If I Could Churn Back Time

When your job is to retain customers, coming into work every day can feel like the end of the world. “Is today the day everyone stops buying from us and our business dies?” you think to yourself as you’re loading today’s reports. The flip side is a dreamy scenario of loyal and satisfied customers who keep buying from you, spend more each time, rave about you, and get their friends to spend money with you, too. Lincoln Murphy called churn the antithesis of growth; to grow, you first have to replace the lost customer, and then add a new one. Stats that confirm the benefits of retention are quite known, but two of my favorites are that repeat customers not only convert better, but also spend more.

For a company to predict a safe future, a mindset shift and a solid strategy are all you need.

Why churn is unavoidable

Here’s the good news, one that everyone—including your competitors—must come to peace with: churn is unavoidable. This is particularly true if you’re a B2C company, because unlike B2B services, consumer purchases aren’t driven by a workplace need, but by interest and entertainment, and as such, often don’t have a promising recurring purchasing nature. There’s also situations products you simply buy once in a few years:

It’s simple: people’s needs change. They move neighborhoods, cities, or even countries. They change a meal plan. They go on holidays or sabbaticals. Their budget gets halved. They switch hobbies. The list goes on, and once you identify your position in these changes, churn becomes easier to manage.

Why timing is so important, and how to understand yours

Not all recurring purchases are made equal. You can probably relate to some of this: I order my groceries online weekly, pay a Netflix subscription monthly, order my contact lenses every three months, and visit my hairdresser twice a year. There’s a huge gap between these frequencies, yet I have an equally strong relationship with these providers and I’m helpless without their services all the same. It’s like with friends. Some you talk to daily, others you meet for lunch once every four months, but you feel close to both. Whenever you meet the every-four-months friend, it always feels like you’ve spoken yesterday. Timing based on use cases is the key to a winning retention strategy. Let’s unpack an example from above. My contact lenses are a compulsory part of my daily routine. I buy them in three-month batches. If I don’t reorder them after three months, the possible scenarios include:

• My laziness to reorder them in time—I’ll temporarily wear glasses instead
• I’ve ordered an extra batch the last time, so I don’t need to order for six months instead of three
• I’m traveling so I’m using the disposable daily contacts I’ve purchased a year ago
• I found a cheaper provider that offers faster delivery

Of these four scenarios, only the last one is actual churn, even though this provider hasn’t seen my money when they expect to in the first three cases.

Think about the daily life of your customers and identify:

• The need they want to fulfil with your product
• The circumstances that affected their purchase frequency
• The timeframe after which they’ve probably found an alternative or lost the need

With the above example, the need is the ability to see, and the probable timeframe for churn is around six months. Take the time to define these to not only lessen the amount of churn, but successfully win back lost customers.

The art of preventing churn when you know it’s coming

The key to winning the churn battle? Having as many touch points with your customer as possible. You might think it’s a risk to follow up, but imagine this simple scenario: Someone bought from you. You’ve never heard from them, assuming they’re happy with what they’ve got. The next thing you know, they churn—and you have no idea why. The data supports your side here, too: 87% of US adults want to be proactively contacted by a company. People want you to check in with them, and that’s a good thing. In fact, it’s so good that Zappos, online shoe and clothing shop, made customer support the foundation of their business and their company culture; “Powered by service” is their actual tagline. Here’s an action plan to make the most out of this

The metrics you should track

A SaaS tool will have a different approach to metrics than, say, a weekly meal delivery service. The nuances will inevitably happen, but you’ll always find a variation of the following:

• Average purchase value
• Purchase frequency
• Time since last purchase
• Time since becoming a customer
• Most recent login and session length
• Frequency and nature of support queries

The patterns to look for

Earlier, you’ve identified the need your product fulfils. You know your customer’s purchase cycle. Now that you can segment based on the metrics you’re collecting, look for the following changes in customer’s behavior:

• More than one purchase cycle since they’ve last bought something
• Inactivity on the customer side, such as a long period since they last logged in
• Low NPS score or an increase in customer service complaints
• A series of unopened emails

That last one probably triggered this email from New Look, who I order from every couple of months and skim through their weekly email promotions:

The actions to prevent churn

With these insights, you can create segments of at-risk customers and build reactivation email campaigns for each. Your exact timing might vary, but a rule of thumb is to react soon after the change in pattern happens and always before the second missed purchase cycle is up as they may have churned by that time.

Your segment-based campaigns could be:

• Lowered average purchase order: a discount and/or free shipping
• Longer time than average since last purchase: a checking-in email
• Low NPS score or an increase in complaints: “we’re dedicated to serving you better” email
• Inactivity/unopened emails: “have you changed your preferences?” email

You can go even deeper into each segment and A/B test email subject lines, trigger timing, or entire campaigns and maximize your churn prevention.

The art of winning customers back

Not all churn is made equal; some customers proactively churn and cancel your service, while others simply stop purchasing from you. Here’s how to tackle each case.

They’ve stopped purchasing

This is obviously a tougher one to get right. The principles are the same as the churn prevention ones above, but for a longer period after you’ve noticed a change in customer behavior. Ideally, you’ll allow for two of their average purchase cycles to pass. If they still haven’t made a purchase by then and they haven’t responded to your churn prevention campaign, you can consider them churned and work on a win-back campaign.

The one thing you definitely want to avoid is jumping in too early and not allowing for the timing scenarios you outlined earlier (the contact lenses example). If you take that path, this might be the result:

(source)

They’ve told you they’ve churned

If there’s an advantage to a churned customer, this is it. When they take the conscious action to say they no longer want to give you their money, you have a shot at making the most out of it. You do that by asking them multiple-choice questions as to why they’re leaving. It’s a quick action for them, but a goldmine of insights for you. A champion in this area is certainly Dollar Shave Club. When you begin their cancellation process, they’ll first check if you want to try a different razor or need more or fewer shipments, which customizes next steps (neither of which are cancellation—how brilliant is that?). If you go on with the cancellation, they ask you the reason you’re taking a break from shaving and a variety of things you might be dissatisfied with. You pick your answer, you cancel, you’re done.

The real deal, however, happens months later:

They’re not just making sure they know why their customers are leaving in order to optimize their products, but to follow up with them and make them laugh along the way. Gathering data like this unlocks countless opportunities to not only spark growth with longer customer lifecycle, but also to build strong customer relationships and gain brand ambassadors for life.