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When surprises aren’t fun: the pain of customer churn

Sai Narendran
By
July 05, 2022

Surprise!Surprise! Unless your coworkers are throwing you a birthday party or you’re getting an unexpected raise, surprises are generally not something we embrace in the business world.

 

And when it comes to unwelcome business surprises, customer churn is one of the least fun of them all. No one wants to be surprised by a customer who says they are not renewing. While this is no fun on an individual account level, it can be devastating on a business level.

The surprising impact of churn

I tend to think of churn based on how it impacts the business over time. Specifically:

 

Start of year customer base

Monthly churn rate

End of year customer base

% Lost

100

1%

89

11%

100

2%

78

22%

100

3%

69

31%

100

4%

61

39%

100

5%

54

46%

100

6%

48

52%

100

7%

42

58%

100

8%

37

63%

100

9%

32

68%

100

10%

28

72%

 

Holding acquisition at 0%, we can more clearly see the impact of churn. All else being equal, a company with 1% monthly churn rate retains almost 90% of its userbase after 12 months. Whereas a company with 5% monthly churn retains only ~55%. Can you imagine losing 45% of your customers in one year?

How to calculate churn rate

I have another unpleasant surprise for you…According to Recurly, the average B2B monthly churn rate is 5%!!! What?!?

 

That means unless you’re a well-above-average company, you might need to take a closer look at your churn rate. In fact, Lincoln Murphy takes it one step further and suggests that every business leader should be intimately familiar with their current churn rate.

 

To that end, in case you’ve forgotten how to calculate churn rate:Churn Formula

Ok, so you have a churn problem. Now determine what is causing it.

Churn is not an adjustable hat where one-size-fits-all. It’s more like a well-fitted suit jacket.

 

As Andres Ugarte stated in an interview with Lenny Rachitsky:

It’s critical to have a good understanding of what makes users churn; otherwise, you’re going to have a leaky bucket that will become a problem once you start growing faster. Not all churn is created equal.

For instance, any one of the following issues could cause churn:

  • Bad customer support
  • Poor customer/product fit (wrong customer)
  • Competitor products
  • Price not aligned to value
  • Customer not achieving desired outcome
  • Buggy product
  • Credit card expired
  • Lack of product engagement
  • Bad onboarding experience
  • Poor user interface
  • Poor user experience
  • Internal reasons (e.g. lack of budget, not internal champion, etc.)
  • Lack of features
  • Poor product-market fit

Or, and here’s the real kicker, it could be something else entirely that causes churn! So what’s a person to do?OMG

Get to the root of churn

Since the causes of churn can be so unique for each company, Tingono provides customized machine learning (ML) models to fit the specific needs of each company.

 

It’s critical to understand not only what different factors are contributing churn, but also to know the weight of each factor. This will help you prioritize where to start and how much attention to give each churn-causing-issue.

 

This approach gives you the best chance to plug that leaky bucket. And plugging leaky buckets is exactly why Tingono was created.

How ML defeats churn and increases customer retention

As we’ve shared, our platform is powered by AutoML technology which creates customized prediction and analysis models according to your individual business needs. And these models continually learn and update to increasingly fit the needs of your business over time.

 

This is how we are able to identify the unique cause(s) of churn in your business. This is also how we are able to turn insights into actions that empower you to overcome churn in your business and increase your revenue retention.Yes

 

If you find all this to be surprisingly pleasant, get in touch! We’d be thrilled to help you remove other, less fun business surprises.