than ideal customer support infrastructure.

Businesses tend to think of customer service or support as a cost center that needs to be optimised, and they are partly right. It is indeed a cost center, but not sunk cost. It is an investment into building a brand.

Customers tend to stick with brands where their needs are taken care of, their questions answered, concerns taken care of. Essentially, brands who customers feel care for them.

In SaaS businesses, customer support can come in many forms. Customers may have a particular usecase they feel .your product lacks support for, they may be struggling with the product, or they just want to report a bug. All of them needs to be addressed, and more importantly, they need to be tended to on priority. The more delayed your actions towards resolution get, the further the level of discontent rises in your customer.

Another key component to customer support is regular and useful communication. Not all resolutions will happen overnight, and for some even weeks may be required - especially in early stages. More often than not, customers understand that, and appreciate your hard work - as long as they know you are working hard to address their issues. Communication becomes key here. Keep your customers in the loop, send frequent updates, and don’t let them feel you are just letting their ticket sit there in limbo. Also, note my use of ‘useful communication’ up there? That’s important too. Your updates to customers should not be way too generic or templated. It should help the customer understand: (a) You understand their problem right, (b) You understand how it can be fixed, (c) You are taking steps to fixing it, and (d) An estimated timeframe by which it can be fixed. Every single one of your updates to the customer should contain at least one of these four elements.

Let me give you an example. A customer recently checked with us on why we don’t provide a mechanism whereby the platform automatically recognises events that need to be tracked based on some parameters they can introduce directly into their website code. Apparently some competitor is doing that. We aren’t, it wasn’t even on our radar. Now, my response could be a simple “sorry, we don’t provide that functionality as of now”, but that wouldn’t have been very helpful, right? So, this is what I did: (1) Looked up the functionality the customer was talking about. What it is, how the competitor is doing it. and how easy that makes the overall process for a customer. (2) Thanked the customer for bringing this to our attention. (As I said, it wasn’t even on our radar.) I mentioned that while it isn’t something we are doing presently, but it definitely looks interesting enough to investigate further and if needed, added to our product roadmap for the coming weeks and months. (3) Along with acknowledging the fact that while this particular route isn’t supported by the system, it is still quite capable of handling event and goal measurements, and the overall process is simple enough to be set up in a matter of minutes. I then added a few ways in which our goal and event measurement capabilities can help them with their broader marketing strategy.

If you were a customer, how would have you wanted me to respond to your query? The way I could have, or the way I did? And that makes a difference every single time you are talking to a customer.

As you can see, a well devised customer support engine can add a lot of value to your product design and roadmap as well.

You do not need to include in your product roadmap everything your customers ask you to. You just need to understand ‘why’ they are asking you to include what they are asking for. And then figure out ways to incorporate those in your product roadmap in a fashion that is aligned with your broader product vision. Always remember, customers aren’t looking for features, they are looking for solutions to their problems.

If a customer can’t use your product, he won’t appreciate your product.

This. This is a case of bad onboarding, bad product design, bad user experience. Just bad bad bad on all fronts imaginable.

The more a customer uses your product, the more likely he is to stick around. Evernote found that 20% of their customers who had been using their product for 2 years would autoupgrade to a premium plan, as compared to 3% on their overall base. So, having the customer around for longer is rewarding on all fronts.

And it is your job to make the overall experience so enriching, so intuitive, so effortless and so valuable that he does want to use the product again and again.

Let us assume that the value your product is adding to your consumers’ lives gives them a dopamine rush. So, from the time they sign up for the product, to the time they get their first dopamine rush. That time is the most critical, and you want it to be as short a duration as possible. And then you guide them on a path where they get that rush again and again till they can see for themselves the value your product is offering.

If a customer isn’t using your product, of course he would churn out.

This is aligned with the previous point, but with a difference.

The previous point is more focused on getting your signups to use the product. It is about the cold flow of the product. What they do when they sign up, show them around and stuff like that.

This part is more about users who are slipping away.

You want your customers to continue using your product, and use it often. The lower the timegap between subsequent usage, the more likely you are to retain those customers.

Let me give you an example from a mobile game. In a mobile game, the game makes money when you buy their virtual currency or items. As a result, it is natural that you would want to focus on getting more and more users to buy the virtual currency. However, your focus should be on getting them to get in the habit of spending that currency. Basics of economics, money needs to go in a full circle. The more you get them hooked to spending that currency on items in the game, the more likely they are to start procuring that currency themselves (instead of waiting for you, the game, to offer it for free). And now they are doing it for the instant gratification they experienced when they did it the first few times from the currency they got for free. Usage is important.

This needs you to have some customer success metrics in place, understand the touchpoints that result in most usage and use that information to design a better product flow.

Churn hurts your revenue

Churn has a direct correlation both to your revenue and growth. So the sooner you bring it down, the faster you’ll grow. These three frameworks we just talked about are a good starting point in reducing churn. And to make sure you are doing it the most effective way possible, calculate churn on individual levels. Measure and analyze churn for paid, transacting customers as well as free users. Reduce them all individually. Your business will thank you for it.

That’s it for today, see you tomorrow.

Cheers

Abhishek

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