How To Conduct An Actionable Churn Analysis

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It’s time to conduct a thorough Churn Analysis.

When the economy is uncertain and new deals are hard-fought: firms have to rely on their existing customers to stick around – to not churn – to keep the cash coming in. 

And improving your churn rates is a good idea if you want to have a major impact on your short-term and long-term growth.

💡 Tip: A 5% increase in churn rates can increase your profits by 25% – 95%. 

And considering it costs- 5 to 7 times more to go out and acquire new customers… keeping the customers you’ve got happy is a surefire way to attaining the holy grail of SaaS companies by being dubbed “recession-proof.”

Ready to dig in and learn why you’re experiencing revenue churn? Keep reading to learn why people cancel, and what the hell you can do about it. 

Three ways you can run a churn analysis

When a customer cancels a contract with you, they’ve “churned”. To find out more about this customer behavior why you’re likely going to have to ask them directly. 

As Jill Avery, a senior lecturer at Harvard Business School puts it:

If I’m interested in keeping customers, I’m interested in understanding how many leave and the underlying reasons why they are ending their relationship with me.

Of all the techniques mentioned below, we highly recommend live interviews over a given time period. They’re the best way to uncover the full customer journey and the build-up to the eventual cancellation. 

💡 Tip: It’s great to find out why customers are leaving, but it’s also helpful to know why they stay. Consider running a full win-loss analysis to find out why your loyal customers choose to stay. 

Use your existing CRM data (and customer segments)

If you’ve seen a big shift in your churn rates over a period of time, the first step you want to take is to hop into your CRM and see if there’s any common ground between them. 

For example, if 20 clients churned this month, try filtering them by: 

• Geographics
• Demographics 
• Industry 
• Product plan 

You might quickly learn that 80% of your customers churned in say, France, due to a geopolitical shift or the release of a competing tool. 

Run exit surveys by email or in-app

Conduct exit interviews with churned customers

What should you ask churned customers?

Unsurprisingly, “Why did you cancel?” is always a good place to start when trying to break down your customer attrition rate.

However, we marketers can do better than that. We can find ways to ask that questions that don’t sound: 

• Sound mildly accusational
• Close off the churned customer’s potential to elaborate further on their customer experience. 

The bottom line is “Why did you cancel” might get you specific answers about the cost, the support, product functionality, or outside interference. But I find the following question is much more effective at coloring in that initial picture with a further valuable insight: 

“What was going on in your company that led you to cancel?” 

It’s a subtle language shift, but try it out — you won’t be disappointed by the intricate answers people now feel compelled to give. 

Once you know what ultimately led your customer to churn, you can start asking more pointed questions that help you find ways to optimize your offering or win-back process. 

“When did you first start thinking about canceling?” 

This question can reveal the point at which your accounts are considered in danger. Actioning this data by setting a KPI for happily engaged customers can give your customer success team the info they need to identify which customers are in danger of churning. This means you can fire of win-back emails, arrange phone-calls, and provide appropriate customer service. 

“Who made the decision to cancel?” 

Ask this question when it’s unclear who the key decision-maker is. You might be spending your time engaging with an employee who loves your tool, but is powerless to keep it. In that case, you could create materials or reports that help employees communicate the ROI of your tool or service. 

“Is there any situation or product change that would have made a difference to your decision to cancel?” 

In some cases, companies churn because their use case has changed or they’ve outgrown your tool. In other cases, they churn because a competing company offered them a better deal. This question reveals if you have a large amount of involuntary churn (change in use-case) or if a high churn rate is due to a lack of functionality. 

When listening to answers, remember that issues with cost are almost always related to a lack of value. Be sure to dig into the perceived lack of value to better understand your pricing model. 

“Would you want to use this product or service at a different company”? 

This question really builds on the above question and makes it crystal clear if the reasons for churn are external or internal. 

“What, if anything, do you still love about the product or service?”

The answers you collect here are likely your key benefits or star features. 

“What, if anything, did you dislike most about the product or service?” 

Churned customers’ dislikes usually point you in the right direction when looking to fix a churn issue. That said, the resulting answers can be a mixed bag, and you should weigh them against the words of your existing customers if you’re optimizing for growth.

💡 Tip: Looking for more questions to ask your customers? This post has over 45 proven questions you can start using today.

How to analyze your churn research results

💡 Tip: Depending on the size of your customer base, we recommend between 10 and 30 churn interviews be conducted before starting an analysis. 

Step #1: Transcribe interviews

Each interview counts as qualitative data — a potent tool when your competitors are stuck looking at basic metrics on their analytics software! 

You’ll need to get your interviews transcribed to turn that qualitative data into easy-to-understand quantitive data. Tools such as Otter.ai or Google Meet’s transcription service can do the job quickly though you’ll probably need a real human to iron out the mistakes (company and product names are often misspelled)

Step#2: Parse quotes into a spreadsheet

With your interviews transcribed, create a table with columns for each question and answer category. Here’s an example: 

Step #3: Categorize quotes for each question

Next, it’s time to categorize those quotes into themed “buckets.” This is quite an intensive process with a fair bit of back-and-forth work put into refining your themes. 

Step #4: Create customer churn analytics reports

With the majority of the analysis complete, tally up the answers for each question to start revealing the key insights. 

Your findings should be shared with the sales, marketing, product, customer service, support, and customer success teams.

💡 Tip: Consider setting up a churned customer Slack channel with weekly or monthly customer churn analysis to increase visibility across your organization. 

👉 Findings are best reviewed quarterly as they can be powerful tools in helping you make more impactful product decisions for both existing and new customers.

Create a great report that delivers answers for your sales and product teams

There’s a lot that can go into a fully-fledged churn report. For brevity’s sake, we’ll stick to the basics, but feel free to get in touch to ask about the finer points or how to add in your historical data. 

How to find low ROI segments

Start by identifying segments of churned customers by categorizing them via profiles such as company size, revenue, months with business, and lifetime value.

Frequently you’ll see those with a low customer lifetime value (LTV) have some traits in common regarding their complaints, company size or type, and reason for churning. In other words, you’ll be able to identify patterns in retention rates for various segments quickly. 

These small fish can be a costly waste of resources for your sales and marketing team when you consider that their customer acquisition costs (CAC) were the same as those with a high LTV. 

When looking at the LTV/CAC ratio, we can answer the following questions: 

👉 What functionality requests/complaints should we prioritize (aka the ones coming from customers with a more favorable ratio)? 

👉 What noise can we filter out of our key performance indicators(the small fry who’re probably not a great fit for your business)? 

👉 Who your salespeople and marketing team should be focusing on (the demographics of those with the best LTV/CAC ratio)

Find out who’s outgrowing your product and why

When you know why companies are leaving, you can start making decisions that encourage them to stay. The big picture could mean acquisitions of smaller companies, and in the short-term, it could be as simple as hiring a new employee to fulfill and undervalued feature such as white glove customer support. 

First, break down your exit reasons into the teams that have the ability to react to the problem. For example, you could break down exit reasons by issues relating to: 

• Customer upgrades to a ‘more enterprise’ solution
• Lack of product functionality
• Customer champion or stakeholder leaves
• Lack of service/support 
• Internal factors (eg, layoffs) 

Next, compare the results with charts that reflect your chosen segmentation. Common options are things like: 

• Lifetime value 
• Customer size 
• Customer revenue

The results should provide you with plenty of insight into how people are outgrowing your service. Over time, you can create a cohort analysis to track the approximate point at which happy customers begin outgrowing your services. 

You know why your customers left… it’s time to take action!

The data you collect from a churn analysis can be incredibly valuable in not only reducing churn, but also promoting business growth in the long term. Instead of relying on just the numbers, surveys and interviews give you TRUE insight into what factors are hiding behind your customer’s decision to cancel. 

Need help figuring out the root causes of your churn issues? Goldpan can provide you with the answers you need. Get in touch with us to book a free consultation.