Ultimate Guide to Reducing Churn

Churn can most basically be defined as resources lost in a given period of time. Typically it’s referring to users or revenue lost and is usually represented with either a percentage or dollar amount.

For example, if you had a 5% monthly user churn rate, that means each month 5% of your customer base is cancelling.

Or if you said you had $2,000 in monthly revenue churn, that means you lost $2,000 in monthly recurring revenue from either customer cancellations or downgrades.

Here are a few signs/red flags that you might have a churn problem:

• Your churn is outpacing new customers.
• LTV is shrinking: The longer your customers stay with you, the higher the lifetime value (LTV) of your average customer should be.
• Your churn rate is above 10%: 5-7% is considered an average churn rate. But when you start getting into double digits, it’s usually a sign that something in your process isn’t working. 
• More downgrades than upgrades: If you offer different plans or add-ons for your product, you want to have more customers upgrading than downgrading.

Ask your customers why they are cancelling. Make sure you customize the cancellation reasons in your survey based on your product.

After having a cancellation reasons form, you can break down the reasons and segregate the customer feedback.

If trying to find out why they are cancelling is the first time you interact with your customer, that’s probably part of the problem. The best time to establish a strong relationship with your customers is during the onboarding/free trial process.