Our proactive strategy to secure a 40% drop in non-paying clients
Preemptively reducing soft churn: how we retained clients likely to stop paying
A year ago, I found myself at a crossroads when a colleague told me:
“Qonto is on a mission to skyrocket client retention. Do you think you can crack the code and detect the patterns that lead to non-paying clients?”
The quest for hidden patterns is notorious for leading data scientists down rabbit holes with no treasure at the end. But this wasn’t just a routine assignment — this was my debut challenge at Qonto, and I was all in to flip the script and transform this conundrum into a triumph. 💪
1. Clarify the scope and consider the impact of possible actions
To tackle the retention challenge, it’s crucial to understand the different steps in the client journey — from signing the contract to leaving Qonto (in cases where it unfortunately happens):
- When clients open an account with Qonto, they benefit from a free trial to use the service without paying subscription fees.
- After this period, clients have to start paying monthly or annual subscription fees. This activation is the first time a client pays.
- The phase during which a client transitions from their initial payment to recurring payments is called engagement.
Qonto can lose clients in two ways:
- Temporary loss: some clients don’t have enough money in their account to pay the fees; they become non-paying. Resurrection is when these clients start paying again.
- Permanent loss: churn happens when a client leaves Qonto and closes their account. Anti-churn refers to the efforts deployed to keep clients from leaving.
Retention = activation + engagement + resurrection + anti-churn
Any attempt to tackle all these steps simultaneously would result in a mix-up of timescales and reasons people stop paying. It’s a sure-fire way of wasting your time and achieving nothing.
Instead, the key move is to pinpoint the most valuable step by studying stock and flow figures. This involves assigning numbers to all the boxes and arrows shown above, ideally across several timeframes (for example, after three months, one year, and two years). In our case, we also chose to further explore the reasons behind churn, because no one benefits from retaining clients whose needs aren’t aligned with our offer.
Once this analysis is done, all that’s left to do is select the step with the highest scope and likelihood of retaining clients through actionable measures.
This exercise led to the discovery that our retainable clients mainly become non-paying within the first three months after activation. To tackle this soft churn, we needed to focus on engagement. Our newly defined scope became clients who pay once, but stop paying during the next three months.
2. Identify client profiles
Once the scope was accurately defined, we needed to better identify the clients who had paid once and then stopped paying. To avoid endless data exploration and remain focused on our goal, we adopted a three-step approach:
- Pay attention to individual customers. We started by scrutinizing a selected group of clients, looking into their characteristics, transaction patterns, and product interactions to identify distinct profiles.
- Statistical validation. We then applied statistical tests to validate our early observations, checking any statistically significant differences across a broader dataset.
- Impact assessment. We focused on the most common profile with the highest potential for retention.
Our analysis revealed three client profiles that were significantly more likely to stop paying. Given our objectives and the size of each profile, we decided to concentrate on the following segment: clients in the construction and wholesale sectors who made a small number of transactions in the first weeks after activation.
3. Test actions to retain these clients and gain knowledge about their needs
The last step was testing actions to retain these clients before they soft churned. For this step, we collaborated with a team whose North Star metric is client satisfaction: the Delight Team from Customer Services. 🫶
Their role was to speak with the identified clients to understand their behavior and offer support where required.
To assess the impact of the calls, we split the clients with the selected profile into two groups:
- Group 1: clients called by the Delight Team,
- Group 2: clients not called.
Then, we compared the level of retention between the two groups, and the results were clear and meaningful.
By relying solely on an empathy-first customer service approach — and without any financial incentives — we decreased the number of non-paying clients after three months by 40%. Even more incredibly, the impact the calls had has stood the test of time: five months after the calls, the proportion of non-paying clients within the first group remained 32% lower.
What we learned from this journey is that the secret to winning the retention game comes from carefully analyzing the stock and flow of your clients, thereby pinpointing areas with potential for impact. Subsequently, if you can get an understanding of what motivates your clients and leverage the best teams in your company, you’re on a sure path to success.
Beyond the immediate success in reducing non-paying clients through proactive, empathy-driven engagement, these discussions helped us highlight opportunities to develop features that meet client needs at this stage in their journey. This has led to us creating a dedicated task force — focused on retention — to work on these possible solutions with the potential to boost net revenue by €1.8 million.
Watch this space for more news on those future solutions…
About Qonto
Qonto makes it easy for SMEs and freelancers to manage day-to-day banking, thanks to an online business account that’s stacked with invoicing, bookkeeping and spend management tools.
Created in 2016 by Alexandre Prot and Steve Anavi, Qonto now operates in 4 European markets (France, Germany, Italy, and Spain) serving 450,000 customers, and employs more than 1,400 people. Since its creation, Qonto has raised €622 million from well-established investors.
Qonto is one of France’s most highly valued scale-ups and has been listed in the Next40 index, bringing together future global tech leaders, since 2021.
Interested in joining a challenging and game-changing company? Consult our job offers!
Illustration by Mathieu Locatin
