Typically, customer success programs own the churn rate. It’s the job of a SaaS organization’s customer success managers (CSMs) to keep that number as low as possible.
Your actual churn rate is irrelevant because you should always be working to lower it. Zero churn isn’t your floor. Negative churn is possible.
There are actually a lot of things you can do to prevent churn. I’ve talked about many of them before.
That’s often the hardest part of a CSMs job. Once you figure out why your users are leaving, the solution is usually obvious.
One of the easiest ways to discover why people churn is by tracking red flag metrics. If you’re new to customer success or building a customer success program for the first time, this is a good way to get some quick wins.
Essentially, we can monitor user behavior and predict when they’re likely to churn. Casey Armstrong, a full stack marketer who focuses on revenue growth and customer acquisition for startups, calls this concept “activity churn.”
“Before cancellation ever happens, there are clear signals that a customer is in danger of churning,” Casey says. “Engagement lags, and your product or service goes from an everyday occurrence to being used once a week, then once a month. Finally, they decide it’s a waste of money altogether.”
Those signals that churn is imminent are red flag metrics. By monitoring them analytically, we can take steps to prevent or reverse churn.
In most cases, red flag metrics can be corrected with large-scale, automated solutions. An in-app prompt can point users toward more information. An automated email can bring them back into the tool. A popup tooltip can tell them what to click next.
Unfortunately, I can’t give you a list of red metrics and say “Track these and you’ll eliminate churn.” The signals you monitor vary widely depending on the type of product and the type of customer.
To figure out which metrics are worth tracking, you have to go backwards. Identify accounts that you’re sure have finally churned. Someone who has canceled their payment information has definitely churned, but you should also include people who…
Once you’ve identified churned accounts, look at their activity just before churning. Do you see any trends? Did they do anything suspicious? Did they fail to do anything that most accounts do?
Look for anything that makes you think “That must have been the last straw.” Don’t just look at their activity. Also consider their lack of activity.
Like I said, I can’t tell you exactly what your red flag metrics are, but I can give you a few examples that apply to many SaaS organizations.
The activation point refers to the moment the user has completed the setup of their account. They have completed all of the proper fields, they have integrated their external accounts, and they’re ready to get into real work.
But most users never make it that far. They poke around the product, but fail to take all the necessary steps. In fact, 40-60% of free trial users never log into the product a second time.
“There are many reasons why a user would abandon an app that early,” says Stripe programmer and engineer Patrick McKenzie. “It might not have been a good fit for them. They might not have been well-qualified by the pre-app marketing. They might just have gotten busy or had their own priorities change.”
But most of the time, users abandon the product for reasons we can control. We can help them reach the activation point and then progress further through the onboarding process.
Naturally, users who successfully activate the product use it longer (and spend more money) than users who never complete the process. A red flag should go up when someone fails to reach the activation stage (which is a fairly minimal threshold).
Once you decide where your activation point is, identify the number of users who never reach that point. If more than 60% of your users are never completing the process, you should address it to reduce your churn rate.
How do you address that? Often it’s as simple as sending a quick email to remind the user that they haven’t finished their set up process. Give them an opportunity to respond to your email if they have any questions or problems.
When a person has a poor experience with your business, they’ll rarely tell you about it. According to HelpScout, for every customer who complains, 26 remain silent.
Sure, they’ll complain to their friends and colleagues, but they’ll only bring their grievance to you if the experience is monstrously bad or cost them something (time or money). Most of the time they just take their business to another provider.
You can use data to identify people who had a poor experience with your product by noting where they spend an unusual amount of time. If their usage is far outside the normal range, they may be frustrated or stuck.
You would first take a benchmark from average users (or, more specifically, from successful users). For the sake of the example, let’s say most people complete this task in 2-4 minutes because it involves opening another tab, finding the right file, and pasting the code.
Anyone who takes significantly longer than 2-4 minutes should be a red flag. A delay here could be indicative of a poor experience. Do they understand the task? Are they capable of accessing that file? Do they know where that file is located? How can the product or process be improved to prevent the delay, thus preventing a bad experience?
You should be especially concerned about these oddities if that session is the user’s last. Anything just before someone quits your product should be scrutinized.
This one is obvious, but it’s worth mentioning because addressing the problem is easy.
You should be able to determine how often successful customers log into your product. It might be every day, twice a week, or any interval. Most organizations see a clear pattern here (accounting for customer segments, of course).
When a customer violates that patterns by failing to log in, it means they aren’t getting enough value of the product to make it worth their time. It will only be a matter of time before they realize they aren’t using the product and should stop paying for it.
The smart solution is to engage them in other ways (usually email) to remind them of your product’s potential value. Lindsay Kolowich, a marketer for InsightSquared, has excellent advice:
“If people aren’t logging in or if they are only engaging with certain parts of your product, set automated drip campaigns to send bite-sized educational material they can use to get excited about your product again – or that will expose them to parts of your product they didn’t realize were useful.”
Remember that the purpose of a red flag metric is to alert you to a problem before your customer churns. Your job is to create a solution that prevents the churn and stops other accounts from reaching the red flag in the first place.
Calling each red flagged account on the phone to ask them how you can help is not a solution. Make a call if you think you can save the account, but that type of manual process is suitable for the long-term. It’s a reactive style of work that isn’t appropriate to a successful customer success program.
If you choose your red flag metrics smartly and take steps to prevent them from occurring, you can take dramatic steps to reduce your organization’s churn rate.