Why Churn Analysis Can Save Your Business

original post: https://tractific.com/blog/what-is-churn-rate-analysis

Customer acquisition is expensive and needs a lot of time. Every founder wants to retain its lovely customers and do something to decrease the churn rate. Data analysis helps us to decrease the churn rate. Churn analysis helps you understand your customers' pain points with your product and why they stop paying for it. Thus it can save your business and save you a lot of time and money.

Churn examples

• Financial services: Users thinking of switching banks
• Consumer tech: Deleting the app
• Energy: Revenue that is at risk of being lost to other providers
• Healthcare: Value of patients lost to other providers
• Insurance: A closed policy
• Life sciences: Revenue that is at risk of being lost to other providers
• Manufacturing: Revenue that is at risk of being lost to other providers
• Media and entertainment: Subscriber churn
• Retail and e-commerce: Revenue that is at risk of being lost to other providers
• Telecommunications: Switching GSM company
• Travel: Churn among repeat web visitors

What Is Churn Analysis

Churn analysis is the process of understanding what caused your users to stop using your product and. Since the SaaS business depends on monthly payments, the SaaS churn rate is crucial.

Churn and retention has an inverse relationship: When churn goes down, retention goes up, and vice versa.

Churn analysis is to understand and fix problems that make your users stop using your product, whereas retention analysis includes churn and finding new ways to keep your customers.

How to calculate Churn Rate

Before starting your churn rate analysis, you should calculate your initial churn rate to compare it and know whether you do the right things.

User churn is calculated by dividing users at the beginning of the period - users at the end of the period by users at the beginning of the period.

Types of Churn Analysis

There are two ways of Churn Analysis which you should focus on to prevent churn and increase your B2B Customer Experience: Customer Churn and Revenue Churn.

Customer Churn

Customer Churn is the process of understanding where and when exactly you lose your customers. It includes a detailed observation of user experience and behavior exploration.

Reducing customer churn will help you to increase retention and your product's overall quality in the long run since it includes a detailed customer experience strategy and user experience research, you will get a detailed explanation of your users' behaviors and know what they use and whatnot.

Revenue Churn

Revenue Churn enables you to understand where and when you lose revenue, but not necessarily customers.

By the revenue churn analysis, some customers are more valuable than others because they spend more money on your product. Revenue Churn analysis helps you to retain those customers.

Revenue Churn analysis will increase revenue in the long term, but not necessarily users.

Using it with the customer churn analysis would yield the best results and make the user experience better.

Why Churn Analysis Is the Key to Success

• Churn Analysis is the key to success because it helps you to focus on what matters the most to increase consumer experience, to decide on the next feature, adding/removing features, finding and fixing broken features/buttons, and so on.
• Churn analysis shows you where in the customer journey users are leaving. It might be a feature that is difficult to understand or use, a button that doesn't work, etc. Finding that and fixing is crucial for customer retention management.
• You need to break down the customer journey into different phases, and then break down each phase even further to make the best out of your analysis. The onboarding flow should be your first phase as it is the first thing your users experience.
• Churn analysis in your onboarding flow reveals the problems causing your users to drop off before they reach an important milestone—or the first a-ha, when they start to realize your product’s value. Your copy has a lot of CTA buttons but sometimes they are not enough to make a user take action.
  Sprout Social sends this email to users who didn't complete their account setup.
  
  Magoosh was also able to increase signups by 17% simply by adding a welcome email to their onboarding flow:
  

A pitfall of selling your product online is that different people expect different things from a product and when you sell online, you cannot manage who buys your product. Everyone with interest and money can buy it.
To tackle this issue you have to create different segments (cohorts) and focus on them separately.

This way you can manage different groups with the same expectations better and easier.

Churn analysis can also reveal if you have product-market fit. The reason for a high churn rate might also be product-market fit.

You should have validated your idea before developing your product but you can always pivot after doing churn analysis.

B2B SaaS Retention Strategies

We talked enough about churn analysis. Let's talk about retention strategies for your B2B SaaS to maximize your customer retention and make the user experience better.

Give value

Email marketing is a SaaS retention team’s best friend but it can be spammy and many users might choose not to open your emails.

You can, however, replace follow up emails with emails that give value to the customer. That is full of your personal experience with your job and tips.

Choose Your Metrics Wisely

Every company measures success differently thus you have to be careful while choosing your metrics to track your business and increase retention.

What is your North Star Metric? What makes your customers stay with you? What is your main value proposition?

Increase Your Average Customer Spend

As we mentioned earlier, different customers spend different amounts on your product.

If you can increase your average customer spend, then you can increase your revenue without acquiring more customers and also your users will be loyal to your product.

One way to reduce this type of stagnation is to focus on what David Skok calls “negative churn.”

In his own words, “Negative churn happens when the expansions/up-sells/cross-sells to your current customer base exceed the revenue that you are losing because of churn.”

AppSumo, for example, shows this message to their Monthly 1K program

Provide your customers with resources and use-cases

Your customers should not try to find use cases and resources to use your product more effectively, you should provide them.

Zendesk, support, sales, and customer engagement software, offers use cases to their customers.

This increases customer retention by offering a great variety of reasons to use the product. Since customer retention depends on loyalty, this is extremely important.

You can also write case studies to show your customers that your product works well and to build trust.

Why Do You Leave

When a customer leaves don't just accept it as a loss instead take advantage of it.

Try to learn why they are leaving with an email.

Don't make them write a whole paragraph but offer them a few options and let them choose.

However, you cannot ask this to every user. There is a difference between a customer who didn't convert after the free trial and a customer who didn't convert after 5 years of loyalty.

Understanding the reasons for the churn will help you to increase customer retention and make the user experience better.

Groove, for example, was able to reduce their churn by 71% simply by asking why their customers were leaving:

It seems overly simplistic and something everyone can think of, not just great founders. But it works.

Conclusion

Customer acquisition is expensive and needs a lot of time thus you have to be able to retain your customers. Churn Analysis will help you to understand your customers' pain points and give insights about your products' product-market fit.
If you want AI-powered segments of your customers based on their behavioral patterns and see which ones are the most likely to convert, you can use Tractific!