Churn Rate is simply defined as the annual percentage of customers who stop subscribing to a service or product.
Every business experiences some type of churn, but if you have a subscription-based business, or if you operate with monthly payments or some type of recurring revenue model, then you know better than anyone how important it is to know your churn rate.
Your churn rate can have a significant impact on your bottom line. So it’s important to know where you stand at all times. Check out this blog post from the good people at Recurly. They do a great job of breaking down churn rates by industry so you can see exactly what others in your industry are experiencing and if your churn rate is abnormally high.
Regardless of where you stand in relation to your industry average, the truth is that your churn rate can be better. It is a sobering thought when you realize that most industries with subscription revenue experience a 10-11% churn rate. That means 10% of your revenue is just walking out the back-door of your business. And just because that may be industry average, it doesn’t mean that your business has to be average. You can improve your churn rate. Here are a few tips to get you started.
Improve Your Churn Rate Tip #1: Be Timely
If ‘customer churn’ is the destination for 10% of your customers, then the ‘credit card decline’ is the vehicle they take to get there. Beyond any shadow of a doubt, the #1 way for your customers to churn out of your business is through credit card declines. Which means when you experience a payment failure (ie. credit card decline) you have to be on top of it. If a customer’s payment fails at midnight, then at 8:00am they should get an email notification of the decline. You can not wait 4 days, you can’t wait 8 days, and you definitely can’t wait 30 days. If you do, you will lose this customer to what is called an ‘unintentional cancel.’ Which means they did not necessarily want to opt out of your product or service, but because of your follow-up failure that is unfortunately what has happened. Develop a system that allows you to send timely follow-up to customers who have credit card declines.
Improve Your Churn Rate Tip #2: Use Automation
There are several software platforms that you can purchase that will automate this process for you. If you are new to the failed payment world, this is called dunning software. Recurly, Stunning, and Churn Buster are a few options that we like and can help your business produce timely responses to customers who experience a payment failure. This is a great first step, but you need to realize that this is not a magic bullet. You will not solve your churn problem just by adding software. At most these software programs will help you recover 10-15% of your failed payments and credit card declines. It’s a great first step, but if you want to really want to solve your churn problem, keep reading.
Improve Your Churn Rate Tip #3: Hire A Full-Time Employee
The best way to address the problem of churn is to hire a full-time employee to go after your businesses failed payments and credit card declines. In all honesty, this is the only way that your business is going to really solve the issue of churn. A full-time employee who is being measured against the metric of payment recovery will give you the full-time focus your company needs to really solve this problem. (We talk more about who to hire for this position in this blog post.) This is someone who doesn’t have 6 other tasks they are responsible for, or 5 other meetings they are required to be in. This person is 100% focused on fixing your churn problem and closing the back-door of your business. We have seen this work over and over in businesses who hire a full-time employee and they can usually cut their churn rate in half, and sometimes as much as 80%!
Hiring a full-time employee works, but as you well know, this is an expensive solution. A full-time employee comes with full-time costs and it’s important for you to crunch the numbers to make sure the ROI is high enough to warrant a full-time hire.
For most small businesses, the ROI is simply not high enough. That’s where we can help. At Gravy we know what it takes to solve the problem of churn. But we also know that its expensive. At Gravy, we can give your business the full-time focus it needs to address this problem once and for all and a fraction of the cost.
We have a highly trained U.S. based team that will implement the proven strategies, sequences, and systems that we have developed over the last 6 years to get your customers’ payments back on-line. We will get your customers re-engaged with your company, and the back-door of your business closed tight.
The great thing is, we work off of commission. So if we are not adding money to your bottom line then you don’t pay us a thing. We want to help as many small business succeed as we possibly can, and make this a no-brainer for you.
Book a discovery call below and let’s have a conversation to see how we can help your business take charge of your churn rate once and for all.