How is churn at your company? How has COVID affected your churn rate?
If you’re like most of the companies and leaders I’ve been talking to *everyone* is feeling it. The only question is how much:
- The great companies struck oil when COVID hit. Those that help companies transition to remote, support the fight vs. COVID, or do video conferencing are thriving. They’re not reading this post anyways.
- The good companies are fortunate to be in healthy markets and they’re approaching 70-80% of their original sales targets. Churn is up a bit, but not life-threatening.
- The struggling companies are in markets where some of their customers were crushed, while others continued along. They’ve seen a spike in churn, deals take longer to close, and pipelines are significantly reduced.
- The dying companies are in markets that have been crippled by COVID/lockdown. Good luck selling software to sports leagues, travel, in-person entertainment, and hotel industries.
Unfortunately, if your entire customer base evaporated, because the industry no longer exists, there are no churn tactics that will save you. You either hold your breath, hoping to survive until recovery and reopening of the industry you serve, or you have to pivot your business in some major way.
For the rest of us in the middle feeling the sting of churn, and still with chips in the game, today’s post is to show you some of my favorite tactics I’ve learned over the last decade working on SaaS businesses. While there are no silver bullets, there are quite a few things you can do that together add up to make a difference.
5 Ways to Reduce Churn Better than an Exit Survey
A common behavior I see in SaaS products is to have a multiple choice survey when they cancel. This helps you quantify what was the straw that broke the camel’s back.
But does that tell the full story? No, it does not.
A lesson in the hidden truth of churn
When I ran product at KISSmetrics back in 2013, over a few months our churn started spiking, from the healthy, 3-5% range to suddenly approaching and exceeding 10%.
This was obviously alarming, so we put our attention on trying to figure out why.
The first place we looked was at our cancellation survey that popped up when you clicked to cancel inside our product’s account settings.
Unfortunately, this information didn’t really tell us much. In fact, the data we had was pretty evenly distributed across a number of the many options we presented.
It helped us narrow down the causes, but it didn’t come close to giving us the full picture.
Unfortunately, people cancel long after the initial warning signs occur. Often, the survey answer you get is merely the straw that broke the camel’s back, or a quick rationalize after they’ve already decided to quit.
It wasn’t until I applied the below tactics that we found the real, root cause. I’ve also used these same lessons since to help my own startups and those of some of my friends and mentees significantly reduce churn.
1) Check with your Customer Support / Success Team (or help out!)
I am always amazed by the number of SaaS product managers and founders that don’t interact with their customer support teams or help out with support tickets.
As this great Tweetstorm from Podia founder, Spencer Fry, reminds us, it’s a HUGE part of retention and customer happiness.
Customer Success interactions and support tickets are a GOLD MINE for product teams. It can answer essential questions like:
- Friction: Where are people getting stuck and confused in the product?
- Bugs: What bugs keep happening and bothering customers most?
- Requests: What are customers asking for either explicitly at the start of a support ticket, or during an ongoing conversation?
These are great any time, but especially if you’re fighting churn, you can work together to determine:
- What support tickets were recently sent by customers who churned this week?
- What tickets did they seem to push most urgently about or have a high degree of frustration regarding?
- Did they make the same requests repeatedly? What were they?
This kind of information helps you see where there may have been points of frustration in the past that contributed to them leaving. If you really frustrated me, your support team is likely to take the brunt of that, too.
Their friendliness may win me over and resolve the problem, but if that issue made me look bad to my boss, made a report late, or caused me to start a work-around that makes me less dependent on your software…the clock is now ticking on churning from your product.
2) Do a set of Jobs to Be Done Interviews
Many people have learned about jobs to be done over the last few years. Whether you love the milk shake example from the Clayton Christensen’s talk above, or the proverbial “I want to hang a picture, not put a 3/4 inch hole in the wall” story, you realize that people hire products to accomplish something, not for “features.”
What many fewer people know is you can use this same process to fight churn.
Jobs to be done is packed with insights for product teams
The big insight of jobs to be done isn’t just what I’m hiring your product to help me do. It’s also the above timeline to help you understand their journey from “passively looking” to “deciding” to “finished.”
There’s a tremendous amount you can learn as a product manager or founder doing these interviews with new customers (paid you for the first time in the last 45 days).
This can inform your marketing, copywriting, onboarding, and positioning throughout.
It can also help you with churn.
Flip the script. Create a churn timeline.
Just like there is a timeline for buying, there’s a timeline for your customer deciding to cancel.
Mapping it to the above timeline, here’s how it looked when I did this for a KISSmetrics customer all those years ago:
- First thought: Over lunch, a director of marketing tried to run a report to check a number. It took about 10 minutes for it to complete. It was annoying, but they brushed it off.
- Actively looking: A month or so later, the marketer tried to run a report when they first got into the office in the morning. Again the report hung. They left the browser open hoping it would finish later. It was still not complete when they left work that day.
- Deciding: Unable to get a report they needed, and complaining in the middle of the office, a coworker suggested they try another system that had always worked for them. The marketer listened and started trying another product to see if they could get the numbers they needed.
- Consuming: The alternative product offered them a strong discount, which then made canceling a no-brainer. Meanwhile, our cancel survey for this user cited price, which was only part of the picture.
As it turned out, in this interview, and many others like it, the key cause for our churn was performance related. It’s little surprise that around that time Mixpanel started running brutal adwords against us:
Understanding the timeline of your user’s journey to canceling can make all the difference in preventing churn. Jobs to be done is the single best way I know to do it.
You can learn how to do these in my in depth post on jobs to be done interviews here.
3) Dig into your product analytics
Great product managers know that to truly understand your product requires both qualitative and quantitative data. You need to understand the stories of your customers (qualitative data) and you need to understand the size and scope of things happening (quantitative data).
This of course applies to understanding churn as much as anything else. Look at your churned customers’ product usage and ask questions like:
- What features were they using vs not, or stopped using?
- What features are customers with a high retention rate using that those churning are not?
- Are your customers making it past 90 days of successfully using your product, or are many of your churns happening shortly after subscribing?
Understanding what they couldn’t get done with your product, or never learned to use can be telling. Every company’s churn problems are a little different.
Personally, I would recommend you start with the Jobs To Be Done interviews, so you have a baseline of stories of what’s going wrong for your customers. From there, you can use analytics to tell you:
- How big and common are the problems I heard in my interviews?
- Which of the problems is likely to have the biggest impact?
Having a mix of qualitative and quantitative information about what’s happening with churn will help you not only better understand why it’s happening, but also prioritize the many solutions you think could help.
How effective is your analytics setup? Please take 2 minutes to fill out this quick survey and I’ll share the results with participants.
4) Make COVID specific offers
These are unusual times and budgets are tough. Even the most loyal of customers have to cut products that are not life-or-death essential for them when they’re also having to cut staff.
The best thing you can do then is to think long term. Ask yourself how you can create win-win opportunities and build a long term relationship with your customers.
If you help them out in a tough time, they’ll be there for you for the long haul. Never underestimate the loyalty of a customer you went above and beyond for.
So how do you do that? Well, if you’re a product manager, you’ll likely need to get other departments and leadership involved to make any of these calls, but here’s a few for starters that many companies have already implemented:
- A few months free: Especially if you’re a business that does “land + expand,” the last thing you want to do is lose your “land.” Give your struggling customers a brief reprieve, especially if they are high value or high potential.
- Discounts for Case Studies: Case studies and testimonials give your company more credibility in a market. Use our present circumstances to ask more companies and customers for testimonials and case studies in exchange for flexibility on pricing and terms.
- Pause accounts: Rather than immediately deleting data when people cancel, agree to pause their access and to check in at a pre-determined future date to reactivate them.
Whatever you offer, make sure you listen to your customers; they may have questions or concerns about some of your offers, which can help you either provide something different and better they prefer, or clarify your offers to avoid objections.
Remember: it’s easier to get an existing customer to spend more money in the future than it is to acquire a brand new customer. Anything you can do creatively to create win-win scenarios and keep your existing customers around is going to pay dividends for you and your company.
5) Think about Olsen’s Hierarchy of Product Needs
Dan Olsen is one of the original Silicon Valley Product Leaders. He was VP of Product at Facebook predecessor Friendster, and has since become a long time advisor and consultant on all things product management.
One of the great concepts I’ve heard him speak about is translating Maslow’s Hierarchy of Needs (see picture above) into a version for software products:
Much like Maslow’s hierarchy, Olsen’s hierarchy starts at the bottom and subsequent steps in the pyramid only matter if the ones below are taken care of.
Applying this to churn you can imagine:
- Uptime: If your product is down (or a key API from a 3rd party), your customers cannot use your product and will churn because they can’t accomplish what they set out to.
- Page Load Time: If your product is too slow, you’ll frustrate your customer as I learned the hard way at KISSmetrics.
- Absence of Bugs: When things don’t work as expected, or inconsistently, again you’ll frustrate your customers, which makes them reduce how often they use your product, or stop using it altogether.
- Features: Are your customers able to accomplish what they set out to do with your product? Whether they don’t know how, need advanced functionality, want a complimentary feature to justify the budget for you, or require a specific integration, listen carefully to them.
- Usability: If people struggle to find the things they need to do in your product, or don’t understand how to use it, they won’t stick around long term.
If you’ve been doing the early tactics I’ve written today of interviewing customers, talking to customer success, and looking at your product analytics, you should start to see some patterns in where on the hierarchy your company’s biggest problems are.
Then, in addition to mapping and grouping your problems, look to the hierarchy as a guide to the priority of the fixes and improvements you will make.
If your product is bug-filled, slow, or has significant uptime issues, then no amount of usability improvements or feature additions will matter. It starts with a strong foundation.
BONUS: More lead bullets for churn
The 5 recommendations above are how to address big churn issues and make a real dent in the problem long term.
While you dig into the hard work of applying the above tactics, here are some quick hacks that can help you and your company with smaller needle movements on your churn rate:
- Set up Good Dunning Resolution: Expired credit cards and failed charges are the bane of any SaaS business. Pro-actively reach out ahead of time when customer credit cards are expiring, and when a charge fails. Stripe has features you can turn on to automatically help with this.
- Show Product Momentum: Especially for early stage companies, sending regular product updates help customers feel like you’re continuing to get better, even if you don’t always fix or add what they specifically want.
- Apologize for Big Mistakes: Your customers know if you messed up. Hiding from it only hurts your credibility, so if you have a major outage or downtime, be transparent about it. You may be surprised how customers may even offer to help! Learn how to send a great product crisis email here.
- Push for Annual deals: Fun fact – If you pay up front for 12 months, you can’t churn for 12 months ;) Make it a win-win for you and your customers by offering a discount versus paying monthly.
- Improve Support Response Time: One of the best ways especially early stage startups can stand out is with amazing support. Providing chat support was one of the secrets to Podia‘s high NPS score for a reason.
- Add a Slipping Away Message: One of the first great innovations Intercom did was to allow you to easily trigger a message after N days to try to recover lost customers. Try setting one up after 25 days of inactivity and tell them about your 3 most popular features.
Each of these tactics alone will not solve your underlying churn issues, but they will help reduce the number bit by bit. Also, as you learn more about your customer base and their motivations, you’ll see smarter ways to apply your insights to engage them and fight churn.
What are your favorite tactics to fight churn? Leave a comment to share what you’ve learned with others.