The best tactic I’ve ever seen is a simple combination of 3 things:
- Measure it,
- Segment it,
- and Drive it Down — Irrespective of Where It is Today.
Churn is a bummer, and high churn is bad. But I’ve yet to work with a SaaS company that can’t improve.
First, measure it. Know exactly what your churn is, and don’t judge it (too much). Set a goal each quarter to improve some amount (say 20% better). And make driving down churn each quarter a Top 5 goal of the company. And then magic will happen. Because churn is the one thing everyone in the company can impact, on some level.
Second, segment churn. Big customers should churn less on a net revenue basis (including upsells) than small customers.
Third, drive it down — as a Top 5 company goal. We already discussed this a bit above, but make driving down churn and drive net retention up a Top 5 company goal. Discuss it in every staff meeting, at every company meeting. Ask everyone for their ideas. And stress less about where it is today, and more about improving it a bit each quarter. In a year or two, you may be best of breed here, no matter where you are today.
Finally, use NPS as a leading indicator. If your NPS is high but your churn is also high, that’s a good sign that with some tweaks, you can easily do better. If your NPS is low, that’s a sign there’s a lot to do. Even if churn isn’t that high today — it likely will be later.
On using NPS to show you you're wrong about how happy your customers are, and to rally the troops: pic.twitter.com/Y1VJXFjR2I
— Jason M. Lemkin 🦄 (@jasonlk) April 30, 2018