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Does customer churn get better?

This week:


 

COMMON MYTH:

"Customer churn goes down over time as companies mature and the product and services improve."


Wrong...


📈 I analyzed our customer churn benchmark data and found that churn got worse for the majority of SaaS companies:


⬇ Churn got WORSE over time for 63% of SaaS companies.


➡ Churn stayed the SAME for 14% of SaaS companies.


⬆ Churn got BETTER for only 23% of SaaS companies!


This begs the question...


❓ IF YOUR PRODUCT AND SERVICES ARE GETTING BETTER, WHY DOESN'T CHURN GO DOWN?


In my work with numerous SaaS companies, I regularly see the following three factors as the dominant reasons for worsening churn:


① THE APERTURE EFFECT:

Under pressure for continuous growth, companies tend to expand the kinds of customers they target and sell to, which usually leads to an increasing share of new customers who are a BAD FIT. The outcome is more customers who do not get good results and churn at higher rates.


② THE ADOPTION EFFECT:

The early adopters of a new technology or solution are usually the most enthusiastic about changing how they work, which is key to getting good results. Over time, subsequent waves of new customers tend to be progressively less adaptable, and their results aren't as good, which invariably leads to higher churn.


③ THE GRADUATION EFFECT:

Customers who get good results often progress to a point where a solution is limiting their improvement, and they look around for a better alternative. This isn't about customers failing; it's about the company not providing customers with continual opportunities and functionality to increase their results.


The common theme in all of these factors is CUSTOMER RESULTS, which leads to a simple and brutally reliable rule of thumb:


👉 Anything that leads to decreasing customer results will increase churn. 👈



 

Optimize your onboarding to get customers to first measurable results faster


I was a guest on the very first Status Check podcast (from status.cx) and in this clip I talked


about the absolute necessity to reduce the time it takes to get your customers to first measurable results!


Watch the clip here:




 


Download your copy of the 2023 Customer Churn Benchmark Report

Learn what benchmarks have impacts on customer churn, such as Customer Satisfaction, Customer Size, Sales Discounts, and more!






 

QUOTE OF THE WEEK:


You can't expand a customer you no longer have.


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