Customer Churn Analysis: The Secret Weapon to Reduce Churn

If you are running a SaaS business and want to ensure continuous growth and profitability, you need to focus a lot of effort on reducing customer churn.

In fact, it has been found that by reducing customer churn by just 5% it can increase business profits between 25 to 125%.

In order to reduce churn, most SaaS firms complete customer churn analysis as it has shown to have a positive impact on overall churn rates. This type of analysis can help measure, monitor, and decrease the overall churn rate for any company.

But what exactly is customer churn analysis and what are its benefits? That is what we are going to examine further in this article.

1) What is churn analysis?

Customer churn analysis looks at the overall customer attrition rate in a firm. It is an analysis that is highly useful for any SaaS business to identify the cause of churn.

Furthermore, the analysis can help to implement effective strategies for consumer retention.

Research has proved that it can cost five times more to acquire new customers compared to retaining existing users. So it might be worth investing in a solution that can help your SaaS company to perform a useful customer churn analysis.

Such a solution is offered by Saizmo. Saizmo provide help to carry out customer churn analysis that can reduce churn, increase business performance, and manage consumer retention.

Saizmo’s software includes several automation technologies, including:

  • Aggregates available user data, such as customer behavior, demographics, transactions, usage pattern, etc.
  • Transform all available data into meaningful and actionable insights.
    Employs these insights to foretell which customers are likely to churn.
  • Points out specific causes for customer churn and strives to solve those issues.
  • Engages with users to facilitates great customer relationships.
  • Builds and implements efficient software to increase customer retention

2) Why analyze customer churn

Churn has a huge impact on whether a SaaS business will survey in today’s competitive market place. If you don’t pay attention and let your churn rate getting higher and higher, it can consequently lead to a number of related problems. On the contrary, if you do perform customer churn analysis it can lead to several benefits.

To increase profit

When you carry out a churn analysis, you will receive valuable insights about how to retain your users. This is an important opportunity for additional profit.

As mentioned above, even a small increase in your retention rate can increase your business’ revenue significantly.

To create a better customer experience

The valuable insights you get by creating a churn analysis will also provide you with a deeper understanding of your customer journeys. Once you have pointed out the crucial steps where most users are likely to leave, you can create different retention strategies to increase better customer experience.

By doing so, companies are more likely to facilitate a community of loyal consumers. In addition, these loyal consumers might even start to share their positive experiences and can become brand advocates for your SaaS company.

To optimize products and services proactively

A customer churn analysis provides organizations with specific information about customer preferences. This can include things such as product features they are dissatisfied with or essential attributes they want in a product/service.

Understanding such essential product features is highly valuable data for companies, which can contribute to optimizing their existing product or service.

To reduce high CAC that leads to reduced revenue
No matter, how effective your marketing strategy is, all new customers cost money to obtain. The total cost of sales and marketing it requires to acquire a new consumer is called the customer acquisition cost (CAC).

The higher the percentage of customers churn, the more money you need to spend to regain the loss of business by finding new users. CAC thereby takes away essential revenue for your firm and essentially works against financial growth. So the lower you can keep CAC, the better! The best way to do this is to actively reduce churn in your organization.

To help you reduce overall churn

Some firms think they can exceed their churn by concentrating on acquiring new customers. However, that is just not possible.

The only way to reduce churn is by focusing on the steps where you are losing customers. Churn analysis is therefore essential so you understand the important areas where you can proactively reduce churn for your SaaS business.

3) What are the benefits of customer churn analysis?

A customer churns analysis tool is used by most companies to understand why customers leave so they can take action to reduce churn. In the end, it is more beneficial to retain existing users, than to replace ex-users.

In addition, there are several other benefits of customer churn analytics, which includes:

  • Reduce revenue loss.
  • Enhance customer service provided by your team.
  • Decrease the costs of acquiring new customers.
  • Lower sales and marketing costs.
  • Increase user experience and user interface

4) Analyzing churn data

Key performance indicators (KPIs) and goals

When you are to perform any kind of analysis, you need to keep track of the right data. This is also important when analyzing your churn. Therefore, you should be outlining some clear KPI-oriented goals that can help you identify what is causing churn in your firm.

Some useful KPIs for a churn analysis can involve:

  • Customer engagement and usage: A constant declining usage rate is a clear signal of potential customer churn. The decline in engagement and usage can imply different things depending on how long your consumers have used your software before their usage rate starts to diminish.
  • Support tickets: Do your support team start to receive fewer tickets than normal? Then you should be alerted. While it could mean that your team is doing everything flawlessly, chances are that it is a sign of falling customer engagement. Your users might no longer feel it is worth their time to ask for support to fix their problems with your software.
  • Competitor pricing points: Always make sure that you re-evaluate your pricing strategy on a continuous basis in order to stay competitive. This will also include monitoring your competitors’ prices and specific deals they are offering.
  • Likelihood to upgrade: It is highly recommended that you keep a KPI that will allow you to hit back against churn preemptively, because high churn can be difficult to reduce. One approach could be to strengthen customer relationships with upsells. Get an understanding of some types of customers is more likely to upgrade their subscriptions than others or if there is a particular point in your product lifecycle where upselling is effective. Then you can use this to your advantage.

Customer behavioral patterns

You are most likely serving more than just one type of user. Therefore, you will find that different users will have different wants and needs, which leads to various behavioral patterns.

Separating your customers into multiple cohorts based on their product usage can be a big help when analyzing and preventing churn. Such behavioral patterns could be based on:

  • Which product features are the most used or underutilized.
  • Which consumers are more likely to stop using your software after a given period of time.
  • Which percentage of your customers are using your support services.
  • Which users are at the highest risk of unintentional churn, e.g. due to failed payments.

Once you have identified these cohorts of customer you can start to create strategies that can re-engage your customers, depending on their needs and wants.

Customer segmentation

You can also take it one step further, and split your users into various groups based on how long they have been using your product, their industry, and patterns in their usage. This will allow you to recognize at-risk users and understand how to engage with them.

  • Examine how users in separate industries use your product and which users are more likely to churn.
  • Examine how the risk of churn changes depending on what pricing tiers they belong to.

Touchpoint behavior

The availability and effectiveness of your support team are vital for preventing consumers from churning. Because customers who face any issue with no support to turn to, are most likely to churn.

Hence, you need to establish points of contact for support. This will give your users the opportunity to gain all the value they have paid for from your product. Furthermore, you can obtain relevant information on how your product can be improved.

  • Implement an easy, well-tested and analyzed onboarding process for any new user. This will prevent early frustration that can stop churn before your customers have even gotten started.
  • Provide a comprehensive FAQ or help page on your website. This can be great for simple product use queries. Yet, you also need to empower a dedicated and responsive customer service team to help with more complex issues.

5) How to start a customer churn analysis?

So how do you get started with customer churn analysis?
In most cases, customer churn analysis is divided into three phases, which includes:

  • Data analysis and feature engineering.
  • Machine learning modeling.
  • Data visualization

Let’s take a further look at all three phases.

Data analysis and feature engineering

The most important element of any churn analysis is to select the right and relevant data. Accordingly, you will have to identify the data sources that will help you determine consumers’ behavior and gain a deeper knowledge about them.We recommend to include the transaction history of your consumers, verify data, and create a preliminary statistical analysis to define potential variables for modeling.

At this stage, it is important that you define the business conditions that determine the status of churn. For instance, a variable can be described by employing the following question: “Has the users returned within the last 12 months? “.

This phase can last from three weeks and up to three months, depending on the number of data sources you need to use.

Machine learning modeling.

Once the data analysis phase is concluded, the next step is to find the model that will be the best fit for your business. Here you should choose a model, which explained variables are 0.1 because the resulting value will be the probability of churn.
If you need help at this stage, it can be a good idea to seek professional guidance from some of the well-established firms that offer customer churn analysis. Predica can help you perform predictive analytics and machine learning models to improve your churn rate.

The modeling phase can last for various time intervals, depending on the number of algorithms taken into account.

Data Visualization

Finally, the last stage is the development of data visualization. Now that you have gathered and enriched your data in the previous phases, you need to visualize the churn probability. This need to be done in a way that will enhance the work of your business units including marketing and sales. Data visualization reports can also be used to create retention strategies and build retention-based marketing campaigns.
The duration of the data visualization phase can take from 1 month and longer. It depends on the number of required reports. Normally, it takes one month for every 10 pages of reporting.

6) Conclusion

There is actually no more vital metric for any SaaS company to keep track of than their churn rate.

A customer churn analysis can reveal if a user is not getting the full value of your software or have stopped using your service altogether.

Because there can be so many different reasons why someone would cancel an account, running a customer churn analysis is vital. This will illustrate your customers’ exact experiences, which goes a long way in making improvements and build retention strategies for your firm.

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