Fixing your high churn rate.
High churn is obviously a common problem for early-stage startups — and myriad causes behind that churn.
I’d like to explore a subset of founders whom I often see struggling w/ high churn. So far, these founders have done everything right. They talked to their prospective users to figure out what they wanted before building.
Q Is this an onboarding problem?
- Do the users complain about not having features that you do have?
- Do users churn w/out engaging w/ the product? How do you measure engagement? At what engagement level does churn drop off?
- <Twitter> famously found that if a new user didn’t <follow> <X> people, they wouldn’t continue to engage with it. After that threshold, though, the new user retention rate increased dramatically. If you have a relatively complex SaaS product — particularly one that requires behavior change — your job is to figure out the analogous threshold, above which retention spikes and users remain happily engaged
- “I’ve talked to so many companies, and they try to get incredibly complicated about what they’re doing, but it is just as simple as when you see the first picture of one of your friends on Facebook, you go ‘Oh my God, this is what this site is about!’ Zuckerberg talked at Y Combinator about getting people to 10 friends in 14 days; that is why we focus on this metric.” https://neilpatel.com/blog/alex-schultz-growth/
- To recap, the social media giant found that people who reached 7 friends in 10 days were far more likely to remain engaged with the product than those who didn’t. So they asked the question “How can we get more people to reach 7 friends in 10 days?”, and spent a lot of time and effort increasing the number of people who met this condition.
- <Twitter> famously found that if a new user didn’t <follow> <X> people, they wouldn’t continue to engage with it. After that threshold, though, the new user retention rate increased dramatically. If you have a relatively complex SaaS product — particularly one that requires behavior change — your job is to figure out the analogous threshold, above which retention spikes and users remain happily engaged
- What is the objective, measurable outcome that identifies that a new customer has been successfully onboarded?
- NB much of my advice may sound very high-touch — infeasible if you’re only charging users $14/mo.
I’m speaking mostly to products w/ annual contract values (ACVs) $10K or greater, who can afford that level of touch. - But as an aside, we notice that many software companies err too far on the side of fully automated onboarding, too quickly.
It goes against the idea of “doing things that dont scale” and allows you to rationalize your way out of the hard, heavy lifting. Unless your automated onboarding is already optimized (if you’re experiencing churn, i argue the probability is very low), you’re losing out on valuable customer insight that you’d get if you onboarded manually.
- NB much of my advice may sound very high-touch — infeasible if you’re only charging users $14/mo.
What is the current situation?
- Who onboards? Sales, CX/Account management, or self-serve?
- $1M Question: What is the hurdle that new users need to get past before they have the “Ah ha!” moment?
- Idk what this moment/threshold is. It’s unique to your product.
- For one of our clients who provide lead generation, their “threshold” is the first time they get a meeting w/ a lead sourced through this tool.
- At Triplebyte, it was the first time a company chose to move forward after matching w/ a candidate that they were excited about.
- More on the handoff b/w sales and {CX, AM, self-service}:
Companies will reasonably disagree on this. Here are a few variations that worked for others.
Start with Variation C.
It involves a joint onboarding session between 3 parties: the customer, the salesperson, and the customer support rep or account manager (AM) who will own the customer relationship going forward.This has the highest cost, but is preferred for early-stage, high-ACV SaaS products for a number of reasons:
- trust / rapport from the existing relationship b/w the salesperson and customer
- salesperson has important context about the customer: constraints, goals, other considerations affecting the customers success w/ the product.
- Airing this context during that onboarding session can:
- Give the customer time to elaborate and clarify
- Give the AM the opportunity to understand those things, and ask clarifying questions
- Ensure that everyone has shared context — where that context can have a meaningful impact on the customer’s success w/ the product.
- It also makes the customer feel pampered / well-understood, and taken care of.
- It’s hard to overstate the importance of all this
- <cite doctor bedside manner’s impact on likelihood of malpractice suit>
- It can all feel like over-communication. But — until you’ve solved your churn problem — think of it like an insurance policy.
- Once you’ve solved churn, you can transition to Variations B or C — both of which require less human resources per new customer onboarding.
