Instead of focusing on customer acquisition
Most startups focus on user acquisition, especially in the early stage of their growth.
In 2014, Groove was looking at a troubling rate of 4.5% of churn. Groove's software is the leading sales engagement platform for enterprises, especially with a focus on Salesforce.
User acquisition was healthy, but many people who signed up ended up leaving. As a rising startup from the valley, it needed to maintain a strong customer base.
What soon followed was a strategy they implemented to reduce their churn rate from 4.5% to 1.6%.
“Your customers probably won’t tell you when they hit a snag,” says Alex Turnbull, founder and CEO of Groove.
Using KISSmetrics, they identified two groups, one who stayed and one who didn’t.
By pinpointing these two groups, they could examine data that correlated to someone staying on the app. They found that this group tended to perform key actions such as creating widgets initially.
On the other hand, those who churned were not as successful as doing this, which may attribute to them unsuccessfully creating their first widget (strong onboarding can prevent this!).
By using this data, Groove was able to send targeted emails to help bring them back and provide assistance where needed when these behaviors were noticed.
Honestly churn is often an overlooked metric as people focus too much on user acquisition.
Look at the example below:
In both scenarios, we have the same amount of customers acquired. The only difference is the customer churn amount.
It’s easy to see where a revenue drop exists and that is through losing your customers, which would provide you potential revenue into the future.
In actual reality, it's proven that you spend less money by focusing on retaining customers than chasing new ones. It's one of the main reasons why Groove decided to chase after its churn numbers rather than making it up with new users.