- Tag 'em, monitor 'em.
They haven't logged in, they haven't deployed,
they haven't responded.
Member at risk, Jared.
- [Jared] Member at risk.
(upbeat music)
- Five reasons you have high churn in your product.
Now, if you're not a SaaS business founder,
churn is the amount of people that cancel every month.
I have entrepreneurs reach out to me
when they have a $200 lifetime value of a customer,
and if they're charging $100 a month,
then that means it's two months and the person leaves.
I also get people that have a 10 month lifetime value,
where essentially if they're at a 10 or 12%
churn every month, the customers,
imagine this, every 10 months they
gotta go find 100% new customers just to even keep even keel.
It's crazy!
And the best products, I wanna share a strategy.
I'm gonna talk to you the five reasons
that customers are churning.
But if you do it right, you literally can
have a product that has an 8% annualized churn.
Most people are at 8% per month,
and I'm like, "Hey, where you at?"
And they're like, "Oh."
And I'm like, "Man, that's crazy!"
Now, I know this first hand
because when I was building my company FlowTown,
it was an email marketing SaaS product.
That integrated social data and emails.
And I remember six months into the product,
we were starting to run a report.
Since in the early days you don't have a lot of data.
And when I pulled the report
to share with my co-founder Ethan,
we literally had a 12% per month churn.
So the scenario I just shared
with you had 9 month lifetime value,
did not create an incredible company.
Now the good news is we actually built
a marketing channel to support that.
So we were growing every month, 20-30%.
But if you looked at the top line growth and the churn,
you would have seen a huge
fall off on the underside of that chart.
So we sat down and we started
looking through this and it was through
the actions I'm gonna share with you today,
that we really dialed in what was missing,
what was broken in our product.
To turn things around, where we eventually
got it to about 15% annualized churn.
Not great, not the eight,
but definitely a huge difference from where we started,
to where we ended up.
So the first thing you need to understand
is you gotta have great customer service.
And I know a lot of you guys are like,
that sounds so trivial, Dan.
Of course great customer service.
Here's what I wanna say, is it's about responsiveness.
One of the things we did, is every time somebody
would sign up for the product, we would literally ...
We'd ask them, we had a little checkbox,
and it said, "Click here for free phone support."
Because in that sign up form,
they would give us their number.
And we had two people, technically they were sales.
They didn't have quotas, but they had
a certain level of expectations,
they were competing against each other.
And their whole job was just to call customers
and make sure that they understood the product,
they understood how to get deployed.
And they had a great customer experience level.
And I think that is just responsiveness.
Have you ever emailed a company
with a challenge, and nobody replied?
Or two days later?
I recently signed up for this obscure domain.
You know like those weird dot whatevers?
And it was this company in probably Europe or whatever.
'Cause one of those small countries.
And it was three day back and forth interactions.
I'd email them, I'd wait for three days.
Those companies,
I ended up canceling the domain.
I was like, "I'd rather find somebody else,
"that I can feel comfortable with,
"then continue to deal with this."
And they coulda had me for a customer
for decades if they had better customer service.
So that's number one, make sure that's dialed in.
Two, is ensure that you're on-boarding experience.
Especially if you do a free trial to paid conversion.
Like a 14-day free trial.
You need to make sure that you're on-boarding experience
gives the customer exactly what they expect and need.
Dials them right into what I call
the core value of your product, so that they get activated.
If they don't get activated, they're literally...
They might stick around for a few months.
Many people when they sign up for products,
they have the need today,
but they're working on solving it over a few months.
And they're willing to wait
and pay what I call the tax of a monthly fee,
knowing that they're gonna jump back in.
But as soon as they realize that the product
isn't as good as they thought it was,
or they find an alternative, they'll just cancel it.
So if you can get somebody deployed
and activated in that first trial,
you're gonna have an incredible reduced churn on your hands.
So number two is just make sure that people get on-boarded.
Three, is recurring value.
As much as you want people to pay every month,
recur every month.
You're like, "Every month I want you to pay me money,
"pay me money, pay me money."
The onus is on you as the company founder
to make sure that that product delivers value.
Recurring value every month.
That was the huge problem in our company FlowTown.
Is that we had this great product hook,
we got them in with the social data on the email addresses.
We even had a few templates that we gave them,
but we didn't give them a reason
to continue setting up and automating their,
essentially, outreach on social media
for their customers and their marketing.
So we had to look at the product,
make sure that the product delivered reoccurring value.
So if you're having that issue,
if you have a two month value
and people churn because they get the need.
They solve it and they move on.
You gotta look at what other features
can you create to really build that kind of value.
Here's a great question to ask yourself and your team,
especially for your customers.
Is what do you,
so I'm asking a customer, "What do you do three minutes
"before and after you use our product?"
Because what they do those actions
will help me build a more broad, and attractive,
and on-going value stream to my customers.
Number four, is just a lack of customer success.
I really think that there's
three core phases to the product.
There's attract, convert and then expand.
Attract is just getting them to the site in the first place.
Convert is making sure that the free trial
or getting into your product, or the demo
does really well to get them as a customer.
And then expand is not even just retain them,
it's literally look at opportunities
to expand their product usage.
Maybe there are certain features that
you guys have that they don't even know about,
and they're not using.
So your job is actually to map out all your customers
and ensure that they deploy and ingrain
and leverage the features you've built
to get more value from the product, okay?
Now the fifth reason people are churning
is for natural causes.
And you need to understand that these are real things.
Number one is just credit card details expiring.
I don't know if you've ever dealt with that,
but it's literally,
for most companies it could be 4 or 5%
of your customer base every month,
that it's just their credit card details expiring.
You gotta get them to update it.
So that's normal.
The other one is they're downgrading.
So they might've been using a lot of features,
they had a big company.
Maybe their company downsized,
or they've found another way to solve the problem.
So they've downgraded their feature set.
So that's negative churn on the revenue side.
And then finally it's just businesses die.
I remember talking to the CEO of Constant Contact, Gail.
And she was like, "The challenge for us being
"in the SMB space ..."
Or what she called the Very Small Business, VSBs.
Is that there's a huge 8-10% a year death rate
of just small businesses.
So if you're in that market, you've gotta combat,
if you're tryin' to get 8% churn per year,
it's gonna be tough because you're
gonna get just companies going outta business.
So those are the five reasons.
Now I wanna give you a tip, okay?
This is huge.
The way to protect yourself,
is actually to tag customers as MAR.
And MAR is Member At Risk.
So it's very simple for you.
You understand what an engaged customer looks like.
These are your best customers,
how they use the product, how often they log in,
what features they use.
You can just write some simple code to monitor that.
And if somebody doesn't log in for two weeks,
if somebody is not deploying the features.
If they signed up and they haven't
used the product a whole lot, you can flag them as MAR,
and then have your customer success team
reach out to them to make sure
they go from a member at risk, to a high retained customer.
That is your opportunity.
Number one, make sure your customer service is rockin'.
Two, your on-boarding delivers the core value
your product promises.
Three, make sure that your reoccurring value
actually is delivered and perceived
from your customer on a monthly basis.
That's a product issue.
Four, make sure that you have a great
customer success team, so that people
not only retain but expand in their usage.
And five, just understand there's natural causes.
You can do your best to improve them,
but at the end of the day, there are gonna be companies
that go out of business and downsize.
And that's part of building a SaaS business.
So, as per usual, I hope this video finds you well.
I also wanna challenge you to live a bigger life,
and a bigger business, and I'll see you next Monday.
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