When and how to “celebrate” churn
A 5-minute guide for subscription companies offering outcome-driven services
Last week my team at ProfitWell advised our client to consider the instances in which customer churn should actually be considered a “win” for their business.
Naturally, it’s against a subscription company’s ethos to “celebrate” churn. As we’ve written before at ProfitWell, churn is the silent killer of a subscription business, and certainly not a metric that CEOs positively associate with a healthy business. A high churn rate fundamentally threatens a subscription company’s existence.
But is there such a thing as good churn? Is it ever appropriate for a subscription company to actually celebrate certain cases of churn?
In the case of outcome-driven services, we think so.
- As the world continues to embrace the subscription economy, more and more service-oriented business are adopting subscription models in an effort to develop stronger on-going relationships with customers.
- As a result, subscription businesses today have a clearer understanding of the outcomes their customers are hoping to achieve through subscriptions than ever before.
- “Good churn” can be characterized as a customer achieving the discrete outcome they intended to achieve from a service, and discontinuing the subscription as a result.
- There are strong growth opportunities associated with ‘good churn’.
Characterizing ‘good churn’ for outcome-driven services
When a service is designed to drive users toward a discrete outcome, and the outcome is achieved
If a customer churns with a glowing recommendation of your business (e.g., high NPS, strongly positive reviews, intent to return as a customer should the problem the service solves arises again), then a business ought to celebrate. The product/service delivered the value it promised the customer!
- Completion of a degree/discipline on an online learning platform (e.g., Pluralsight, Udacity, Codecademy)
- Start of a long-term relationship on an online dating platform (e.g., Bumble, Tinder, Hinge)
- Being hired into a new job/career (e.g., LinkedIn Premium, Enhancv)
Opportunities for growth
It’s no secret that churn, whether it’s good or bad, hurts a subscription company’s bottom line. If new customer acquisition and net revenue retention do not offset your ability to retain customers, you’re dealing with a leaky bucket of a business that’s bound to become totally parched. And you cannot rely on the positive morale of your happily churned customers alone to save your business.
So what steps can your subscription company take if you’re successfully churning customers? In other words, how can you survive with a high “good churn” rate?
Monetization: Identify opportunities for expansionary revenue
While churn in this case means the product “did its job”, it may illuminate opportunities for cross-sell or up-sell. Questions to think about that may help drive strategic planning and product development:
- After a customer achieves the outcome, does she adopt an adjacent product or service?
- What’s the next product on her greater journey?
- Are we thinking too small in terms of the outcome we’re optimizing for or is there a bigger outcome she’s driving toward?
Acquisition: Continued engagement
Despite the fact that your customer churned, if she was ultimately happy with the service then you should make an effort to continue to engage with her.
But not by enrolling her into drip email campaigns. It’s important to not think of churned customers like leads, because they are not. They are more like old friends who you can trust will rely on your service again should the problem you solve arise again in their lives.
Instead, keep her informed with how you’ve been improving your service, and give her the opportunity to inform you about how your service helped her achieve their desired outcome, and how her life have benefited from the experience.
Continued engagement with happily churned customers can benefit your subscription business in a couple of ways:
- Product Marketing: Having a rich understanding of your happily churned customer’s success stories provides great product marketing fodder, which should help from a customer acquisition perspective.
- Buyer Persona Development: Hearing critical feedback from your happily churned customers about how their experience could’ve been better will be more impactful than hearing from unhappily churned customers. After all, they represent your ideal customers, so optimizing their experience will ultimately help your subscription business more than aggregating the wide range of critical feedback you’ll hear from unhappy customers who may not have been a great fit for your service in the first place.
Conclusion (or your TL;DR :) )
Subscription executives face tremendous pressure to track and manage customer churn as it represents arguably the most important lever of growth for their businesses.
But in a world where outcome-driven services continue to gain market share and businesses continue to develop a richer understanding of their customers’ desired outcomes, we challenge subscription executives to:
A) celebrate when you successfully deliver the value you promised to customer;
B) broaden the scope of the outcome you’re helping your customers achieve or discover adjacent outcomes you can help your customers achieve;
C) strive for an even better understanding of happily churned customers and try to acquire more of them.