After discussing customers’ churn in a previous article—a key concern for startups and big companies alike—it's even more vital for CEOs to learn not just to spot these signs but how to stop them. This article will offer clear steps and real examples for each point made before. I'll also go beyond cohort analysis, a method I mentioned before for spotting potential churn, to share other practical advice and actions based on my experience that CEOs should think about to reduce churn effectively.
Churn Due to Product Issues (see Exhibit 1):
Dealing with Value Proposition
Adopting a flexible pricing model based on customer usage and segment-specific features is crucial. For instance, offering basic packages with optional feature add-ons for small businesses ensures they only pay for what they need, mitigating churn from perceived overpricing. An example is a software company that switched to billing based on active users, accommodating both small and large teams by matching price with actual value.
Dealing with Lack of Features
Gathering and analyzing customer feedback to highlight and then develop the features users are missing is key. Tools like the Net Promoter Score (NPS) can guide this. Such a focus on innovation, informed by customer needs, can greatly reduce churn due to dissatisfaction. For example, Adobe Creative Cloud has grown by consolidating its software into one platform, directly responding to user feedback for a unified creative solution.
Dealing with lack of Support and User Engagement
Building a thorough onboarding experience with tutorials, webinars, and direct support options is essential. Establishing a customer success program that actively engages with users during key phases of their journey can ensure they receive help when needed, boosting satisfaction. It’s important for the customer success team to be in tune with customer challenges to intervene proactively. A SaaS company I worked with expanded its support through an online knowledge base and community forums, alongside quick-response customer service, making it easier for users to leverage its CRM software.
Churn derived from Customer-Specific Reasons (See Exhibit 2)
Going out of Business
Maintain regular communication to stay informed about your customers' financial health. While you can't always prevent churn due to bankruptcy, offering flexible payment options or a suspension feature could help keep startups afloat during tough times instead of losing them completely.
Mergers and Acquisitions (M&A)
Cultivate relationships across different levels of your client's organization to keep abreast of any M&A activity. Providing integration support or special deals for companies that merge can help you retain these customers by demonstrating the ongoing value of your product. Part of your business development role is to act as an early warning system, bringing potential M&A insights to your executives in a timely manner. For example, a client in the Industry 4.0 sector developed a Champion Program that identified potential M&A activities early, allowing the company to strategically prepare.
Changes in Business
Conduct regular strategy sessions with clients to grasp the changing needs of their business. Adapting your offerings promptly to match their evolving requirements can ensure your services remain essential, even as their business models change. It's also crucial for the business development team to signal any such shifts. Remember how Netflix, transitioned from DVD rentals to a streaming model, whole shifting from managing physical inventory to focusing on content streaming and recommendations?
Churn derived from External Factors Reasons (See Exhibit 3):
Market
Remain proactive in product development to stay in line with market trends. Adopt and integrate emerging marketing platforms, such as social media and SMS, to address changing market demands, thereby minimizing churn as customer strategies evolve. The product marketing team needs to stay attuned to these shifts, readying strategic updates in the product lineup as necessary. For instance, the emergence of digital streaming platforms like Spotify and Apple Music compelled music retailers to pivot from the sale of tangible or downloadable music to prevent rising churn.
Macroeconomics
In times of economic uncertainty, offer flexible pricing plans or temporary discounts to help customers maintain their operations without sacrificing essential tools. Demonstrating partnership during challenging times can build loyalty and reduce churn. Example: a fintech client extended its free trial period to aid businesses during the COVID-19 outbreak.
Regulatory Changes
Guarantee that your product aligns with prevailing regulations and can quickly adapt to legislative changes. Providing features that assist customers in achieving regulatory compliance transforms your service from an option to an essential asset. An example of this is how GDPR led entities like Mailchimp to advance their data security features, maintaining customer trust and reducing churn among those concerned with data privacy.
Focusing on what causes customers to leave and finding precise solutions can really help startups keep more customers and improve their engagement. This approach boosts growth and sets the foundation for success that lasts. I encourage other founders and CEOs to explore my articles for more tips on reducing churn and pushing your startup forward.
