A story in pictures.
Justin and I have been at Silicon Y’all all week, and yesterday I presented a 20-minute TED Talk-style session, “Fighting Churn with Hand-to-Hand Combat, A Story About Not Giving Up Even When You Think You’ve Tried Everything.”
I’ll come back to customer churn in a moment. First, let me rave about the Silicon Y’all event for a moment. This is a long waiting-list, invitation-only, intimate event that brings together SaaS founders & tech investors for two days of fireside chats, informal activities and lots of time to learn from attendees and mentors.
If you aren’t on the Silicon Y’all newsletter, following along on Instagram and keeping tabs on Twitter, I think you should. The event, now in its sixth year, is just getting started. I expect many exciting developments in the future. It truly provides a unique way of connecting entrepreneurs for meaningful dialog and learning.
Now, back to the dreaded customer churn. My presentation was designed to tell my story of not giving up in the face of what seemed like an immovable customer churn number.
The dirty secret of SaaS? Customer churn, of course. I remember reading the sentence above sometime last year and feeling a wave of relief. Yes, customer churn really is something we don’t talk openly enough about as SaaS founders and leaders. How many people do you know who are shouting their customer churn numbers gleefully from the top of the mountains? Right. Maybe a handful, probably more like zero.
Unless your churn is really low, it’s something that is whispered about. There are benchmarks, of course. But they can be confusing. Is the stat referring to monthly churn? Annual churn? Customer churn? Revenue churn? These are very different things.
For a long
But as much as we struggled with our customer churn number, our revenue churn number was always negative. That meant we retained (or grew) more revenue from customers who stayed than we lost from customers who churned. That was a very good thing.
We were bootstrapped, and so had to be profitable. And we were. When I think about ways to characterize our revenue churn, all I can say is that it was smooth sailing. A piece of cake. The right customers stuck around and continued to spend more, and the company was growing and profitable. This growth happened organically, without struggle or bang-your-head-against-the-wall effort.
Actual customer churn was another story,and I always felt like we were on the customer churn rollercoaster. Was it going to be a bloodbath of a quarter, or would we hold on to a few more customers by the skin of our teeth? Even though we were growing and profitable, churned customers take a toll—on your emotions if nothing else. I now know we weren’t alone in this roller coaster, so many SaaS companies are on the same ride.
Because we were growing from the customers we did retain, our leadership initiatives around customer churn can best be described as a see-saw.
We always undertook the usual customer retention initiatives and we had a strong, positive culture around customer success. We modified the painful parts of the product, we revamped onboarding (a million times), we changed how we trained customers, we accelerated our value-driven outreaches, we went out on the road to get in front of customers, we scored and graded customers, we tracked their health, we had rapid at-risk review cycles…you name it, we did it. And yet, the customer churn number would just not budge. And so over time we would teeter-totter between an all-out-effort to improve churn and an overall sense of apathy.
Remember, we were growing…and profitable…and so had our hands full with all sort of other things in addition to customer churn. And trying to improve our customer churn really did feel like we were banging our head against the wall. No matter what we did, the number didn’t budge.
Until one day, customer churn became a crisis. Two forces really drove this crisis. The first was finally understanding that despite our strong revenue retention, the market would assess our value equally on actual customer retention. Duh. Of course, this makes sense. Investors, partners, acquisitors—they all want to know that when you land a customer, you keep a customer.
The second factor driving our renewed attention on customer churn was a pivot into a new market. The market was performing well for us—sales increased. But product usage patterns were naturally different in this market and so while sales increased, ARPU decreased. We knew this was going to happen—it was by design, but the reality was that with ARPU lower, retention simply had to be higher. Remember, we were bootstrapped, so that literally was a brick wall. We had no choice, churn
And that’s when the gloves came off. I decided to stop banging my head against the wall using the same “best practices” over and over again and just follow my gut. I did some unusual, messy, hard-to-explain things in my journey to lower churn.
But it worked.
I’ve written before about some of the ways I improved customer churn during this period. Like tracking customer health, teaching our sales team to set the right expectations, reorganizing teams when I couldn’t change our product, providing professional services, never throwing in the towel on a cancellation, account expansion initiatives and more. I won’t rehash them in detail here, and I’ve got lots more to share in the future about how we improved customer retention.
The point of my Silicon Y’all presentation wasn’t what we did to finally reverse our customer churn woes. The point was to remind everyone that they could forge their own successful path forward and improve their customer retention.
Customer retention is the lifeblood of any SaaS, even when revenue retention is strong. Every customer counts, and almost every customer is worth saving. Apathy is never a good strategy, and SaaS companies should always seek to reduce churn, no matter how good (or not) their retention is.
Do everything that the industry says to do in order to retain customers—follow the well-established playbook. But make up your own rules too, and follow your own playbook. Chase down the ideas that seem too crazy to implement. Trust your instincts. Take risks. Try new things. Make your own way forward. You know your customer and product best.
You can improve customer retention, even if you think you can’t.