The Metric that Controls the Fate of Your SaaS Business - Churn
• 3. We’ll cover... 1 The Basics of Churn 2 Your Only Strategy to Truly Fix Churn 3 Tactics and Hacks to Reduce Churn • 4. The Basics of Churn • 5. What is churn? The number of customers who cancel within a given time period. • 6. The Churn Formula % customer churn = # of customers who churned total # of customers forentrepreneurs.com/saas-metrics-2-definitions • 7. You’re in for the long haul. • 8. If you don’t keep customers around... You’ll never survive because customers will never become profitable. • 9. Standard time to recover acquisition cost? 12 Months • 10. Standard time to reach profitability? Up to 24 Months • 11. So what’s our churn goal? • 12. 10% monthly churn and above... You haven’t found product/market fit yet. Your customers do not like your product. • 13. Results of the Pacific Crest Survey Median Annual Churn = 9% Median Monthly Churn = 0.72% forentrepreneurs.com/2013-saas-survey • 14. Who responded to the survey? Larger SaaS companies with a median contract value of $20,000. forentrepreneurs.com/2013-saas-survey • 15. If you’re targeting SMBs: Annual Churn = 15% Monthly Churn = 1.17% • 16. The Bottom Line on Monthly Churn 1 Over 10% = New Product or Market 2 2-10% = Major Problem 3 1-2% = Doable 4 Under 1% = On Track • 17. Your Only Strategy to Truly Fix Churn • 18. Here’s the bad news... The only way to fix churn entirely is to improve your product. • 19. You need to talk to your customers. • 20. Talk to two types of customers: 1 Customers that have never churned. 2 Customers that churned in the last month. • 21. Look for key differences between the two groups • 22. Specific items to look for: 1 Are they different customer types? 2 How do they use the product? 3 How do they describe the product? 4 Do they get continuous value? • 23. Start nudging people in the right direction. • 24. You’ll need to find your own path. • 25. Other items to look for: 1 Is your app stable? 2 Does it provide value quickly enough? 3 Slow support? 4 Better alternatives? • 26. Tactics and Hacks to Reduce Churn • 27. The Hacks 1 Ask People Why They Cancel 2 Push Annual Billing 3 Expired Credit Cards 4 Call At-Risk Customers 5 Go for the Upsell for Negative Churn • 28. 1. Ask People Why They Cancel • 29. 2. Push Annual Billing • 30. Send emails for your annual dicscounts. • 31. 3. Expired Credit Cards Inform customers their credit card is going to expire two weeks before it does. • 32. 4. Call At-Risk Customers Alert your support team when customers become inactive, then reach out. • 33. 5. Go for the Upsell When a current customer upgrades their plan. • 34. Common upsells: 1 Exclusive features 2 Expanding seats 3 Increased usage 4 Better support • 35. What’s negative churn? Increase in revenue from upsells exceeds revenue lost from churned customers. • 36. Low churn + great upsells = negative churn
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The Metric that Controls the Fate of Your SaaS Business - Churn
- 1. The Metric that Controls the Fate of Your SaaS Business - Churn Lars Lofgren Growth Manager - October 2013 Zach Bulygo Content Marketer
- 2. @larslofgren
- 3. We’ll cover... 1 The Basics of Churn 2 Your Only Strategy to Truly Fix Churn 3 Tactics and Hacks to Reduce Churn
- 4. The Basics of Churn
- 5. What is churn? The number of customers who cancel within a given time period.
- 6. The Churn Formula % customer churn = # of customers who churned total # of customers forentrepreneurs.com/saas-metrics-2-definitions
- 7. You’re in for the long haul.
- 8. If you don’t keep customers around... You’ll never survive because customers will never become profitable.
- 9. Standard time to recover acquisition cost? 12 Months
- 10. Standard time to reach profitability? Up to 24 Months
- 11. So what’s our churn goal?
- 12. 10% monthly churn and above... You haven’t found product/market fit yet. Your customers do not like your product.
- 13. Results of the Pacific Crest Survey Median Annual Churn = 9% Median Monthly Churn = 0.72% forentrepreneurs.com/2013-saas-survey
- 14. Who responded to the survey? Larger SaaS companies with a median contract value of $20,000. forentrepreneurs.com/2013-saas-survey
- 15. If you’re targeting SMBs: Annual Churn = 15% Monthly Churn = 1.17%
- 16. The Bottom Line on Monthly Churn 1 Over 10% = New Product or Market 2 2-10% = Major Problem 3 1-2% = Doable 4 Under 1% = On Track
- 17. Your Only Strategy to Truly Fix Churn
- 18. Here’s the bad news... The only way to fix churn entirely is to improve your product.
- 19. You need to talk to your customers.
- 20. Talk to two types of customers: 1 Customers that have never churned. 2 Customers that churned in the last month.
- 21. Look for key differences between the two groups
- 22. Specific items to look for: 1 Are they different customer types? 2 How do they use the product? 3 How do they describe the product? 4 Do they get continuous value?
- 23. Start nudging people in the right direction.
- 24. You’ll need to find your own path.
- 25. Other items to look for: 1 Is your app stable? 2 Does it provide value quickly enough? 3 Slow support? 4 Better alternatives?
- 26. Tactics and Hacks to Reduce Churn
- 27. The Hacks 1 Ask People Why They Cancel 2 Push Annual Billing 3 Expired Credit Cards 4 Call At-Risk Customers 5 Go for the Upsell for Negative Churn
- 28. 1. Ask People Why They Cancel
- 29. 2. Push Annual Billing
- 30. 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
- 31. 3. Expired Credit Cards Inform customers their credit card is going to expire two weeks before it does. *Another tip from Patrick McKenzie
- 32. 4. Call At-Risk Customers Alert your support team when customers become inactive, then reach out.
- 33. 5. Go for the Upsell When a current customer upgrades their plan.
- 34. Common upsells: 1 Exclusive features 2 Expanding seats 3 Increased usage 4 Better support
- 35. What’s negative churn? Increase in revenue from upsells exceeds revenue lost from churned customers.
- 36. Low churn + great upsells = negative churn