Customer retention is not a new problem. However, with big data solutions and new marketing technologies, there are now innovative approaches that can be taken to solve the problem. As a result, many companies are seeing their retention marketing budgets rise as personalisation and optimisation efforts start to drive impressive ROI in this space. Some say it’s seven times more expensive to acquire a customer than to keep one; whether or not that’s true, it can’t be argued that acquisition costs are increasing and more focus needs to be directed at keeping current customers on board.
A few weeks ago, Qubit hosted a webinar on applying predictive analytics to reduce churn. David Hitt, our in-house expert on subscription-based industries, gave a few examples of how to identify at-risk customers and personalise their experiences to retain them. Check out the presentation here.
Steven Pavlovich of Conversion.com, one of Qubit’s agency partners, joined us for a live Q&A. With over 10 years experience in conversion optimisation, Stephen shares his view on the problem of retention, and some quick wins to start applying today. As CEO and founder of Conversion.com, he has helped Moneysupermarket, Citrix and other clients worldwide impact their bottom line through conversion optimisation.
Here, we'll dive deeper into some of his recommendations.
Q: What are the main reasons why a customer churns?
There are four main causes of churn, and they are consistent across any industry. At Conversion.com, we work with clients in financial services, gaming and SaaS. The causes of churn are always the same. In order of importance, they are:
Product: This is the simplest and most fundamental cause of churn. If the product doesn’t perform as expected or the customer doesn’t understand the value, they’ll churn.
Adoption: A customer’s first time using the product is crucial for their lifetime value. Did it do what they expected? Was the experience frustrating or did it delight them? In SaaS and gaming, you can look at the first 24 hours and tell if a new customer is going to churn.
Pain of loss: What would the customer say if they could never use your product again? What if they cancelled today and then signed back up again tomorrow? If possible, increase the value of a product the longer it’s used. You can cancel an online conference service if you don’t need it anymore (you can always sign up again tomorrow; it’ll be the same). But it’s harder to cancel the accounting software you’ve been using for a year. You’d lose all the historic information you’ve entered.
Market: Underlying changes in the market can affect the competitiveness of the product. It’s essential to maintain an up-to-date assessment of product, pricing and marketing competitiveness.
Q: How do we understand why customers churn?
We need to analyse the customer’s motivation and behaviour during the entire lifecycle. We can’t just look at the reasons why they leave. That means, we need to know:
Why did they purchase in the first place? Can we identify their motivations and intended usage?
How did they use the product?
Did they try it once and then never come back?
Did they reach the point where the product can “delight” them or did they give up first?
How is their behaviour different to more committed customers?
Why do some customers renew?
Surveying engaged and loyal customers to understand their usage will show us how we can sell to customers who are at risk of churning. Why do others churn? Surveying them when they churn is essential. It gives us an opportunity to resell them on the product: every reason they select can have a targeted response. It also shows us how we can improve our CRM during a customer’s lifecycle.
Q: What are some quick wins for tackling churn?
1. Improve the new user experience (NUX)
Churn is decided by what happens at the start of the customer’s lifecycle, not the end. Improving the new user experience (NUX) is essential. Any improvements in the NUX should be measured by the customers’ usage of the product. Can we get the customers to use the product sooner after signing up? Can we get them to that “aha!” moment where they get value from it? Can we integrate it into their lives so using it becomes a habit?
2. Address concerns and promote benefits in cancellation flow
At Conversion.com, we’ve worked with a SaaS client to optimise their sales and retention flows. When we surveyed their customers, we found something interesting: a lot of customers churned because they wanted a product that has video conferencing. As it happens, our client’s product does have video conferencing--it just wasn’t promoted enough.
The cancellation flow should be focused on reselling the user on the product: remind them of the main benefits, show how others are using it successfully, and make it easy for them to get value from it.
3. Make it harder to cancel
This shouldn’t be used as a “dark pattern”, but at the same time, it shouldn’t be too easy for a customer to cancel. Here’s a good example of these last two points. This is how it used to look like if you wanted to deactivate your Facebook account
It’s easy to see why this page was replaced: the copy doesn’t motivate the user to stay, and even the default button is to deactivate your account, rather than cancelling. Compare this to Facebook’s current deactivation page:
They’ve made it harder to cancel. The “reason for leaving” question is required. Also, they reiterate the main benefit of Facebook: keeping in touch with friends. By showing five friends and encouraging you to send them a message, Facebook diverts users away from deactivating their account. In fact, the deactivation button is even below the fold.