9 min read
One of the most important metrics we track at ConvertKit is churn.
Churn is the result of customers who were paying for your product or service but no longer paying for it. There are many different ways to calculate and benchmark churn, but here’s a simple and quick way of understanding it.
Churn is best measured with subscription products and services, since at the beginning of the month there is a new ‘X’ number of subscribers/customers. For ConvertKit, we could roughly measure it this way:
885 customers lost / 15,000 customers = 5.9% churn (see it here)
We’ve consistently lowered user churn rate at ConvertKit this year through a number of ways, and even though this is usually seen as a tech company problem, there are important takeaways and practices for all types of creators.
In this article, I’ll lay out three case studies for churn rate reduction: recurring (memberships), single purchase, and email subscribers. And at the end, I’ll teach you four specific tactics that help reduce churn rate in each case study presented.
Ready? Let’s go!
This is the most oft-cited churn example you’ll see and the easiest to measure and track. That’s because each month (or year) there is a new payment to be processed. And whether the customer is still around to make the payment is how churn is measured.
For many creators, this is best compared with a membership community, coaching program, mastermind, and much more. Anything that has a recurring payment at a defined interval works.
A few examples of these are Fizzle, SeanWes Community, Platform University, and CoCommercial. Each of these membership communities charges a monthly fee, and you’re able to cancel as needed. We can calculate churn like this:
There’s also a churn metric that’s useful in recurring revenue models, and it’s termed “time to churn”. To keep it simple, it’s just what it describes. We’ll take all of our cancelled customers, average out the number of months they were active, and that gives us the average time to churn.
There are several opinions on this. Again we’ll keep it simple and I’ll share what we look at for ConvertKit.
If there is a trial period for your product or service, or a 30 day full refund policy that the customer takes advantage of, then we don’t count that customer as churned. Basically, if you’ve never kept a single dollar from the customer, then I wouldn’t count them as “churned”.
I do think it’s worthwhile to track customers who try the product and don’t convert, and many people consider that a part of churn. But to me, people who don’t convert are a result of gaps in the onboarding and value discovery phase, which we’ll cover below!
This is less common of a measurement because the payment is not recurring, but instead of looking at the equation as a timed interval, let’s measure in terms of overall sales.
Another way to look at it is if you have a series of related products (books, courses, etc). Find out how many people purchased product 1 from your series, and then purchased product 2. With that information, you could measure it based on this equation:
(Product 1 sold – Product 2 sold) / Product 1 sold = Churn from Product 1 to Product 2
A couple examples from our ConvertKit customers are Rita Ester’s branding and social media services and Galen Mooney’s form design eBook which then upsells to a monthly membership community. Each one starts at a relatively low-priced entry product or service, then scales up to related products and services at higher prices. They could easily track the number of customers who fall off at a certain level and count that as churn.
The opportunity here is to dig in and figure out why customers aren’t progressing to the next level of service or product. Is it unclear? Is there a natural stopping point for most customers?
Understanding where customers are leveling off is a necessary part of understanding your product and finding places you could fill the gaps for them.
We’re an email marketing company so I thought it would smart bring this up. Especially if you’re building a product for the first time, then it’s something you should measure and track!
In ConvertKit you can find these metrics by going to the subscriber page and clicking the dropdown menu (it defaults to confirmed subscribers) and clicking on “cancelled”.
To easily find your recent subscribers, go to the main dashboard of your account and click on the date range. From there you can use one of the preset filters or define your own range.
Now let’s talk about how to lower those churn rates. Each of these tactics could be an article by itself, so please comment at the end or hit me up on Twitter @mattragland if you have any extra questions! I’m happy to help!
But until then, here are four ways you can start tackling your churn today.
Onboarding is the process of the customer getting set up and comfortable in the product or service to see the value in continuing to use it.
For ConvertKit, I usually look to make sure a new customer has set up a form, imported subscribers, and sent a broadcast. Those are three important milestones in being set up for success in the first 30 days for us.
For a membership site, the onboarding could be to make sure the customer profile is set up, they’ve added to primary channels and forums, and made a post to engage with other members.
For a course, the onboarding could be that the student needs to log in, complete the introduction, and submit the first assignment.
Whatever your business is, you’ll need to figure out what those first few steps are that a customer takes to get settled in. Once you know those, you can start tracking all new customers by the completion of those steps.
The main takeaway is that you need to think deeply about the initial experiences of the customer with your product or service. Remove friction at any point that keeps him or her from hitting those early milestones and achieving success.
Now that your customers are properly onboarded, you need to make their first 30 days a great experience! One of the best ways to figure out how to do this is by talking to your current customers.
Whether it’s in a group forum or 1:1 calls (I highly recommend at least a few of these), ask your customers these questions and follow the answers.
When you have these answers, find the common threads and create the “dream month” for your new customers. Make sure you regularly check in with them to help solve problems and celebrate their success!
Speaking of check-ins, it’s not just for the first 30 days– it’s forever! If you’re using ConvertKit, simply adding a sequence of check-in emails for customers can be a huge help in making sure your product or service is delivering the value customers need.
You can ask questions about their business, their goals, habits, or just a simple “how’s it going?” Not everything needs to be conversion focused, sometimes people just appreciate a check-in to know you care.
This is a next-level tactic that’s really for those making a consistent income with their recurring revenue product. Why? Because every month there will be credit cards you try to process that fail.
A service like Baremetrics, Chargify, Chargebee, Stunning, or Churnbuster will automatically send emails and reminders to those customers reminding them to update their card, along with a link to your billing page.
The reason I say this is a next level solution is that all of these services can be expensive, but if you’re churning more than $1,000/month on failed payments, then a $200 service to save those will pay for itself. ConvertKit rescues an average of $25,000 a month with these emails, so you know they work!
If you’re in the early stage of a recurring revenue product, then it may be something you can track manually, so keep a sharp eye on those failed payments!
Onboarding is the first interaction, check-ins show you care (even if they are automated), quickly responding to questions demonstrates commitment, and a great product ties everything together.
Some level of churn is inevitable, people cancel for a multitude of reasons beyond your control. But if you pay attention to these details you’ll reduce your churn dramatically and create a better product for your customers in the long run.
But the best tactic you can have for reducing churn isn’t dependent on onboarding, check-ins, and rescuing failed payments. Yes, they all play a role in the experience, but ultimately you need to have a great product or service that solves a problem and provides incredible value to your customers.
Download this issue of Tradecraft as a PDF to read and reference at your own pace.