Why are your customers leaving? Let’s talk about churn
Yes, we think you’re ready to deal with your trust issues. We think it’s time to talk about churn.
“Attrition or turnover of customers of a business or users of a service”
The only thing worse than a customer leaving you to give money to one of your competitors is not knowing why they left in the first place. Ideally, you figure out why every single one of your customers churned - so you can make sure no customer ever leaves you for the same reason again.
The good news is: there are really ever only two reasons customers churn. Either something happens to them, leading to them not requiring your service any more (i.e. they go bankrupt) or they simply did not achieve the desired outcome they expected to get by using your product or service. You can’t do much about the first reason, so we won’t be talking about that here. But you can do a whole lot of digging into the second reason.
The two sides of Desired Outcome
To understand what your customer’s desired outcome is, you need to be aware of the fact that the desired outcome has two parts, the required outcome and the experience while achieving that outcome. The desired outcome is not just the what, it’s also the how.
Customers who achieve the outcome they desire are very unlikely to churn. They are also likely to have a high Customer Lifetime Value and Customer Referral Value.
The required outcome is the what. The outcome of the service or product you provide. The required outcome is, simply put, the reason you exist. It’s the problem you solve. Quite obviously, if you fail to deliver on the required outcome, nothing else matters. Your customer likely has alternatives to using your product: a competitor’s product, a homegrown solution, avoiding the problem in the first place etc.
But why wouldn’t your product deliver the desired outcome? There are many reasons a customer may not achieve the required outcome they expect from using your product. Some of them are:
- Your product or service is missing vital functionality
- Your onboarding is poor or you don’t have one
- The product is difficult to set up or keep running (UX)
- There are bugs or other usability issues
Especially in B2B, some customers may not even start using your product without a little extra push, like one of your friendly Customer Success Agents calling them up to help.
As obvious as the above list looks, many businesses misread their customer’s desired outcome or deliver mediocre usability. But let’s assume that’s not the case for you. You have a great functioning product, deliver on onboarding and usability and fix bugs quickly.
The only reason your customers would churn is if they’re lacking an appropriate experience.
After a customer has made the most important decision - that they want to solve a problem they are encountering by buying a product or service - the overall experience they’re striving for varies.
Often times this is where Buyer Personas come in. In complex segments, each persona can have a different desired outcome when it comes to experience. If you’re selling a SaaS product that can be used both by marketing and sales, your marketing persona may mainly be interested in collecting and tracking data, while your sales persona is looking for a quick-and-easy product to get instant results.
So how do you know what the appropriate experience for your customer is?
Studying your customer
The only way to know for sure why your customers churn is to ask them. You didn’t expect that, huh?
Studying churn turns up rich information about the needs and preferences of different customer types. When you ask people why they left, you learn not only what interactions or experiences in your own app drove them away - you also uncover valuable information about your app’s value proposition and competitive advantage.
There’s a reason why customer satisfaction metrics such as the Net Promoter Score or the Customer Effort Score are so popular. It’s because these metrics can add serious revenue to your baseline - if you measure and read them correctly and act on what you discover.
The most important thing about churn surveying is to avoid leading questions that could generate bias. If you can, create a survey specifically targeted at your churned users and try to get a decent sized sample in comparison to your total user base - surveying around 200 users should be the minimum to generate statistically relevant data.
There are different aspects you can (and should) survey for.
When surveying for churn it’s important to not just ask about satisfaction, but also about product usage. If you’re surveying for an app, you should ask when the app was last used and tailor your questions based on that. If your sample is big enough, this is a chance to get open-text responses with extra details that can help you find hidden pinpoints. You might discover issues that didn’t appear in your internal data or qualitative research.
Asking the classic NPS (Net Promoter Score) question can be the most important indicator to get you started on reducing churn.
How satisfied were you with our product/service? How likely are you to recommend the product/service?
Customers respond with a number on a scale from 0 to 10, giving you a very exact idea of how happy they were with your offering - and if they’d share the experience with their peers.
Here you have another opportunity to collect valuable open text responses. If a customer scores under 5, you can introduce a follow-up question such as: “You responded that you were unsatisfied with your experience — please explain your answer why using detail and examples.” Even though only few customers will take the time to answer, the responses you receive will be telling.
If you have specific assumptions around why users have not been using your product or service, you can also measure the impact of individual issues. You may ask a question such as “How much did factor X influence your decision to not use the product?” You can also name several factors and ask users to check the ones that played a role in their decision making.
Analyzing your results
Let’s assume you’ve collected a bunch of data from several surveys. How do you handle it?
What are the differences? Are there any prominent differences between customers’ answer to certain questions? These could be a good starting point. You’re comparing how impactful each reported issue was on a user’s decision to leave. You might find that an issue like i.e. app speed is way more important than the long-tail of reported issues to one group of users. Another group’s decision to leave may not have been affected by speed at all. By breaking down churn reasons into user groups, you’re likely to discover important habits about user behaviour.
Read between the lines. Go through all the open response texts you receive and pull out any qualitative detail that explains why and how each of the reported issues were significant for an individual to leave. By doing this you may be able to make connections to user behaviour that can help you not just improve the product, but also adjust messaging and onboarding.
Cluster the data. Combine responses. What did the least satisfied customers have in common? Is there a difference between the least satisfied customers and the ones that were close to satisfied? What is that difference? Is there something that stands out for one specific time period? What are the difference between people who identify churned vs. those who might return to the app? Mashing up your survey data and testing for significance can yield interesting results.
Less Churn, More Revenue
Churn is one of the few metrics that can be directly correlated to your revenue. If you manage to reduce churn, you’ll be rewarded with higher revenue. It’s that simple. All it takes is learning how to spot where your customers are struggling to achieve their desired outcome - be it by lack of product experience or other circumstances.
If you want to get better at managing customer experiences, reach out for a demo today. You can also sign up for one of our upcoming webinars by clicking the photo.