The Metric that Controls the Fate of Your SaaS Business - Churn
Lars LofgrenGrowth Manager - October 2013
Zach BulygoContent Marketer
@larslofgren
The Basics of Churn1
Your Only Strategy to Truly Fix Churn2
Tactics and Hacks to Reduce Churn3
We’ll cover...
The Basics of Churn
What is churn?
The number of customers who cancel within a given time period.
The Churn Formula
# of customers who churned
total # of customers=% customer churn
forentrepreneurs.com/saas-metrics-2-definitions
You’re in for the long haul.
If you don’t keep customers around...
You’ll never survive because customers will never become
profitable.
Standard time to recover acquisition cost?
12 Months
Standard time to reach profitability?
Up to 24 Months
So what’s our churn goal?
You haven’t found product/market fit yet. Your customers do not like
your product.
10% monthly churn and above...
Median Annual Churn = 9%
Results of the Pacific Crest Survey
Median Monthly Churn = 0.72%
forentrepreneurs.com/2013-saas-survey
Larger SaaS companies with a median contract value of $20,000.
Who responded to the survey?
forentrepreneurs.com/2013-saas-survey
If you’re targeting SMBs:
Annual Churn = 15%
Monthly Churn = 1.17%
Over 10% = New Product or Market1
2-10% = Major Problem2
1-2% = Doable3
Under 1% = On Track4
The Bottom Line on Monthly Churn
Your Only Strategy to Truly Fix Churn
The only way to fix churn entirely is to improve your product.
Here’s the bad news...
You need to talk to your customers.
Customers that have never churned.1
Customers that churned in the last month.
2
Talk to two types of customers:
Look for key differences between the two groups
Are they different customer types?1
How do they use the product?2
How do they describe the product?3
Do they get continuous value?4
Specific items to look for:
Start nudging people in the right direction.
You’ll need to find your own path.
Is your app stable?1
Does it provide value quickly enough?2
Slow support?3
Better alternatives?4
Other items to look for:
Tactics and Hacks to Reduce Churn
The Hacks
Ask People Why They Cancel1
Push Annual Billing2
Expired Credit Cards3
Call At-Risk Customers4
Go for the Upsell for Negative Churn5
1. Ask People Why They Cancel
2. Push Annual Billing
Send emails for your annual dicscounts.
1 month after a monthly user subscribes, send an email with a link to get your annual discount.
*Patrick McKenzie gets credit for this one
3. Expired Credit Cards
Inform customers their credit card is going to expire two weeks before
it does.
*Another tip from Patrick McKenzie
4. Call At-Risk Customers
Alert your support team when customers become inactive, then
reach out.
5. Go for the Upsell
When a current customer upgrades their plan.
Common upsells:
Exclusive features1
Expanding seats2
Increased usage3
Better support4
What’s negative churn?
Increase in revenue from upsells exceeds revenue lost from
churned customers.
Low churn + great upsells = negative churn
Q&A Time!Lars Lofgren
[email protected]@larslofgren
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