The Metric that Controls the Fate of Your SaaS
Business - Churn

Lars Lofgren

Growth Manager - October 2013

Zach Bulygo
...
@larslofgren
We’ll cover...

1

The Basics of Churn

2

Your Only Strategy to Truly Fix Churn

3

Tactics and Hacks to Reduce Churn
The Basics of Churn
What is churn?

The number of customers who
cancel within a given time period.
The Churn Formula

% customer churn =

# of customers who churned
total # of customers

forentrepreneurs.com/saas-metrics-...
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?
10% monthly churn and above...

You haven’t found product/market
fit yet. Your customers do not like
your product.
Results of the Pacific Crest Survey

Median Annual Churn = 9%
Median Monthly Churn = 0.72%

forentrepreneurs.com/2013-saas...
Who responded to the survey?

Larger SaaS companies with a
median contract value of $20,000.

forentrepreneurs.com/2013-sa...
If you’re targeting SMBs:

Annual Churn = 15%
Monthly Churn = 1.17%
The Bottom Line on Monthly Churn

1

Over 10% = New Product or Market

2

2-10% = Major Problem

3

1-2% = Doable

4

Unde...
Your Only Strategy to Truly Fix Churn
Here’s the bad news...

The only way to fix churn entirely is
to improve your product.
You need to talk to your customers.
Talk to two types of customers:

1

Customers that have never churned.

2

Customers that churned in the last
month.
Look for key differences between the two groups
Specific items to look for:

1

Are they different customer types?

2

How do they use the product?

3

How do they descri...
Start nudging people in the right direction.
You’ll need to find your own path.
Other items to look for:

1

Is your app stable?

2

Does it provide value quickly enough?

3

Slow support?

4

Better al...
Tactics and Hacks to Reduce Churn
The Hacks

1

Ask People Why They Cancel

2

Push Annual Billing

3

Expired Credit Cards

4

Call At-Risk Customers

5

G...
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 an...
3. Expired Credit Cards

Inform customers their credit card
is going to expire two weeks before
it does.

*Another tip fro...
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:

1

Exclusive features

2

Expanding seats

3

Increased usage

4

Better support
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

llofgren@kissmetrics.com
@larslofgren
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The Metric that Controls the Fate of Your SaaS Business - Churn

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• 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. 1. The Metric that Controls the Fate of Your SaaS Business - Churn Lars Lofgren Growth Manager - October 2013 Zach Bulygo Content Marketer
  2. 2. @larslofgren
  3. 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. 4. The Basics of Churn
  5. 5. What is churn? The number of customers who cancel within a given time period.
  6. 6. The Churn Formula % customer churn = # of customers who churned total # of customers forentrepreneurs.com/saas-metrics-2-definitions
  7. 7. You’re in for the long haul.
  8. 8. If you don’t keep customers around... You’ll never survive because customers will never become profitable.
  9. 9. Standard time to recover acquisition cost? 12 Months
  10. 10. Standard time to reach profitability? Up to 24 Months
  11. 11. So what’s our churn goal?
  12. 12. 10% monthly churn and above... You haven’t found product/market fit yet. Your customers do not like your product.
  13. 13. Results of the Pacific Crest Survey Median Annual Churn = 9% Median Monthly Churn = 0.72% forentrepreneurs.com/2013-saas-survey
  14. 14. Who responded to the survey? Larger SaaS companies with a median contract value of $20,000. forentrepreneurs.com/2013-saas-survey
  15. 15. If you’re targeting SMBs: Annual Churn = 15% Monthly Churn = 1.17%
  16. 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. 17. Your Only Strategy to Truly Fix Churn
  18. 18. Here’s the bad news... The only way to fix churn entirely is to improve your product.
  19. 19. You need to talk to your customers.
  20. 20. Talk to two types of customers: 1 Customers that have never churned. 2 Customers that churned in the last month.
  21. 21. Look for key differences between the two groups
  22. 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. 23. Start nudging people in the right direction.
  24. 24. You’ll need to find your own path.
  25. 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. 26. Tactics and Hacks to Reduce Churn
  27. 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. 28. 1. Ask People Why They Cancel
  29. 29. 2. Push Annual Billing
  30. 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. 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. 32. 4. Call At-Risk Customers Alert your support team when customers become inactive, then reach out.
  33. 33. 5. Go for the Upsell When a current customer upgrades their plan.
  34. 34. Common upsells: 1 Exclusive features 2 Expanding seats 3 Increased usage 4 Better support
  35. 35. What’s negative churn? Increase in revenue from upsells exceeds revenue lost from churned customers.
  36. 36. Low churn + great upsells = negative churn
  37. 37. Q&A Time! Lars Lofgren llofgren@kissmetrics.com @larslofgren
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