When it comes to customer success, one of the most important metrics to track is customer retention. Â After all, figuring out how to keep your customers aboard ship and reduce churn rate is the linchpin of software-as-a-service (SaaS); you want to keep your customer base intact to prevent revenue loss.
In the basic sense of the word, churn refers to the loss of a customer, but often this is conflated with subscription cancelation.
However, it's essential to understand there’s a big difference between when a customer cancels their subscription and the all-too-familiar term, customer churn. By understanding the difference between the two, you can take proactive measures to prevent customer churn and improve customer retention rates.
In this article, we’re going to dissect these all-important benchmarks of customer activity and provide greater clarity into how you can tailor your customer success strategy around them. Namely, we’ll examine:
- What cancelation means
- What churn means
- The difference between the two terms,
- How you can avoid cancelations, and
- The strategies you can adopt to win back canceled customers before they churn.
What is customer cancelation?
When an individual customer cancels their subscription it means they have actively chosen to stop paying for the product (or service) in question. They've literally clicked the 'cancel subscription' button.
They no longer desire to use your product and have taken this step to sever future ties with your organization. This decision almost always can usually be traced back to previous symptoms or tell-tale signs that exhibit the customer’s dissatisfaction with your product.
This could be for a variety of reasons, such as finding a better solution with one of your competitors, finding the prices of your product too high, possible product bugs affecting user experience (UX), or poor customer service.
On the flip side, they could have canceled for a more positive reason – they might simply no longer need your product or service anymore because they’ve fulfilled their original goals with your product.
It's important to note that customer cancelation is a leading indicator of customers who will eventually churn. To avoid a future lack of revenue from this customer, Customer Success Managers (CSMs) need to work fast.
When a customer cancels, it means they’re actively terminating their subscription agreement with an organization. The payment won’t renew upon the next scheduled billing, but it doesn’t automatically mean a loss in revenue. That’ll occur when the next payment is usually due.
Lawrence Chapman
What is customer churn?
Customer churn refers to customers who've stopped paying for their subscriptions and there isn’t any revenue flowing into the organization. Churn is essentially a revenue impact.
In a nutshell, customer churn is the point where the customer’s canceled subscription has a negative revenue impact on your business.
Of course, the responsibility of preventing customer churn shouldn’t solely fall on the customer success team’s shoulders. If a customer has churned because of a persistent glitch or bug with the product, that technically falls within the remit of the product development team. If the customer has found the price to be too high, whoever’s in charge of your product’s pricing ought to re-evaluate their strategy.
How to pre-empt cancelations
Of course, one of the key ways to prevent a customer from canceling (and then eventually churning) is by focusing on customer success. This means proactively working with customers to ensure they are getting the most value out of your product or service. This can be achieved through a variety of methods, such as customer onboarding, training, and regular check-ins.
Max Duce
A water-tight customer onboarding process
Onboarding is the process of introducing new customers to your product or service. This is an essential step in the customer journey and can have a significant impact on customer retention.
By providing new customers with the information and resources they need to get started, you can help ensure they have a positive experience with your product or service from the start.
Solid training
By providing customers with the skills and knowledge they need to use your product or service effectively, you can help them get the most value out of it. This can be achieved through a variety of methods, such as webinars, tutorials, and in-person training.
Regular check-ins
By checking in with customers on a regular basis, you can ensure that they are getting the most value out of your product or service. This can also help you identify any issues or challenges that customers may be facing, allowing you to take proactive measures to address them.
In addition to these customer success strategies, it's also important to keep in mind that customer feedback is key. By regularly soliciting feedback from customers, you can get a better understanding of their needs and wants, and make adjustments.
Emma Bilardi
Win-back canceled customers before they fully churn
Thankfully, there are several strategies that CSMs can use to win back customers who have canceled their subscriptions before they fully churn.
Here are a few:
1. Understand the reason for the cancelation
The first step in winning back a canceled customer is to understand why they canceled their subscription. This can be done by reaching out to the customer and asking for their feedback. By understanding the reason for cancelation, CSMs can tailor their approach to address the specific issues that led to the cancelation.
2. Offer a special promotion or discount
If a customer has canceled their subscription due to cost, a CSM may be able to win them back by offering a special promotion or discount. This can be a great way to show the customer that the company values their business and is willing to make concessions to keep them as a customer.
3. Address any pain points
If a customer has canceled their subscription due to poor customer experience, a CSM should work to address the pain points that led to the cancelation. This can be done by providing additional support, resources, or training to help the customer get more value out of the product or service.
Follow-up regularly: Even if a customer has canceled their subscription, it's crucial that CSMs continue following up with them on a regular basis. This can help to keep the company top-of-mind and show the customer that the company is still interested in their business.
4. Personalize the approach
A personalized approach to winning back a customer is more likely to be successful. CSMs should try to understand the unique needs, pain points, and preferences of the customer and tailor their approach accordingly.
5. Offer a free trial
If a customer has canceled their subscription due to lack of engagement or not being able to see the value of the product or service fully, CSMs can offer a free trial or demo to show the customer the full capabilities of the product or service and how it can benefit them.
Alex Morris
6. Show empathy
Showing empathy and understanding the customer's situation can go a long way in winning back a canceled customer. By acknowledging their concerns and frustrations, the CSM can create a sense of trust and goodwill with the customer, which may make them more likely to re-subscribe.
Ultimately, winning back a canceled customer requires a combination of understanding the reason for cancelation and being proactive in addressing the customer's specific needs and concerns. By following these strategies, CSMs can increase the chances of winning back canceled customers and improving customer retention.
To wrap things up…
Understanding the difference between a customer canceling their subscription and customer churn is vital in order to take proactive measures to prevent customer churn and improve customer retention.
The strategies used to prevent cancelation from snowballing into churn will depend on the type of customer, whether it’s an individual customer or a more significant business client, but largely there’s a window between the time of cancelation and the point of churn that CSMs can use to win back the customer.
In conclusion, customer churn is an essential metric for any company to track, and depending on the time frame you’re working with (what point of the month, or year, the customer cancels), full churn can be prevented.
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