1.
The Metric that Controls the Fate of Your SaaS
Business - Churn
Lars Lofgren
Growth Manager - October 2013
Zach Bulygo
Content Marketer

2.
@larslofgren

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.
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.
3. Expired Credit Cards
Inform customers their credit card
is going to expire two weeks before
it does.
*Another tip from Patrick McKenzie

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

37.
Q&A Time!
Lars Lofgren
llofgren@kissmetrics.com
@larslofgren