I just finished reading Why Churn is SO critical to success in SaaS by David Skok. I have always been aware of Churn, and it’s impact it has on a business that has a monthly revenue model, but it is something that I have largely neglected to pay attention to over the years.
Mark MacLeod, Partner at Real Ventures, points out that the churn rate is the most important metric for the long term success of a monthly revenue business. The lower the churn, the more revenue you will generate from each customer. This increases the customer lifetime value, enables you to invest more in customer acquisition, which helps you grow faster!
I thought that David’s blog was one of the most intuitive posts on the topic I have seen, and it inspired me to take a look at Purlem’s churn rates. The results were very interesting…
As the chart below shows, a year ago Purlem’s churn rate was 30%! This is saying that for the month of May, 2011, 30% of paying Purlem users cancelled their account. Not good! Mark MacLeod says that from his experience churn rates should be 5% or lower to have a true long term money maker.
The good news is that today, Purlem has a Churn rate at 6%! I huge improvement from a year ago. I credit this to both the instantPURL and Landing Page Editor that we released in the past year. Both features helped those “non-techy” users to still create PURL campaigns and engage with the application.
My goal is to get the churn rate below the 5% as Mark suggests. Actually, I think it is achievable to have it down in the 3-4% range. This is what I’m going to be doing to try and reduce Purlem’s churn:
- Follow up with cancelled users
I was much better at doing this when Purlem was in it’s infancy. Recently I have not been following up with cancelled users at all. So time for this to change. I now have an alert sent to my inbox every time a user cancels with the email and phone number. For each user I will attempt to reach out to them and ask why they have cancelled. Hopefully this will help me to have a better understand for why users cancel, and take actions to help prevent it in the future.
- Add more API integrations
I have a hypotheses that by adding more API integrations with email marketing and CMS platforms, the application will not only get easier to use, but will increase the “stickiness” level.
- Target larger users
There are many users that use Purlem on a temporary basis. This is because they are smaller companies with only a couple campaigns a year that use PURLs. By starting to target larger users, it churn rate could potentially decrease because they will have a steadier stream of campaigns to use with PURLs.