Podcast: Play in new window | Download
Subscribe: Apple Podcasts | RSS
- Churn is the percentage of customers you’re losing on a monthly or yearly basis. [01:24]
- Keeping your churn rate below a certain percentage is critical, because if it’s above 10% or 15%, a lot of VCs will look the other way because if you’re losing too many customers, it will be difficult to grow no matter how good your marketing is. [01:48]
- There’s a misconception surrounding churn: if you think you have less than 5% monthly churn, it’s okay. [02:15]
- In Lincoln Murphy’s blog post, he talks about 5% churn. He has a formula that tells you to take your churn percentage (5%) and subtract it from 1. (1-0.05) But when you take that number to the power of 12 (for one year), you actually get 0.54. 1-0.54 is like taking 100 customers and subtracting 54 of them. 100-54=46 [02:49]
- In essence, if you have a 5% churn, this formula shows that you need to make up for 46 of your clients in one year to break even. This is a lot of work. [03:48]
- Some software companies have 1% to 2%, sometimes 3%. Having a high churn rate is a momentum killer. [04:35]
- If your churn rate is too high, there’s a fundamental problem with your product, and you need to figure out why customers are leaving. [04:51]
- Another resource from Lincoln Murphy’s website is a post called 22 Ways to Reduce Churn with Growth Hacking. [05:16]
- You can try exit surveys and follow-up emails. [05:29]
- Using something like Intercom.io can help you track pre-churn behavior to find out what’s really going on. [05:46]
Selected Links from this Episode:
- SaaS Churn Rate: What’s Acceptable? by Lincoln Murphy
- 22 Ways to Reduce Churn with Growth Hacking by Lincoln Murphy
Leave some feedback:
- What should I talk about next? Please let me know on Twitter or in the comments below.
- Did you enjoy this episode? If so, leave a short review here.
- Subscribe to Growth Everywhere on iTunes.
- Get the non-iTunes RSS feed
Connect with Eric Siu: