Churn management is the process of reducing lost revenue from existing customers. The process is usually owned by a customer success team, who can identify customers at risk of churning or downgrading, and take steps towards preventing that.
Broadly, a success team working on churn management will deal with:
Here, we’ll focus on managing voluntary churn. Read more about involuntary churn here.
It’s also possible to break churn down into further categories. Any of these might become a KPI for customer success teams:
It’s also possible to get negative churn. That happens when net churn goes below zero. It means that expansion revenue is worth more than contraction MRR, and it is considered the pinnacle of SaaS growth.
Churn can be caused by an array of problems. You might not have the right features to promote customer stickiness. There could be stability, performance, or customer service problems. Competitors may be outpacing you with new integrations. Price could be too high… you get the point.
Start by digging into exit surveys & customer interviews to find out where the problems are.
Sometimes customers churn without ever even speaking to someone on the team. If you can enable self-serve customer education, that might prevent some cases.
Consider an online video series, a comprehensive knowledge base, in-app walkthroughs & tooltips, etc. – whatever you think is required to make customers successful.
In order to do the things above, your team needs software. That might be an onboarding tool like AppCues, a SaaS analytics tool like Amplitude, a revenue analytics tool like ChartMogul, and so on. If you have an established customer success team, there’s a good chance you can benefit from a dedicated customer success platform like Gainsight or Totango to maximize opportunities.
Customers committing to annual (or even longer) contracts will obviously reduce churn. It also gives time for your customer to embed your solution into their workflow over a longer period, making it painful to replace.
Incentivize this by providing discounts, or even by adding value – for example, having dedicated success managers or priority support for annual customers only.
Chances are, as a customer success team, you cannot adequately give your time to every customer. It’s simply not possible, unless you have a smaller number of customers with very high average revenue per customer.
Spend some time figuring out who is your ideal customer profile. That might be measured by who spends the most money, or who are the biggest advocates, or something else.
Once you have clarity on who are the best customers, and who are the less good customers, you can prioritize accordingly. You can even adjust pricing to make it clear that smaller deal values don’t get the same service.
The best way to avoid churn is to simply deliver an irreplaceable product experience. If everything works perfectly, and you solve your customer’s biggest pain points, you’ll find customer stickiness and high LTVs.
Talk to customers regularly, and find out what they want/need. Prioritize allocating budget to Product & Development teams to keep up the pace with feature development & bug fixing.
After that, everything in customer facing teams becomes easier.
None of the above strategies will work effectively if your customers aren’t talking to you.
Embed a culture of customer engagement. Make sure that at least one team is in regular, proactive contact with customers to learn about their work, challenges, and opportunities.
Distribute the knowledge within internal teams. Let support know, and update the knowledge base. Let product know, and update the roadmap. Let sales know, so they understand prospects’ pains. Let marketing know, so they can attract the right persona.
Growth with high churn is just painful. Like taking 3 steps forward and 2 steps back. The cost of customer retention is typically much lower than the cost of customer acquisition.
An investment in churn management, perhaps even with the goal of achieving negative churn, can provide even higher ROI than marketing & acquisition strategies.
Churn can be voluntary or involuntary (failed payments). You can measure it in multiple ways. Most commonly: gross churn, net churn, and customer churn.
Typically, a customer success team will be tasked with handling churn. It depends on the business size though. People in teams like Product, Lifecycle Marketing, and Support may also be involved in reducing churn.