Demystify churn

Only 5% of companies understand their drivers of churn – do you?


June 2018


Thomas Christian Vasehus

Your customer is likely to leave if the customer experience falls short of his or her expectations. This is obvious.

Yet, not enough companies analyse and understand when and why they fail to meet customer expectations. Management will start debating why the latest churn figures look the way they do. Instead of how they should improve the customer experience in the affected area.

I went with a colleague of mine, Mads Schjølin, to get a peek inside Silicon Valley and learn how start-ups and tech companies go beyond the first hype from early adopters to building customer relations and sustainable growth.

Mads and I are writing a series of posts based on our learnings and reflections. This is a follow-up on “What Silicon Valley can teach you about B2B marketing” – focussing on the last part of the sales funnel:

How to keep your customers coming back, increase their share of wallet and get them to advocate your brand.

Action requires insights

Many companies do churn reporting that reveals customer development in a historic perspective but gives little insight into whether (and how) action should be taken, leaving management with more questions than answers.

An Implement Customer Retention Survey (2016) revealed that only 1 in 20 companies understands the underlying churn drivers, while even fewer companies identified leading indicators of churn. Identifying and understanding the underlying components of churn is critical to developing and testing retention hypotheses.

We need to demystify churn and go beyond “the numbers” in order to create insights that we can act upon – and change the conversation:

Invest time and resources in gathering the right insights, aiming to understand the needs and behaviour of customers and continuously building on experiences and relationships.

Caring for your customers

Working with customer retention requires more than a one-off initiative when the numbers look bad. It is about caring for your customers, taking responsibility for the experiences you create and realising that nice companies finish first.

At the recent Growth Marketing Conference, Ryan Kulp from Fomo (a marketing platform that helps increase website conversions) shared how they “care a lot more about existing customers than random people on the internet”; how they seek to grow their business through great customer experiences and word of mouth. Not by giving extra discounts or special promotions – as it will diminish the perceived value of the product – but by investing in the relationship. A fitting example is how they recently prioritised resources for hiring an engineer for customer support instead of sales.

Today, there is no excuse for not working continuously on improving the customer journey. Customers expect it, and your competitors are already doing it.

How to get started with structured retention

To identify the initiatives that will benefit your business the most, you need to track and analyse your customers’ journey from early onboarding – browsing your website or talking with your customer service centre – to customer churn, either by slowly reducing the use of your services or slamming the door and telling the world on social media. Once you have the necessary insights, you will be able to optimise the customer journey.

Ideally, you combine historic insights across systems in Analytical Base Tables tailored for analysis. Having a single view of the customer enables holistic analysis of customer engagement and easy access to analysis and insights.

Once you have gathered the necessary data sources, we recommend a four-step approach, gathering insights across your business and turning them into actions:

  1. Prioritise retention efforts – Analyse how churn affects your business and identify where retention efforts will have the largest impact.
  2. Reveal insights and predict churn – Perform statistical analysis of historical churn behaviour to understand internal drivers of churn.
  3. Identify hypotheses and initiatives – Use customer interviews and internal workshops (sparked with insights from churn analyses) to uncover churn drivers and identify potential initiatives for mitigation.
  4. Accelerate impact – Evaluate opportunities and test prioritised initiatives in a closely monitored framework to enable swift adjustments based on customer feedback.

The four-step retention process is not always linear – new insights may lead you to revisit initial prioritisation or hypotheses.

Retention projects can be based on machine learning algorithms predicting the likelihood of churn – or by gathering insights through customer interviews and conversations. Ideally, it is a combination of the two working in agile sprints with rapid experimentation.

Here it is applied in the real world

The key takeaway is to keep focussing on how you can improve your customer experience, prolong your customer relations and avoid inexplicable surprises in your next churn report.