Reducing customer churn is a must if you want your business to grow. Let churn fester and you’ll have a leaky funnel: one new customer in, one existing customer out.
We surveyed 445 workplace education professionals and found that 20% saw an increase in customer churn at their organization over the past 12 months.
There are many reasons why customers churn. But one reason is rarely talked about: Companies overpromise and underdeliver.
Intellum CXO, Greg Rose, explains this below:
Greg’s not alone in his sentiment: 60% of the education professionals surveyed agree that their company is good at selling outcomes, but not great at helping users achieve those outcomes.
Don’t worry; this issue is fixable with a deep understanding of customer needs and the right customer education.
Keep reading to learn about:
Why companies need to “close the loop”
Determining if you have a churn problem
Step 1: Identify at-risk customers
Step 2: Understand what at-risk customers have in common
Step 3: Identify goals for your customer education initiative
Step 4: Align on customer education content and delivery
Step 5: Measure education’s impact on churn
Why companies need to “close the loop”
People usually talk about the customer journey as a funnel. Similarly, customer journey mapping generally visualizes the customer journey as a straight line:
Awareness → Consideration → Purchase → Retention → Advocacy
This model is overly simplistic. Customer journeys are complex, and they’re certainly not linear or neat-as-a-pin.
That’s why we prefer to think of the customer journey as a loop.
We open the loop when we sell the dream to our prospective customers; they sign on expecting us to close the loop by fulfilling our promises.
But then we don’t close the loop, which makes it easy for them to run away (aka churn).
We close the loop by delivering on our promises and helping our paying customers achieve their desired outcomes.
A closed loop is strong.
A closed loop means customers are in an ongoing relationship with our business. There’s no customer drop off at the end of a linear journey, and there are fewer customers who run away because they didn’t see the expected ROI.
As you probably guessed, customer product training is key in helping paying customers achieve their desired outcomes. But before you dive in and start creating customer education, determine if you even have a churn problem in the first place.
Determining if you have a churn problem
First, know that there’s good churn and bad churn.
That’s right, not all churn is bad. Churn weeds out poor-fit customers (typically these are customers who aren’t a fit for your product based on their needs, but also those few who complain a lot or use a disproportionate amount of support team resources).
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Next, know that you probably want to take action if your churn rate is higher than industry benchmarks.
View churn benchmarks
Churn rates vary by industry and whether you’re a B2B or a B2C business. Recurly Research put together industry benchmarks so you can understand how you fare.
Calculate your average churn rate.
Remember, churn rate is time bound (i.e., monthly churn or annual churn).
Use a formula to calculate your churn rate:
(Lost customers ÷ total customers at the start of the time period) x 100
So for example, if you’re a SaaS business calculating your annual churn rate, and you lost 340 customers but started the year with 1,236 customers, your churn rate would be 27.5%.
A churn rate of 27.5% is far above the industry average, so this is unhealthy churn and cause for concern.
If you’ve identified your churn rate and know it’s unhealthy, follow the 4-step formula below.
Step 1. Identify at-risk customers
Your initiative should target customers who are at-risk for canceling.
Actions you can take to pinpoint these customers include:
- Interview customer success employees
- Review feedback from past NPS surveys
- Review call audio or transcripts
- Review product usage data (if you have it)
- Review subscription status and reasons for pausing
- Look for signs that indicate low engagement (e.g., not calling their account manager back or not opening emails)
Next, it’s time to analyze your at-risk customers to understand what they have in common.
Step 2. Understand what at-risk customers have in common
Pick up the phone and interview your at-risk customers. (Just be sure to talk with the customer’s account manager before you call. Surprises aren’t good when it comes to customer outreach.)
Find out, in their own words, how they feel about your product or service.
Do the customers in your “at-risk” group have anything in common?
- Maybe many of them share the same account manager.
- Maybe they never completed your product onboarding course.
- Maybe they only use approximately 25% of your product functionality.
In the same survey mentioned above, we asked respondents to tell us “How much of your company’s product functionality do your customers use?” About 1 in 3 customers use half or less of the product’s full functionality. This is a big problem.
We encourage you to dig deep and think critically to understand the root of the problem..
For example, say you determined that your at-risk customer was only using 25% of the product. However, upon further examination, you see that most of these customers are self-serve customers.
From there, you’ll put your detective hat on:
- Are our self-serve training materials sufficient and up-to-date?
- Are we giving our customers access to education at the right times?
Many education professionals conduct a training needs analysis to pinpoint learner needs.
Step 3. Identify goals for your customer education initiative
The Intellum Framework is a practical way to build your customer training strategy. Using a framework will ensure your content is strategic and built with business goals in mind.
When building any education program or initiative, always think about the end goal:
- What outcomes do you want your customers, partners, employees, and/or your business to achieve?
- Which outcomes can be augmented with education?
(You might be wondering why we just mentioned partners and employees in an article about customers. Well, sometimes customer-facing partners and employees contribute to churn because they’re not well-versed in the product or positioning. So when you build your training plan, you’ll need to educate them as well as your customers.)
Our course on organizational education walks you through goal setting, step-by-step.
As you’ll see, you’re not just setting broad goals like “reduce churn by 15%” or “increase customer product usage by 25%”. You’re setting personalized goals for each learner persona. (This is where the legwork you did in steps 1-2 comes into play.)
[Insert graphic CTA pushing people to the course]
Step 4. Align on customer education content and delivery
What counts as customer education content? Glad you asked.
Education content
Generally, you can categorize content into three buckets:
- Marketing content
- Thought leadership content
- Education content
Any and all of this content can be used as part of your education initiative. However, when we talk about customer product training, we’re often talking about the education bucket: eLearning courses, product videos, help center articles, virtual instructor-led courses, etc.
Getting aligned
The reason we mentioned the word “align” is because you can’t curb churn in a vacuum; this is a cross-functional initiative. You’ll want to get aligned with internal stakeholders and customers to ensure training is relevant.
As explained in our guide to customer product training, involved parties typically include:
- Customers
- Senior leadership
- Learning or customer education professionals
- Cross-functional team leads
Content delivery
Many companies purchase an LMS to deliver content to learners.
Some LMSes are a cut above the rest as they're built specifically for educating multiple audiences. If your research showed you that you’ll need to educate customers, employees, and partners to solve your churn problem, you’ll benefit from an LMS that makes it quick and easy for you to upload training content once, then build adaptive learning paths for your different learner personas.
Aside from training content that lives within your LMS, there are various other ways to deliver training to your learners:
- In-app learning or “tool tips”
- In-person learning (at a conference or at your company offices)
- Email (you can trigger by product usage data or schedule as a drip campaign)
Step 5. Measure education’s impact on churn reduction
It’s important to understand how to use data to measure education program health.
If you’re using an LMS, this might be as simple as viewing the built-in data visualizations.
If you’re delivering content through multiple channels (LMS, email, in-app, etc.), reporting can get more complex. Don’t stress: You don’t have to pull the data yourself. But you do need to know:
- What data you need to see (and why)
- How to make improvements based on data insights
FAQs and helpful resources
Want to keep learning about customer churn? Below are some frequently asked questions and links to helpful resources. Enjoy!
What is customer churn?
We like HubSpot’s definition: Customer churn is the percentage of customers who stopped using your company’s product or service during a set period of time. Churn is typically measured monthly, annually, or both.
Why does churn matter?
Churn is a critical metric for most businesses because when you lose a customer, you don’t just miss out on the recurring revenue provided by their contract: you miss out on expansion revenue from a continued relationship. Customers bring potential net-new revenue through advocacy activities like referrals, references, or reviews.
Not only do you suffer that opportunity cost, but it’s also significantly more expensive to acquire a new customer than to keep an existing customer. Forbes notes that on average, acquiring a new customer can cost five to seven times more than retaining an existing one! Hence the adage, “The best customer is a current customer.”
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Resources on customer churn:
- Recurly’s guide to minimize churn rate and maximize subscription business revenue
- Hotjar’s article on 7 churn management strategies to delight and retain customers
- Qualtrics’s customer churn rate calculator
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