Customer churn identifies the customers that stop using your service or product. For SaaS businesses, customer churn is a result of customers canceling or not renewing their subscription.
Measuring customer churn allows you to understand how successful your company is at retaining clients, and a low customer churn rate is crucial for business growth.
In this article, we take a look at measuring your churn rate, why customers churn, and how you can use behavior-based, personalized email and push notifications to drive engagement and decrease customer churn.
- Measuring customer churn
- Understanding why your customers churn
- Reducing short-term customer churn with data-driven messaging
- Reducing long-term customer churn with data-driven messaging
Measuring customer churn
Customer churn rate can be calculated in several diverse ways, and every metric is useful for different purposes and types of businesses. The most straightforward measure of customer churn rate is the proportion of consumers that stopped paying for your product during a particular period.
SaaS and subscription companies that cost monthly track churn rate by monthly cohort, in addition to annually, so that they can see how this speed changes over time.
Why is it important to compute customer churn rate?
Customer churn rate is among the most important metrics for understanding the health and long-term prospects of a company.
The more customers that churn, the more you need to acquire to keep your revenue or grow at the same rate. Since the price of bringing new customers can be significantly higher than the cost of keeping customers, high churn rates can quickly inhibit earnings growth.
Measuring and tracking customer churn rate is therefore vital for financial modeling, prioritizing product development, and customer success efforts. It enables companies to understand whether client retention has improved on a month-to-month or annual basis, and what might have affected it.
What is an acceptable churn rate?
Churn rates always vary by industry. The maximum viable churn for a business is dependent upon the company’s runway and the rate at which it could grow current accounts through up-sell and cross-sell.
Tech industry investor, Andrew Chen advises that in general “it’s critical to find monthly churn under 5 percent and the goal should be 1-2%”.
Understanding why your customers churn
It can be useful to measure and analyze churn for different customer tenures, as the motives long-term clients churn are often different compared with newer clients.
Short-term customer churn
SaaS businesses typically observe a greater customer churn rate in the initial few months of the customer lifecycle due to clients still learning and evaluating the product, but not reaching the ‘aha moment‘.
Long-term customer churn
Reasons for long-term churn may include clients experiencing issues or bugs with the product, lack of visible product development, and poor customer service.
Assessing both short-term and long-term churn rates can help you to more easily identify and address the causes, and measure the impact of your solutions.
Reducing short-term customer support with data-driven messaging
Short-term churn is typically due to customers not attaining the ‘aha moment’ — the stage at which they realize the value in your product. Although it is known as a ‘moment’, it’s typically a set of activities that separate users that you are likely to stick around from those who will churn.
Every product has a unique ‘aha moment’.
Facebook and Slack have simplified their ‘aha moment’, but for many goods, the ‘aha moment’ is reached when a brand new customer completes several actions.
Investor and former Growing Product Manager at Snap Inc., Parsa Saljoughian provides a helpful guide on the best way to discover your program ’s aha moment.
As soon as you’ve identified your product’s ‘aha moment’ you can map out ways to help clients reach it. Email and push notifications are two of the most effective channels for driving product engagement and helping clients reach the ‘aha moment’.
Behavioral onboarding emails
Understanding and tracking customer interaction with your product is key to ensuring you can provide relevant onboarding email and push messages that prompt actions. For instance, a customer who logged but didn’t socialize with your merchandise will call for different messaging to a customer who successfully participated with two important features and invited a friend/colleague to use it as well.
Dropbox’s email provides a excellent example of how you can prompt users towards an action — and get them closer to their ‘aha moment’. It focuses on a clear benefit and makes it fast and easy to achieve.
Invision send a similar email:
Emails such as this can be installed in a messaging workflow and triggered based on the customer’s behavior. For example:
- Trigger workflow Once the customer creates an account
- Wait one day
- Send email 1 if the client has not ‘created a board’
- Send email 2 if the client has ‘created a board’
Once customers have started engaging with your goods, you can use email and push messages to remind customers to complete incomplete tasks that will bring them closer to the ‘aha moment’.
“The best programs will be the ones you don’t have to remember to use. They’ll remind you. Soon that will be the only type of app. ” — Noah Weiss, Slack (First Round interview)
If you see a new customer is heavily engaged with your product in their first days or weeks and has attained the ‘aha moment’, you can create a condition on your workflow to quit sending them onboarding emails entirely. Alternatively, you could send an email or message offering a discount on an yearly plan (for instance ).
Reducing long-term customer churn
Long-term churn is typically because of clients no longer experiencing enough value from a product (with the exception of inevitable churn, i.e. a client that ceases their business). Product updates and customized insights are two types of mails that can help customers experience worth and promote continuous product engagement.
Merchandise update emails
New features and updates can significantly increase the value that clients get from your product so it’s important to communicate them effectively.
Starling Bank, Asana, and Notion provide excellent examples of product update emails that describe the advantages of the new features, instruct customers on how best to use them and prompt engagement with the item.
Starling bank email illustration:
Asana email example:
Notion email example:
Regular product update emails reveal momentum in product development so clients trust the item will continue to meet their needs in the future.
Data-driven personalized insight mails
Customer account usage insights can deliver additional value and promote continuous product engagement.
Small business accounting program FreeAgent sends a weekly overview email to prompt customers to take specific actions, based on their accounts usage. This email functions as an extension of their core product by assisting their clients stay on top of their finances. It prompts actions and habits as a means to continuously deliver customer value.
Strava sends a similar email — their monthly stats update delivers customers personalized insights based on their account utilization and prompts engagement with the item.
Image source: Dribble — Monthly Stats email by Strava
You can make personalized insight messages, like FreeAgent and Strava, by adding dynamic content to your own emails. Vero supports the Liquid templating language to allow you to create personalized content, and it’s Fusion attribute lets you pull data directly from the API into Vero at the time the email has been rendered, just before it sends. This helps you create emails with account utilization data, personalized product recommendations, and much more.
Measuring the impact of your messages on customer support
Measuring the direct impact of campaigns on customer churn rate is notoriously difficult because of the necessary time period for testing, and ensuring that no other factors influence customer retention during this period. It’s possible, however, more easily and accurately A/B test email and push campaigns to find the impact on clients ’ feature usage and engagement.
We’ll be adding more on how to accurately test the impact of email and push campaigns on key growth metrics — stay tuned!
For now, we hope this article inspires you to create messaging that helps your clients get into the ‘aha moment’ quicker, and send personalized emails that offer more value and prompt regular product engagement.
The post decreasing customer churn with data-driven messaging appeared first on Vero.