Leading Indicators of Customer Churn, And What to Do About It

By Lindy Tolbert

You’ve been acquiring a ton of customers lately for your SaaS company. On the surface, this seems awesome. More customers, more money. So you throw your energy into your customer funnel. However, soon after sign up, they seem to fly right out the back door.

Why is this happening? Why do customers leave, or use the service less, often without saying anything? What you’re experiencing is customer churn.

What is customer churn?

Every SaaS or subscription service, no matter how fast it’s growing, has to contend with customer attrition. Also known as “customer churn,” customer attrition is the loss of clients or customers using your service. This happens both voluntarily and involuntarily.

We’ll focus on voluntary churn, because voluntary churn has actionable prevention steps by SaaS providers, while involuntary churn is mostly unavoidable, like when a user has to stop SaaS subscription services due to death, relocation, etc. If you’re unsure, you can learn how to calculate your churn rate here.

Types of Churn from DataScience.com

Figuring out the correct customer relationship management (CRM) strategy will not only help your organization retain pre-existing customers, but will also prevent loss of customers in the future.

Companies can boost profits more than 100% by retaining just 5% more of their customers.” Increases like that are undeniable, and many marketers say reducing churn is their highest priority.

Lagging vs. leading indicators

Customer churn is a lagging indicator, meaning the loss has already happened, and it’s just a measurement of the damage inflicted. Any company’s goal to reduce churn should be to get ahead of the loss by identifying their leading indicators, or “red flags.” These metrics identify when a customer is about to stop their usage, before they actually do.

When customers see a loss of value, they stop using the service. The goal is to increase the perception of your service’s value in the eyes of your users, just as their use begins to lag. Improving the UX will go a long way. As the old Benjamin Franklin adage goes, “an ounce of prevention is worth a pound of cure.”

What are some leading indicators?

1) Decreasing customer engagement and usage

This is where tracking specific KPIs comes into play. If users are using the site or service less and less (for example, if they logged in 10 times a month and now it’s down to 3), this is a solid indicator of future churn.

Some important leading indicators include: decreased amount of time spent on the site (known as abandonment), an increased number of lapsed payments, an increased number of customers who downgraded services, and a decreased amount of support tickets submitted to customer service channels.

The less the user tries to fix problems with their site experience, the less likely they want to stick around, the rationale being that there’s no point trying to fix something that’s no longer useful to them.

Low amount of support tickets correlated with Go to the full article.

Source:: Business 2 Community

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