This One Trick Lowered Our Churn By 30%

I don’t know about you, but just thinking about churn makes me want to cry in the shower. You worked so much to get customers and then they just… leave? It costs up 50x more to get a new customer than keeping an existing one. This one trick lowered our churn by 30% and helped us grow revenue.

I know churn is normal. You can’t expect every customer to stay forever. There’s actually a lot to learn from surveying customers who churn. You can find common traits and unmet needs and address them to make your product better. Which gives a hint about the trick that I’m about to show you.

But before we get into that…

What is Churn?

There are 2 types of churn: customer churn and revenue churn. Customer churn is how many customers cancel their subscriptions during a given time period. Revenue churn is much revenue you lose because of those customers canceling during that time period.

When I talk about churn, I’m talking about revenue churn because looking at revenue is more helpful to me when making decisions.

Customers can churn voluntarily, which is when they cancel intentionally. There’s delinquent churn, which is when a customer cancels unintentionally - this is usually because their credit card expires or there’s a payment processing issue.

How to Calculate Churn Rate

1. First, you need to determine what time period you want to look at. Most companies look at their churn on a monthly basis, so that’s a good place to start.

2. Then you’ll need the number of customers you had at the beginning of the time period.

3. And then the number of customers that churned by the end of the time period.

4. Then you’re going to divide the number of lost customers by the number of customers you had prior to the churn.

5. And that you multiply that number by 100. Tada.

Are you still with me? It’s a lot of math. Don’t worry we’re almost there.

Let’s do an example, let's say your software company had 500 customers at the beginning of last month.

However, you also lost 50 customers.

This would mean your monthly customer churn rate would be the 50 churned customers divided by the 500 former customers, and 50 divided by 500 is 0.10.

Multiplied by 100, this gives you a customer churn rate of 10%.

Customer Churn Rate = (Lost Customers ÷ Total Customers at the Start of Time Period) x 100

Customer Churn Rate = (50 ÷ 500) x 100

Customer Churn Rate = (0.10) x 100

Customer Churn Rate = 10%

For revenue churn rate, it’s the same thing, you just replace the customer number with the dollar number.

So if you made 500 dollars, but you lost 50 dollars due to churn, your revenue churn rate is 10%.

What is a Normal Churn Rate?

80% of running a SaaS company is wondering “Is it too late to ask someone about this?”. This is especially true for metrics. You know your metrics, or at least you should, but knowing everyone else's metrics helps you know where you stand.

Let’s look at churn rates per industry.

Looking at these stats from Recurly, which is a great source of information by the way, I’ll have it linked below, it looks like if your churn is lower than 10%, you’re doing great.

If you’re in SaaS, Media & Entertainment, Business Services or IT, your goal churn rate should be at around 5%. It makes sense that people are more likely to cancel a subscription box than a business service, since it’s something more essential, more integrated into their lives.

So now that we know what churn rate is considered ok in your industry, let me tell you what we did at involve.me to reduce our churn rate by 30%. Are you ready? You in the back, are you ready?

Trick That Reduced Churn Rate by 30%

Ok, this is what you came here for. What did we do at involve.me that lowered our churn rate so drastically?

Let me show you.

We built a churn funnel. Now what’s a churn funnel? Instead of explaining what it is, I’m going to show you how it works. Feel free to see for yourself and grab one of the templates below.

So normally, you’d let customers cancel with one click and then maybe send a confirmation email to let them know they’re credit card will not be charged anymore.

That’s fine, we don’t want to block the door. You’d have zero cancellations if you just removed the cancel button, but you know what else you’d also have? An angry mob with pitchforks in front of your house.

Do 👏 not 👏 block 👏 the 👏 door.

But while they're at the door, they’re still engaging with you, so take advantage of that engagement and talk to them.

At involve.me, we asked customers with cancellation intent 3 questions:

1. What went wrong?

2. Were you successful? Meaning: did you achieve what you came here to achieve

3. How would you rate your experience on scale from 0 to 10? This question is important because it helps you make a review funnel, I made a whole video about that.

The first question is the most important one: What went wrong? Knowing what went wrong gives you an idea where your product or process is lacking. It also helps you put customers into categories.

Each category has a specific reason for canceling and you can provide solutions for that category.

The categories we have here, and these are the categories every SaaS business puts their churn customers into are:

1. Nothing Went Wrong. My Campaign or Project is Over.

This is fairly normal. Sometimes the customer had a great experience and they’re done. What you can do here is help them understand how your product can be more than just a one time thing. You can do that by sending them more resources or remarketing different solutions you provide to them.

2. I Am Missing Some Functionality

This is also a very common reason why people cancel. They were expecting certain features and didn’t find them, so they’re going to look elsewhere.

What you can do for these customers is find out what the feature was and make sure you really don’t have it. You’d be surprised how many people cancel because they were missing a feature that you very much have. They just can’t find it. The best course of action for these people is connecting them to customer service, tutorials and resources.

IF a lot of people report missing the same feature that you DO have, that’s on you. If your customers can’t find a feature and use it successfully, it’s your job to make it easier.

3. I’m Using Another Service

This question will give you insights into who your real competitors are. If you’re in a crowded market, it takes a lot of work to compare the pricing, the features, the service, the ease of use…

The best way of knowing who you’re actually competing with is listening to people who have used your product and decided to make the switch.

4. I Don’t Use It Enough

Fair enough. This category is specifically here for people who forgot to cancel their subscription. I don’t know about you, but at the end of every quarter, I go through all my payments and cancel a bunch of things I got excited about because I liked the website, I saw a cool ad or a friend recommended something to me. And I never came back.

This is one, even though very common, is also on you. If this is the most common reason people cancel, you might need to look into onboarding them better. Explaining what your company does and keeping people engaged will keep this category of people from canceling.

I have a full tutorial on how to build an onboarding funnel, check it out if you’re running out of ideas.

5. It’s Too Expensive

This is the easiest problem to solve. Give them a discount, or offer to pause their subscription for a few months.

6. I’m Having Technical Issues

Straight to support! That is why we have customer service in the first place. But again, don't force this action. Ask if they have already spoken to customer support and add a button that can take them there. But also add a button to skip that and cancel, otherwise you'll create frustration and friction.

7. It’s Too Difficult

This one is painful to hear. Nobody wants to hear that their product that you build specifically to make people’s lives easier is actually making things more difficult. If this is the most common reason people are canceling, it might be a good idea to hire people outside of your company to test and review your product.

So these are the issues we’re able to identify via this survey. We also address them immediately. Which means the whole thing needs to be automated.

For example, when a customer says “it’s too expensive”, the survey immediately takes them to a page where they can select a discount or pause their subscription for a while.

Now what results did we get by doing this?

First of all, we got A LOT of data. And it’s all data we can use to create more happy customers and keep them around for longer.

Secondly, we got less churn. Because we offered cancellation alternatives.

Instead of canceling the subscription, we let people know that they can:

1. Pause their subscription for up to 3 months

2. Pay less with a discount

3. Speak to a real person who can help them fix things

Again, we’re not blocking the door.

We’re just putting a sign pointing at other doors next to it.

How to Lower Your Churn Rate?

So that is one quick trick that helped us lower churn.

But we didn’t just leave it at that. We gathered a lot of data in the process. And what did we do with this information? We took the blueprint of what made this survey a success and we made it into free templates for you to grab and put your logo on.

If you go to our website and click “templates”, under “cancellation funnel” you can see templates inspired by this strategy. So you can literally just take this strategy and copy-paste it into your website.

We’re giving you the different designs for different industries, but all templates are 100% customizable so you can grab whatever you want and make it match your brand.

Functionality-wise, these all work the same:

1. They ask what went wrong.

2. They offer solutions.

3. They send custom emails for each solution.

And you can do that too today. There is no time limit on the free plan, so you can try it for as long as you want to. Give it a few weeks or even months to see if it works for you. If it does and you want to do fancy things like integrate the data into your CRM automagically, like the absolute wizard you are, the price for that starts at $19/month, but you can get discount for 2 month with our discount code.