Using Red Flag Indicators to Fight Churn

The most important thing to a customer success program in any company is that it keeps the figure representing this rate as low as possible. Of course, the CSM team can do all it can to prevent churn. However, that’s not where the real challenge lies. Once the churn has already crept in, as it inevitably will, how do you fight it? The real problem with this is figuring out why your customers are forsaking your service.

Once you know clearly why users are leaving your subscription base, you have half of the problem already solved. Now it just becomes a matter of plugging a few holes and keeping customers happy.

One way to efficiently track the causes of churn in your product is by using red flag metrics. This is mainly the process of tracking user behavior in a bid to find out where their behavior starts to change and become indicative of abandonment.

The Writing’s on the Wall

Before a user ever leaves your product and decides they won’t be logging into their account again, they show signs of the same. Most users won’t wake up one morning and suddenly decides to abandon a product. It is usually a slow process of frustration or indifference that culminates in abandonment. Your job as a member of the CSM team is to find patterns in user behavior to see these red flags before the user capitulates.

The signs are usually easy to see. The first thing to go out the window, of course, is engagement. What was a casual login every day turns into a login every other day. It soon becomes once a week, then once a month and before you know it, the user is missing in action.

Such signals are what we call red flags, and they are essential as they enable us to see the smoke before the fire begins to burn. Once you start to recognize at the red flags waving, you can quickly remedy the situation using various tools, including automation on a large scale or contacting the customer directly. You would be surprised at the difference made by a popup tooltip, or an automated email can make.

There Are Many Different Types of Red Flags

There isn’t a one-size fits all list of red flags that you can look for. Everything depends on the specifics of the situation; your product, the type of customer, as well a lot of other small details that come into play along the way.

The best way to find red flags is to work backward. Look at clear-cut examples of customers leaving your book of business. These are customers who you are sure to have entirely given up on your product. Try to find the common thread running through all of their cases. You can also look at other issues, such as:

  • Customers who haven’t opened your app in a long while
  • Customers who have given your product scathingly negative reviews
  • Customers who have recently uninstalled your app
  • Customers who closed their free trials

shutterstock_200797052The last one is particularly telling since a majority of customers don’t close their accounts, no matter the service. These are some of the things you can look at to give you a clear indication of who already left and who might only just now be toying with the idea of canceling your services.

To understand why customers are canceling your business, gather the data on a group of customers who have canceled and start to look for trends in their experiences.  It’s important to look for any patterns as they will help you quickly identify potential future churners and rush to fill the leaks before they become impossible to manage. Try to compare their activity, or lack of it, before they left, with the activity of your most devoted customers. This is when the data you collect as a business becomes vitally important. Refer to their history and compare it to other users, with tools like VisualCue, to understand the trends in unhappy customers.

Activation is a Critical Stage

As mentioned earlier, there aren’t any universal red flags to look out for. However, some common signs will easily apply to many SaaS products and organizations.

One of the factors that matter most is how many users manage to achieve activation. The activation point is the point where the user completes the setup process for their account. The truth is, most users do not reach full activation of SaaS products. The actual percentage is close to 60% of users on free trials. These users never log in to their products beyond that first login.

Users can fail to reach the activation point for a plethora of reasons. They might just have decided that they don’t like your product, or you might have targeted the wrong type of user with your marketing strategy. There will be some factors you can’t control, but it is essential to mitigate any factor that leads to churn as much as possible.

When the User Doesn’t Login Again

If your product has an established user base, then there is a clear pattern for most users for how frequently they log in, and it is up to you to understand that trend. The typical user might be daily, weekly, and so on. When you notice a user breaking from this pattern, then that’s a red flag of potential churn. The failure of a customer to log in is an indicator that the customer simply doesn’t see as much value in your product as they did before.

Here the solution is to remind them of how valuable your product can be for them. Send them an email containing reminders for them to check their accounts. You can also send them some educational materials or little tips on how to navigate particularly different areas that they might be having trouble navigating. It’s as simple as getting the customer excited about your product again.

The Follow-up Always Matters

Remember, the point of this whole process is to recognize churn before it materializes and nip it in the bud to reduce your overall churn rate. The easiest method to reduce churn before it starts is to observe patterns as they emerge and employ large-scale automated solutions. Tracking these signs of churn is made simpler with the use of the VisualCue data visualization tools. It can help you see patterns in your customer base at a glance and in real-time, allowing you to be able to understand better where your customers find value.

By looking for the red flags you and acting quickly on them, you can reduce your churn rate and turn business around altogether.

 

  • Sources
  • https://blog.intercom.com/designing-first-run-experiences-to-delight-users/
  • https://glideconsultingllc.com/makes-great-onboarding-process/
  • https://glideconsultingllc.com/10-reasons-saas-business-creating-poor-customer-experience/

 


Understanding Why Some Customers Leave

Understanding why some customers leave is something that many businesses struggle with. Companies small and large have been looking for answers on what they can do to reduce their churn quickly to unlock significant revenue potential. As Benjamin Franklin once noted, “An ounce of prevention is worth a pound of cure.” This idea is the foundation of what reducing churn is all about— preventing small issues from turning into reasons for cancellation.

For the sake of this article when we refer to churn, we will be referencing customer churn rate or the pace in which customers are leaving your book of business. This likely effects your company but if you are a SaaS provider, then this should hit especially close to home. So how can you reduce your customer churn rate now? For starters, you must understand the customer experience from start to finish.

It’s time to get tuned into your customer lifecycle. If your lucky enough to have customer success managers within your organization, speak with them about the signs of a customer who is about to cancel your service. These are the people you should be learning from to better your chances of keeping customers paying for longer. Signs of churn can range from being late on payments, browsing the terms of service page on the application, calling a help number, or even the age of the account. Learn which signs of churn are most important in your business and address them as soon as possible. If a CSM is not readily available for you, use your data to determine common traits of customers who have canceled your service. By monitoring the symptoms of churn, you can better address customer needs before it’s too late.

why-do-customers-leave-a-company-2017Consider this, according to SuperOffice.com 68% of customers leave a service because they feel as if the company does not care about them or their needs. One thing you can be doing right now is reaching out to your customers to understand what they expect from your service. By doing this, they will know that you care about their needs being met and will likely stick around.

caleb-jones-131206We live in a data-driven world, and responsible decision makers understand the power of decisions backed by data. By following and tracking your customer experience from start to finish, you better understand common trends and better address concerns. Here at VisualCue, we offer the tools to see in real-time which customers need attention. With limited training, you and your team can find the patterns in the data necessary to meet your customers’ expectations. Happier customers lead to less churn which leads to more monthly recurring revenue in the case of a SaaS company.

No matter the industry you are in if you are running a business than it is safe to say that you are concerned with keeping customers happier for longer. Reduce your churn rate by understanding the customer experience and look for patterns in the data. As you analyze the data, you will begin to recognize commonalities between the unhappy customers. Find these trends and address them because in the end, if you don’t take care of your customers, then I am sure someone else will.

 


What can you do about customer churn?

Although 96 percent of businesses fail within ten years, some companies manage to become successful enterprises. Companies like Apple, Berkshire Hathaway, and General Electric manage to thrive even though they face considerable trials—but how? What are these companies getting right that so many others are getting wrong? They keep clients onboard.

interview deskThese companies get a few other things right, too, but when it comes to customer retention, they refuse to leave a single box unchecked.

With a five percent reduction in churn leading to a 25 to 125 percent increase in profits, it should come as no surprise that your company can benefit significantly from reducing its churn rate. And with new information and customer retention software that can help decrease your churn rate today, there’s no excuse for not improving this aspect of your business.

Below, you’ll find more information on customer churn, its importance and how you can retain more customers.

What is Customer Churn?

The software as a service (SaaS) industry is primarily responsible for making churn a noteworthy metric. Churn is equal to the number of customers you lose every month divided by your total overall customers. For example, if you have 100 customers and you lose three, your churn rate for the month will be three percent.

Acceptable customer churn rates often fall somewhere between 10 to 20 percent churn per year. Churn standards often vary by industry. For example, SaaS rates are considered good if they’re below seven percent.

One other thing that’s important to note about churn is that the percentages as mentioned above aren’t universally accepted. Although a five percent churn rate might be acceptable to you as a business, venture capitalists and other funding parties prefer churn rates of around two percent a month.

Finding Your Customer Churn Rate

As mentioned above, the most basic way to calculate customer churn is to take the number of subscribers or customers you lose every month and divide that number by your total customer base. Some companies will claim that they have a negative churn rate because they add more customers than they lose every month, but industry experts suggest that businesses avoid this method because it often provides a less comprehensive picture of their consumer retention success.

mrr-churn-analysisChurn can also be calculated with revenue as the baseline. With this approach, companies first derive their monthly recurring revenue (MRR). Then, they take the amount of their canceled MRR and divide it by an interval of time multiplied by total MMR at the beginning of the period.

How to Reduce Customer Churn

There’s no hard-and-fast rule when it comes to what you should and shouldn’t do to reduce churn. Contemporarily, large businesses primarily use the following techniques: they give their customers fewer chances to terminate their relationship, they conduct a survey, or they invest in a customer retention software.

Whether you know it or not, you’ve probably been subjected to the first retention strategy. Companies that enlist this technique start by offering a free trial of their product or service. Once the trial is up, they just bill the free trial user annually. This approach seems to improve customer churn efficiently, but at the end of the day, it might only delay the inevitable. After all, if you’re unhappy with a company, you’re going to stop doing business with them eventually.

Surveying customers is another way to try and prevent churn. Call your customers or send them an email and ask them what they like—and don’t like—about your product. This technique will give you a greater understanding of what causes people to become valuable customers so you can try and replicate their experience. As you get to understand your customer base better, you will begin to learn what is essential to the people or companies you serve and what needs attention.

Last but not least, you can reduce customer churn with the help of a software platform. This is often the preferred approach because it provides companies with more valuable customer churn information than the two other strategies combined. Customer retention software offers real-time data that are key to reducing current churn and preventing it in the future. If this is the route, you take to make sure to study the options you have before you. So tools deliver insights on data while others, like VisualCue, offer actions to consider as you monitor your client base. No matter how you plan to take on your churn rate, remember that, it is best not to wait!


Interpreting Your Data to Reduce Customer Churn

Customer churn is costing you money. Most times it’s costing you a lot of money! Fortunately, increasing your customer retention by only five percent can increase your profits by 25 to 95 percent. So, you might be wondering how you can convince a customer to stick around. Well, it all starts with analyzing your customer relationship management (CRM) data.

CRM systems have transformative potential when it comes to reducing churn. However, very few businesses understand how to maximize their systems to improve customer success. If this sounds like your organization, you should focus on three areas when you track and analyze churn. After you’ve finished reading this article, you will understand how to identify problem areas and monitor change as you implement strategic solutions.

Analyzing Customer Behavior

Have you ever noticed that some of your customers behave the same way—especially if they have similar characteristics? Particular groups of your customers do in fact exhibit common behaviors.

If you can learn the common behaviors associated with particular groups, you can predict how similar customers will behave under similar circumstances. For example, you can estimate what a customer’s reaction will be to a future marketing action or an outreach moment from a team member.

Luckily, building customer behavior models is fairly simple with the help of a CRM tool. The confusing part is often translating the data into all-in-one visualizations. Many companies work with a data visualization, like we do Visual Cue, to better understand their reports.

Image #1 (1)Another aspect of customer behavior analysis that can challenge companies is deciding how specific the models should be. Businesses that already use software designed to track user behavior can generally make their reports very granular. After all, one of the advantages of a CRM software is that it collects and organizes a plethora of specific user data.

Businesses that don’t have a user behavior software in place may need to work with their engineering team to see if they can provide the data or create a tool that will collect it moving forward. Overall, the more specific you can get with customer behavior data, the better. An in-depth report will take time to produce, but it’ll provide you with the best picture of what behaviors lead to customer success.

Considering Customer Age

Another effective way to analyze customer churn is to look at churn by age. Here, age is calculated by how long customers have been with your company. In other words, one age group could be “first month,” and another could be “twelfth month.” After all of your users are sorted by the amount of time they’ve been customers, you can start to analyze customer abandonment rates.

Viewing data in this way will help you grasp customer information in a simple way. It will also allow you to know your customers’ behaviors as they age. Chances are you will notice some similarities that you can try and address.

Companies that have high churn rates within the first few months can and should be working on improving their onboarding process. On the other hand, businesses that notice increases in churn several months in might find that their rates increase when customers need to renew their contracts. If spikes occur during specific time frames for various reasons, and addressing these reasons can make all the difference.

Risk_Pg11Once you implement solutions to problem areas, take the lessons learned there and apply it to another problem area in your business. Step by step you will be able to conquer all the issues your company faces.

Churn By Time Frame

In some ways, analyzing churn rates by time frame is similar to analyzing churn rates by age. The main difference is that time frame data can be harder to track and analyze—especially if you’ve been in business a few years. Again, this is why many companies work with a data visualization tool or software. It’s all too easy to become confused by a chart that has hundreds of lines.

To group customers by time frame, you must first define your parameters. There are several common ways to do this, but one of the most popular is to group customers together my month. Under this parameter, all customers who purchased in January of 2017 would be grouped, all customer who purchased in February of 2017 would form another group, so on and so forth.

When you analyze data based on time frame, you’ll notice two benefits right off the bat. First, you’ll find that your numbers aren’t influenced by customer acquisition. You’ll have clean, clear data that speak only to your customer abandonment rates. The second benefit is that you’ll see clear patterns for various groups.

After you create this report, analyze patterns and look for causes of customer churn. If you find that a lot of customers joined your company in November but abandoned shortly after that, seasonality might be to blame. With this speculation in mind, you can begin to look into what happened in the month November to learn why that time frame group had a high churn rate. As soon as you figure out what led to the increase in abandonment, you can create a plan to improve your retention for the future.

This type of report may also provide you with insights on actions that improved customer retention. For example, if individuals that joined in April have lower attrition rates, chances are you did something right to influence them to stay with your organization.

Once you dig into the month, you can begin to determine the elements that incentivized customers to stay active. Then, you can work on reducing churn by creating similar conditions for your entire customer base.

The Impact of Reducing Customer Churn

There are many ways to make reports, but every single one you create should inform strategic action. Overall, the easiest way to interpret data is a clear and accurate visualization that will help you gain insight into your customer base.

Equipped with strategies to collect and represent your data, you’ll be able create plans designed to influence churn. You might instruct your marketing team to run campaigns that share similarities with past successful campaigns. Maybe you take the time to work with your call center employees and teach them about certain behaviors they can perform to reduce churn.

As you roll out your solutions, make sure you understand how you will measure their impact. A sound monitoring system should be in place you so you can promote the aspects of your customer churn reduction plan that are working.