The 5 Drivers of Churn and How to Fix Them

Churn is the rate of customers leaving a company, most frequently used to describe people canceling subscriptions. You can improve churn, or stem the tide of departing or disengaging customers, by identifying the “holes in the bucket”—the reasons people, especially your best customers, leave you.

While most organizations think their churn drivers are unique and that they need to do a lot of market research to identify those drivers, in most cases, it’s the same few reasons. And while it’s great to do research, if you don’t have the resources, you can probably make some logical guesses based on these common drivers:

Communications drivers:

In this case, the message that drove initial sign-up was either misleading or addressed to the wrong audience.

For example, if I invite a bunch of new parents to a “great family-friendly restaurant” but I meant it was great for teens and adults but didn’t have high chairs, booster seats, or chicken nuggets, I might attract a lot of people who will likely have a lousy time and not return. The restaurant itself might be a huge hit with older kids and parents, but if I’m marketing to young families or even “all families,” I’m wasting my budget and attracting people likely to churn out.

Onboarding drivers:

Even if I have attracted the right people to the restaurant, if I don’t do a good job of orienting them when they walk in and during their first visit, they might not return. 

For example, if I don’t welcome them, show them where the dessert buffet is, or tell them about our amazing Saturday night Karaoke contest, they may not understand what a great fit our restaurant is for their family, and they may not return—even if it’s a perfect fit. There’s a half-life to enthusiasm; you want to engage new customers while that enthusiasm is still high.

Product/Market Fit drivers:

Sometimes, I have done a great job communicating what I’m offering to the right people, but when they arrive, there just aren’t enough great benefits to get them to return.

Maybe the menu only has a couple of (delicious) items, and guests grow tired of them. Or perhaps the restaurant is great in the winter but has no outdoor seating for summer days. Or maybe the price doesn’t make sense in your market and needs to be adjusted.

Operational drivers: 

If the product doesn’t work as promised, people will leave and may never come back. If the streaming service isn’t reliable, the fries are burnt, or the customer success team doesn’t respond to emails requesting support, it doesn’t matter how good your ongoing product market fit is—retention will suffer.

A word about passive churn: 

Sometimes, especially in recurring revenue models, “passive churn” can be a big problem. Passive churn is when someone’s payment method is rejected somewhere in the billing process—by the bank, card processor, or even your company’s automatic algorithms.

Even if the issue is innocent—for example, the customer lost their credit card, and the new one has a different number—that customer might be dumped because there isn’t a “good” method of payment. Track this one, too, because it can be a huge driver of churn and often doesn’t need to be.

Prioritize your drivers of churn, and fix the “biggest cheapest” leaks first

Rank the drivers of churn. Look at the data in a few different ways—first, just by the volume of churn, then maybe by expected revenue lost if you can distinguish between ideal customers lost and everyone else, and then maybe by cost to plug the hole.

This way, you can start to get an ROI on your investment in different churn mitigation techniques. 

Usually, the easiest thing to fix is passive churn, which can often be done by simply hiring a vendor that can optimize payment algorithms across your systems. These companies are usually paid a percentage of what they recover, so it’s pretty easy to make the case for trying. 

Communications and onboarding challenges are relatively inexpensive and easy to implement, test and adjust.  

Operational challenges must be fixed because customers not getting what they’re paying for is both a driver of churn and potentially a driver of lawsuits. 

The hardest thing to change is a product problem—which can be expensive, especially in contrast with the other drivers. It is also the most likely to have repercussions upstream and downstream and hardest to undo—so proceed with caution.

As you fix the holes in your leaky bucket, be sure to track the changes in each driver area and not just in aggregate. That way, you can see what really moves the needle for churn, which can help you make decisions more confidently in the future.

About Robbie Kellman Baxter

Robbie is the founder of Peninsula Strategies LLC, author of The Membership Economy, and The Forever Transaction, as well the Instructor for 10 LinkedIn Learning courses including: Create a Membership-Based Business and B ecome an Entrepreneur Inside the Company. Her clients have included large organizations like Netflix , SurveyMonkey, and the National Restaurant Association, as well as smaller venture-backed start-ups. Over the course of her career, Robbie has worked in or consulted with subscription-oriented clients in more than 20 industries.

As a public speaker, Robbie has presented to thousands of people in corporations, associations, and universities. She has an AB from Harvard College and an MBA from the Stanford Graduate School of Business. Find Robbie on Twitter, @robbiebax on Instagram @robbiekellmanbaxter and on Facebook.

#churn #retention #customerretention #subscription #membership #subscriptionmodel

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