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How to analyze churn data and make data-driven decisions
The importance of customer feedback
How to improve customer experience
When startups talk about percentage churn(say 5 percent) they ignore too many variables:
Does this include users who signed up during this month, or only lost customers from the previous month?
What is the revenue churn vs user churn? 5% is okay if it’s all free users you’re losing, but what if that 5% happened to be all your premium customers or 50% of your revenue?
What is your activity churn? How many users became inactive this month? This is your leading indicator of future churn, and usually the most actionable insight.
Activity churn is the best indicator of future problems. Typical churn stats use something like account cancellations as a measurement but cancellation is only ever a trailing indicator, it’s literally the last thing that happens.
When you identify previously active customers who are slipping, a well-timed personal email can help to re-engage them. The best case is that you recover a customer; the worst case is you learn why your users leave. Either of these leaves you in a better position than doing nothing.
There is a difference between someone who didn’t convert after a 30-day trial and a year-long user who has started to slip away. The difference results in two different jobs, conversion and recovery. Don’t let them both fall into a naive “we miss you” bucket. Treat them differently.
Don’t auto-mail a customer who has several open support issues to remind them to login and don’t begin your mail with “Dear Customer”. Such activities do more harm than good. Introduce yourself in the email, and make it clear that you’re a real person who really wants to hear what they have to say about your application.
Customers don’t forget to use your product, they lose interest in it. So you have to motivate them. There are some features that will bring customers back, or keep them from switching. By offering churning customers a glimpse of what’s coming down the line, you can excite them about future releases. Things that inspire people to stick around are usually features which save time (e.g. better importing), increase adoption or efficiency (e.g. integrating with third parties), or offer additional value for no extra work (e.g. weekly reports).
If you have new features coming down the line, screenshots or gifs can be particularly interesting for long standing users. If the improvements are in terms of workflow, sometimes a clear diagram will be seen and understood far better than paragraphs of text. Never forget you’re just one of many emails in the inbox, and they’re all making promises. Any effort that makes your email stand out will help.
Some amount of churn is natural. Businesses come and go, as does the demand for your product. When a customer decides to leave, make sure they leave on good terms. If they have legitimate problems with your product, acknowledge them. Don’t delude yourself and fight back. Thank them for their custom and let them go. The easiest way to screw this up is to continue to spam them months or years into their departure. It does more harm than good.
If you’re a SMB(Small Or Medium Business), you could expect an annual churn rate of anything from 31-58%. As startups acquire more customers and target the enterprise market, churn falls to a more respectable 6-10%.
In their early days, companies are still finding their customers and will inevitably attract the wrong customers for whom their product isn’t a good fit, hence churn should decrease for startups as their product and brand become more focused and mature.
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