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

The Metric that Controls the Fate of Your SaaS Business - Churn

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• 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. • 31. 3. Expired Credit Cards Inform customers their credit card is going to expire two weeks before it does. • 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

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Page 1: The Metric that Controls the Fate of Your SaaS Business - Churn

The Metric that Controls the Fate of Your SaaS Business - Churn

Lars LofgrenGrowth Manager - October 2013

Zach BulygoContent Marketer

Page 2: The Metric that Controls the Fate of Your SaaS Business - Churn

@larslofgren

Page 3: The Metric that Controls the Fate of Your SaaS Business - Churn

The Basics of Churn1

Your Only Strategy to Truly Fix Churn2

Tactics and Hacks to Reduce Churn3

We’ll cover...

Page 4: The Metric that Controls the Fate of Your SaaS Business - Churn

The Basics of Churn

Page 5: The Metric that Controls the Fate of Your SaaS Business - Churn

What is churn?

The number of customers who cancel within a given time period.

Page 6: The Metric that Controls the Fate of Your SaaS Business - Churn

The Churn Formula

# of customers who churned

total # of customers=% customer churn

forentrepreneurs.com/saas-metrics-2-definitions

Page 7: The Metric that Controls the Fate of Your SaaS Business - Churn

You’re in for the long haul.

Page 8: The Metric that Controls the Fate of Your SaaS Business - Churn

If you don’t keep customers around...

You’ll never survive because customers will never become

profitable.

Page 9: The Metric that Controls the Fate of Your SaaS Business - Churn

Standard time to recover acquisition cost?

12 Months

Page 10: The Metric that Controls the Fate of Your SaaS Business - Churn

Standard time to reach profitability?

Up to 24 Months

Page 11: The Metric that Controls the Fate of Your SaaS Business - Churn

So what’s our churn goal?

Page 12: The Metric that Controls the Fate of Your SaaS Business - Churn

You haven’t found product/market fit yet. Your customers do not like

your product.

10% monthly churn and above...

Page 13: The Metric that Controls the Fate of Your SaaS Business - Churn

Median Annual Churn = 9%

Results of the Pacific Crest Survey

Median Monthly Churn = 0.72%

forentrepreneurs.com/2013-saas-survey

Page 14: The Metric that Controls the Fate of Your SaaS Business - Churn

Larger SaaS companies with a median contract value of $20,000.

Who responded to the survey?

forentrepreneurs.com/2013-saas-survey

Page 15: The Metric that Controls the Fate of Your SaaS Business - Churn

If you’re targeting SMBs:

Annual Churn = 15%

Monthly Churn = 1.17%

Page 16: The Metric that Controls the Fate of Your SaaS Business - Churn

Over 10% = New Product or Market1

2-10% = Major Problem2

1-2% = Doable3

Under 1% = On Track4

The Bottom Line on Monthly Churn

Page 17: The Metric that Controls the Fate of Your SaaS Business - Churn

Your Only Strategy to Truly Fix Churn

Page 18: The Metric that Controls the Fate of Your SaaS Business - Churn

The only way to fix churn entirely is to improve your product.

Here’s the bad news...

Page 19: The Metric that Controls the Fate of Your SaaS Business - Churn

You need to talk to your customers.

Page 20: The Metric that Controls the Fate of Your SaaS Business - Churn

Customers that have never churned.1

Customers that churned in the last month.

2

Talk to two types of customers:

Page 21: The Metric that Controls the Fate of Your SaaS Business - Churn

Look for key differences between the two groups

Page 22: The Metric that Controls the Fate of Your SaaS Business - Churn

Are they different customer types?1

How do they use the product?2

How do they describe the product?3

Do they get continuous value?4

Specific items to look for:

Page 23: The Metric that Controls the Fate of Your SaaS Business - Churn

Start nudging people in the right direction.

Page 24: The Metric that Controls the Fate of Your SaaS Business - Churn

You’ll need to find your own path.

Page 25: The Metric that Controls the Fate of Your SaaS Business - Churn

Is your app stable?1

Does it provide value quickly enough?2

Slow support?3

Better alternatives?4

Other items to look for:

Page 26: The Metric that Controls the Fate of Your SaaS Business - Churn

Tactics and Hacks to Reduce Churn

Page 27: The Metric that Controls the Fate of Your SaaS Business - Churn

The Hacks

Ask People Why They Cancel1

Push Annual Billing2

Expired Credit Cards3

Call At-Risk Customers4

Go for the Upsell for Negative Churn5

Page 28: The Metric that Controls the Fate of Your SaaS Business - Churn

1. Ask People Why They Cancel

Page 29: The Metric that Controls the Fate of Your SaaS Business - Churn

2. Push Annual Billing

Page 30: The Metric that Controls the Fate of Your SaaS Business - Churn

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

Page 31: The Metric that Controls the Fate of Your SaaS Business - Churn

3. Expired Credit Cards

Inform customers their credit card is going to expire two weeks before

it does.

*Another tip from Patrick McKenzie

Page 32: The Metric that Controls the Fate of Your SaaS Business - Churn

4. Call At-Risk Customers

Alert your support team when customers become inactive, then

reach out.

Page 33: The Metric that Controls the Fate of Your SaaS Business - Churn

5. Go for the Upsell

When a current customer upgrades their plan.

Page 34: The Metric that Controls the Fate of Your SaaS Business - Churn

Common upsells:

Exclusive features1

Expanding seats2

Increased usage3

Better support4

Page 35: The Metric that Controls the Fate of Your SaaS Business - Churn

What’s negative churn?

Increase in revenue from upsells exceeds revenue lost from

churned customers.

Page 36: The Metric that Controls the Fate of Your SaaS Business - Churn

Low churn + great upsells = negative churn