Churn is one of the most important metrics tracked by today’s startups, but is often misunderstood. Intercom is a product that actually reduces churn, and can be used as a way to reduce churn by clarifying what churn looks like in your business and making plans to address it.
How to understand churn properly
When startups talk about percentage churn they ignore too many variables
- 5% is okay if it’s all free users you’re losing, but what if that 5% happens to be all your premium customers or 50% of your revenue?
- What is your activity churn? How many users became inactive this month? These questions keep coming until we get some real insight
Be Thankful, Honest, and Respectful
When a customer decides to leave, thank them, and let them go. Do not spam them months or years into their departure.
- The single best way you can engage customers that are slipping away is by talking with them.
Activity churn matters
Activity churn is the best indicator of future problems
- Customers don’t make a snap decision to stop using a product unless something goes wrong
- Typically customers gradually stop using products, from using it every morning to every week to once a month
- At some point down the road you’ll remember you’re paying for something you don’t need and don’t use, and then you ‘churn’, even though the decision was made months ago
Be interesting, not cute
Motivate users
- Offer customers a glimpse of what’s coming down the line
- Features that save time or increase adoption or efficiency
- If you can’t make a concrete promise, it’s better to say nothing and focus on fixing the problem
Identifying and reducing activity churn
The most effective time to address churn is when you see a drop in usage across an entire team.
- When you identify previously active customers who are slipping, a well-timed personal email can help to re-engage them.
Be visual
Screenshots or gifs can be particularly interesting for long standing users
How churn impacts your business
Churn is usually seen as a factor limiting growth, but the impact on customer lifetime value (LTV) is equally significant
- If churn is significant, then LTV is too low to support a SaaS model
- Even with strong revenue growth month to month churn can still be a killer, albeit a more silent one
Target the right customers
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.
- Don’t let them both fall into a naive “we miss you” bucket. Treat them differently
Be Personal
Introduce yourself in the email
- Make it clear that you’re a real person who really want to hear what they have to say about your application.
- Don’t auto-mail a customer who has several open support issues to remind them to login
