It’s hard to make people aware of your product or service. Getting them to actually buy it may be harder. Thatâ€™s why itâ€™s so difficult when they decide not to re-buy. You spent ample time and resources acquiring them, and now you may not recoup your expenses.
If youâ€™re starting to see more and more customers stop buying, itâ€™s likely time for customer churn research. As a process that systemically evaluates challenges customers have with your product or service, and the reasons for no longer purchasing, customer churn research isolates key issues you must address to impact customer satisfaction.
In essence, customer churn research is a key tool to pinpoint issues across marketing, sales, and product so you can build strong customer experiences and robust lifetime values.
What Is Customer Churn
Customer churn reflects the number of customers that have stopped using your product in a given span of time. The most basic calculation of churn looks at the number of paying customers at the start of a given time period. It then looks at how many of those same customers are no longer paying at the end of the time period. We divide the number of lost customers by the original number of customers. We then multiply that by 100 to get our churn percentage.
When it comes to customer churn, there are two types you should keep in mind:
â€¢ Involuntary Churn: This type of churn happens when customers stop using a product due to external factors outside of their control. Think budget cuts due to a recessionary environment or business strategy shifts that result in product or division divestments.
â€¢ Voluntary Churn: This churn occurs when customers decide to stop using a product because it does not address their needs.
Involuntary churn certainly impacts business revenue. However, a single organization cannot control macro-level factors.
This is why customer churn research focuses on voluntary churn. Voluntary churn reflects a productâ€™s inability to fulfill customer expectations. Either unreasonable expectations were created from the onset or customer needs evolved and the product did not evolve with them.
Customer churn research unearths these expectations and needs gaps, helping companies tackle voluntary churn head on.
Performing Customer Churn Research
Customer churn research centers on capturing and analyzing feedback from churned customers. While not always, it tends to leverage interview-based research approaches. This is largely because you need to explore a variety of topics in an exploratory manager. Interviews allow for open-ended questions so you can glean a wide range of feedback from participants.
Here is the standard process for performing customer churn research.
1. Identify Churned Customers
First, we need a list of churned customers. For businesses with subscription models, this means targeting individuals that recently cancelled their subscription. Meanwhile, for businesses with tangible goods, this often means going after lapsed customers or customers that have not purchased in a given span of time.
2. Tag Customers By Relevant Segment
You may want to explore if different types of customers churn for different reasons. For instance, enterprise versus mid-market customers. Or high-revenue versus mid-revenue customers. If this is the case, make sure your customer list tags each participant by these relevant segment names. This is critical for analysis later on.
3. Develop A Discussion Guide
At the heart of any interview-based project is a discussion guide. This is a structured set of questions to ask each and every participant. The guide should capture relevant information about participants as well as reflect hypotheses you have about what is leading them to churn.
4. Recruit & Perform Interviews
Once you prospective list is complete and you finalize your discussion guide, itâ€™s time to perform your interviews. We suggest 8-10 interviews per any given segment or customer cohort. This tends to be a sweet spot for identifying recurring trends without performing an unnecessary number of interviews.
5. Analyze Your Data
Last but not least, itâ€™s time to review the feedback captured across your interviews. When analyzing qualitative or interview data, we look for how participants respond to each question in the guide. Specifically, we look to see if there are patterns in how individuals respond. If so, that helps point to consistent trends many customers experience and, therefore, likely churn culprits.
It’s also during this stage that you want to look at feedback by customer segment. Once again, youâ€™re looking for trends within a segment and also across segments. This tells you if churn issues are universal or more common within certain groups.
Frequent Questions To Include In Churn Research
As we mentioned above, the discussion guide is the heart of customer churn research. By ensuring that the same question is asked of many respondents, the discussion guide lets us collect data points around a single topic. Itâ€™s this dynamic that lets us pinpoint trends in open ended feedback.
Of course, this begs the question, â€œWhat questions should you have in your customer churn discussion guide?â€ Naturally, each guide must be tailored to a specific business category or context. Nevertheless, there are certain types of questions we suggest including:
â€¢ Churn Reasons: This should sound obvious be donâ€™t be afraid to overtly ask what lead a customer to stop using you in the first place.
â€¢ Actual Experiences Vs. Expectations: Include questions that identify the original reasons people purchased and then how well the product executed on their expectations.
â€¢ Desired Features: Evaluate if customers want incremental features or benefits that you donâ€™t offer. This is different that misaligned expectations as it captures potential evolutions in customer needs.
â€¢ Competitive Alternatives: Explore if customers are using a competitive product in place of yours. And, if so, why they made that switch.
â€¢ Pricing: Include questions about price point and pricing model perceptions.
â€¢ Customer Support: Ask question about customer supportâ€”phone reps, live chat, knowledge basesâ€”to see if customers receive timely responses to their questions.
â€¢ Post-Sales Experience / Onboarding: Where relevant, explore the experience (or lack thereof) that customers had just after the deal closed.
To re-iterate, this is not a comprehensive list. Rather, it serves as the foundation for questions you should include in your discussion guide. If you want a broader list, check out this earlier post.
What To Do With Churn Research Results
We recognize that reviewing customer churn research is hard. It may show unpleasant details about your business. But, thatâ€™s also the good news. It uncovers tangible things that an organization can change to improve customer experiences and build customer retention.
For instance, if experiences do not meet expectations, itâ€™s time to look at your marketing messaging and sales processes to see if you are promising things that you cannot deliver. Relatedly, the feedback may point to product issues that are ripe for engineering or R&D attention.
You may also uncover issues with the post sales experience. Perhaps customers do not have access to high quality support, or perhaps they need more guidance to complete their ramp up. These are great opportunities for customer service or customer success team interventions.
Essentially, think of customer churn research as an incredible opportunity your organization has to build revenue. Youâ€™re already doing a great job attracting and closing customers. Once you know why theyâ€™re leaving, youâ€™ll be able to fix the problems and do a great job of retaining them too.