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Product Design

Design Strategy

Churn Baby Churn: Tracking and Fixing Your Digital Product’s Cancellation Inferno

Evan Shoemaker

June 29, 2021

Between work and play, salads and ice cream, and leg days and rest days, you strive for an equilibrium between the pleasurable and the necessary in life. You do what’s essential so you can enjoy everything else.

Scaling your digital product is much the same and requires a balanced approach. It’s easy to get hyper-focused on one ball in the air that you let the other drop. The yin and yang can get out of whack pretty quickly.

Your SaaS startup may know this situation all too well. You focus so much on the growth strategy of your business that you forget to pay attention to the retention side. Before you know it you’re in Churn City scrambling to find a way out.

Anything north of a 2% churn rate starts eating into your customer base. And if you can’t grow faster than people cancel, your digital product will inevitably suffer.

If you want to achieve sustainable, predictable, long-term growth (read: a steadily growing monthly recurring revenue or annual recurring revenue), you need to strike a balance between acquiring new customers and nurturing and retaining existing ones.

Ignore Your Digital Product’s Churn Rate at Your Own Risk

As your startup gathers steam, it’s tempting to go all-in on only attracting new users. What’s better than watching your download rates skyrocket? Nothing. But riding that high without keeping an eye on your cancellation rates can be a mistake.

Discovering your product’s churn rate can bring you back down to earth real fast.

Churn is how you measure the rate of customers who stop paying to use your product. Whether they’re deliberately canceling or failing to renew their subscription, you can see how often your users are saying thanks, but no thanks. By tracking your churn rate monthly, quarterly, and annually, you can identify patterns and come up with a solution to stop the leak.

Look, it’s never fun learning who isn’t digging your product. But your churn rate is one of the most important metrics to track in the beginning. Because if you don’t know how many users you’re losing — and how to correct course to retain them — you’re missing out on guaranteed revenue.

Imagine spending $100 to acquire a new customer. That customer signs up for a $20/month subscription and then cancels after 4 months. That's a $20 loss, and an $80 lifetime value (LTV). Losing $20 for every new customer you bring in the door is a fun way to light a lot of cash on fire.

Now imagine the same acquisition scenario but you're able to retain that customer for 8 months instead. That's a $60 gain with a $160 LTV. See which one scales better?

Nail Retention before Hitting the Gas on Your Growth

Call it growth tracking, growth packing, or growth hacking. No matter how you slice it, the idea of ‘growth’ is omnipresent in the business world. You could spend all your time focusing on your digital product’s growth strategy and still have an appetite for more.

But until you've dialed in your unit economics and worked out a fundamental business model, you'll be spinning your wheels on creating a sustainable strategy that actually scales. And long-term success will slip further and further away.

Before you think you can solve the gap later, it’s not that easy. Sometimes ‘later’ never comes, or your once-small issue snowballs out of control.

If you zero in on solving the problems behind the churn, tweaking your retention strategy, and otherwise eating the frog you’ll be able to spend more time on growth. You know, the fun part.

Mitigate Cancellations By Building a Digital Product People Love

Users don't cancel digital products or subscriptions they love. Think about the app you downloaded years ago that you just can’t seem to quit. Their retention strategy must be on lock.

So how do you create products people love? It's a just-right combination of thoughtful, user-driven design, user testing and product research, experimentation and testing, and obsessive consistency.

Also a great starting point? Reaching the ever-elusive goalpost of product-market fit. Or, in other words, creating products and solutions users want and need. Until then, you can find ways to keep the users you already have (retention) while you work to improve your product.

6 Ways to Extinguish the Blazing Bonfire of Churn

Illustration of a hook holding a notification page with popping out alerts like a bell, phone icon, or wifi symbol.

  1. Make your product sticky. It’s pretty simple: Users cancel products they no longer find useful and/or don't use regularly. That means you need to find out ways to provide consistent, repeated value so they don’t forget about your product. It’s all about your product hook. For instance, a reminder from Headspace that it's time to meditate. A ping from Facebook that you’ve got a new message. An alert that your credit score has changed from Credit Karma. All these digital products have sticky points that bring their users back for more. Illustration of a hand holding a phone with exclamation marks on the screen. An image above shows a person giving five stars.

  2. Bake it into your core experience. If you're a Fintech app handling payment and transactions, your users are more likely to log in regularly to manage their finances. But if you're a B2B app for small businesses, you need to get creative with your features to entice people to return routinely. What’s something your product could offer that’s unique to your brand that also provides your users value? Do you have a robust design system that could enhance your visual brand and processes? Think about creating elements that delight and surprise your users. Illustration of a clock and calendar with a line leading up to a cloud.

  3. Stay consistent and competitive. When customers come to expect something of you, they'll be let down if one day they open your product and you don’t deliver it anymore. Does your product publish a curated playlist every week? Keep doing it, and keep reminding your customers it’s there. Ensure you have a system in place that keeps creation flowing and features launching so your users aren’t left wondering if anyone’s home. Don’t forget to keep an eye on market trends and competitors’ advancements to keep your product fresh and differentiated. Illustration of multiple headshots with speech bubbles showing reviews.

  4. Dig into the why. How else do you truly know unless you get feedback from the source? Reach out to customers and ask why they're leaving. Conduct surveys, talk to them directly: whatever you can do to find out why they want to leave. Offer solutions to their issues and give them reasons to stay while you work out the kinks, perhaps a discount for hanging with you. Maybe you offer pausing their service for a month or two, penalty-free. You may lose out on immediate revenue, but it’s better than losing customers entirely. Plus, you build a little brand loyalty showing your users you care. Illustration of an orange bucket with a few holes with water splashing out. A hand is positioned underneath, catching some of the water.

  5. tackle passive churn. Sometimes your customers don’t actively cancel. Instead, their payments fail or their credit card information is expired. There are paid tools that identify passive churn within your user base and proactively stop payment from failing. Pricing is based on your monthly recurring revenue, so it’s a reasonable investment to make. - Churn Buster emphasizes not frustrating your customers in getting their right information and correcting failed payments. - ProfitWell hones its algorithms to leverage data that win back your customers. Illustration of a thumbs up with a wireframe and a person giving a positive review. The illustration shows the perfect match!

  6. Above all, deliver value. Obsess over your customers’ problems and how you can solve them. Ask them questions, get to know their needs/desires, and build a world-class product to help them address their challenges and reach their goals. No big deal, right?

Some of your users will want to grow old with you, sipping iced tea in a rocking chair as the sun sets. Some may be with you for only a short time. But you may never find out who these users are if you don’t fortify your retention rate and stop the leak in your bucket.

And while churn isn’t as fun to think about as growth, we can all agree it’s better than all work, no ice cream, no rest day cycles.

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