However, too much churn could signify something wrong with your app experience. As Lincoln Murphy, founder of Sixteen Ventures, says: “Churn is a symptom of a deeper, underlying disease; that disease is a failure to ensure your customers achieve their Desired Outcome.”
Also, churn can be costly for your app. You spent a lot of money on marketing campaigns to attract and acquire new users. So, any way you look at it, churn is a loss of revenue.
It’s why you have to monitor churn along with the reasons for it, so you can change what’s causing users to leave and hold on to your investment.
Churn analysis tells you essential information about your audience because it indicates which type of user is most likely to churn and where users are dropping off and helps you understand how to improve the app experience. In this blog post, you’ll learn:
- The different types of churn
- The 4 steps of churn analysis
- 3 ways to minimize churn
The Different Types of Churn
There are at least three different types of churn, each associated with a different reason the user churned.
Voluntary Active Churn
Voluntary active churn is when the customer actively cancels your service. Reasons behind voluntary active churn can include the user not feeling satisfied with your app or going to a competitor. Most of your user churn will fall into this category.
To reduce voluntary active churn, you’ll need to understand users’ experience with your product. For example, are there any features that your app is missing? Do users find your app to be too glitchy and complex to use? Based on this information, you can focus on making product updates to satisfy users better.
You may also want to improve how you educate users about your product. For example, you could set a better user onboarding flow to help users navigate your mobile app and see its value from the beginning.
Involuntary Passive Churn
Involuntary passive churn refers to any payment failure from users that prevents them from using your app. Common culprits of involuntary churn include declined cards by banks, expired cards, or maxed-out credit cards.
Involuntary passive churn represents over 40% of user churn. According to Patrick Campbell, CEO at ProfitWell:
“20–40% of your churn is actually absolutely needless, stemming from failed, expired, and delinquent credit cards. Let me put that data in perspective for you. If your churn rate is currently 5%, then one to two percentage points of that churn exists for an absolutely needless reason. You’re pointlessly losing a lot of money every month.”
The good news is that involuntary passive churn is the easiest type of churn to solve. Often, users may not realize that their payment failed. A simple nudge (like a push notification or in-app message) is enough to get them back on the paying customer track.
Downgrade churn happens when a customer chooses one of your cheaper pricing plans. Users could decide to downgrade due to budget issues.
However, according to Tia Fomenoff, director of product marketing at Thinkific, the issue can go deeper than just pricing. Downgrade churn may actually point to users’ inability to see the value of your premium membership program.
“‘It’s too expensive’ might be why your customer claims they didn’t sign up after their trial period, but there are so many underlying explanations that can fall under that,” says Fomenoff. “Dig deeper to find out the true cause of them leaving: you might find that the cost of your product itself wasn't the real problem but that your customer just didn't find enough value for what they were paying.”
To reduce your downgrade churn, you must clearly explain your premium membership’s value to users. Another strategy you could use for price-sensitive customers is to offer them discounts.
The 4 Steps of Churn Analysis
Here are the steps you must follow to run your churn analysis and better understand why you lost customers:
Step 1: Invest in Data Analysis Software
If you plan to measure your churn data manually, it will require a lot of work, and the information itself might not be accurate.
Product data analysis software centralizes all of your user data in one place. It monitors your most crucial user metrics, which reduces the amount of work it takes to manage churn data. The metrics you want to observe within your data analysis software are:
- Average user session
- Number of support tickets
- Daily and monthly active users
- Time to Value (TTV)
Different data analysis tools that you can use include:
Mixpanel helps you identify which features are the most popular among your user base and which segments of users are the most loyal. The software enables you to identify at which point of the app journey users are dropping off and why.
Amplitude comes with crucial features such as customer journey mapping and user interaction tracking to monitor your users’ behavior. The data analysis platform also shows how different segments interact with your product and how new product updates impact retention.
With UXCam, you can identify any glitches or sources of friction that cause users to churn. The tool comes with a user session replay feature to determine in which journey touch points users churn to understand better where users drop off.
Pendo’s analytics feature helps track your users’ behavior across your web, mobile, and internal apps to monitor churn. You can then leverage the data to make better decisions for your product and improve the user experience.
Step 2: Calculate Your Overall Churn
Before going into specifics (such as which type of users churn the most), it’s vital to calculate your overall churn rate. Your overall churn rate won’t give you a complete view of your churn, but you’ll get a basic idea of how many customers you’re losing.
It’s simple to calculate your overall churn rate. First, divide the number of users that churned from your app across 30 days by the number of users you had at the beginning of the month. Next, multiply the number by 100.
Example of Overall Churn Rate:
1,000 churned users over one month / 10,000 total users at the beginning of the month × 100 = 10% churn rate
Step 3: Analyze Churn by Segments
After calculating your overall churn rate, it’s time to analyze your user churn based on different user segments to determine which type is most likely to churn from your app. With your data analysis software, you can segment your churn data based on the following factors:
Demographics help you set the base for your segmentation. You can segment your churn data based on factors such as age, location, gender, or geographical criteria.
Revenue and Pricing
Another effective way to run segmentation is to divide your customers based on the revenue they bring to your company. If you notice that some users are churning due to budget issues, for example, you can offer them discounts to retain them. You can run revenue and pricing segmentation by dividing customers based on their Monthly Recurring Revenue (MRR).
Involuntary vs. Voluntary Churn
Identify which portion of your churn comes from users canceling their subscription on purpose and which portion is due to payment failure. The good news with users who churn involuntarily is that you don’t have to worry about making changes to your app to win them back. For users who churn voluntarily, you may have to offer discounts to retain them.
Step 4: Identify Where Users Drop Off
Next, identify where users drop off, then use that data to improve the user experience at those touch points. When you identify where users drop off, you can find which stages of the user journey have the most friction. You can then use this data to eliminate these sources of friction and improve the app experience.
There are many ways to identify where a user drops off. A good tactic is to look at your product’s user journey and see where most people are dropping off, whether it’s onboarding or when you ask users to upgrade their plan.
Something else that you can do is observe what behavioral patterns churning users have in common. For example, what features do they tend to underutilize? Do they not enable push notifications, unlike your most loyal users?
3 Ways to Minimize Churn
Even though churn is inevitable, it doesn’t mean that you can’t do anything about it. There are ways to improve your churn analytics and retain more users:
Make In-App Feedback an Integral Part of Your Strategy
Collect feedback from users to identify what parts of their experience they like and don’t like. Next, use that data to improve the elements they don’t like and double down on the aspects that they do.
A common best practice is to run in-app NPS surveys. These surveys ask users to rate how likely they are to recommend your app on a scale of 0 to 10. A score of 0 means they’re highly likely to not vouch for your app, while a score of 10 shows that they’re brand advocates.
You can also make in-app feedback an integral part of your strategy by integrating an activity feed as part of the app experience, which Stream’s API suite can help build. An activity feed displays information in real time within your app and encourages users to start a discussion with each other.
It’s also a place where users can openly share their feedback about your brand, which you can use as a helpful direction for improving your own app.
Use Customer Churn Data to Improve Marketing
If you find yourself driving many installs but still have a high churn rate, you could be attracting the wrong customers. Your churn data gives you a view of the types of users that are most likely to be loyal or churn, which you can use as a roadmap for improving your marketing efforts. Create the following personas with your churn data:
Write down the attributes of your most loyal users. For example, what are their key demographics? On which social platforms do they hang out the most? You can then leverage this data to improve your marketing and advertising efforts.
One way to reduce your churn significantly is to stop attracting the wrong users in the first place. Write down the attributes that your churning users have in common. The data will show which type of audience you want to avoid in your marketing campaigns.
Improve User Support
Fifty-eight percent of customers report that poor customer support is enough to make them leave a company for a competitor. Optimal user support helps reduce churn by ensuring that your user’s issues and challenges are solved quickly.
Here’s how you can offer the best support for users:
Integrate a Knowledge Base and FAQ Pages
Seventy percent of customers want self-service options as part of their product experience. A knowledge base and FAQ pages allow users to find solutions to their problems independently without having to reach out to your agents directly.
Include a Live Chat Feature
Chat platforms offer support to your users and allows them to reach out to you directly with any questions. You can use chat messaging as a tool to solve customer problems quickly and more efficiently.
What Does Your Churn Analysis Data Say About Your Users?
Churn analysis allows you to better understand why users leave your app in the first place. In return, you can use the data to improve your app and better serve users to minimize churn.
If too many of your users churn, then it’s time to make a change. Maybe you need to update your mobile app’s features and improve the UX. Or you could adapt your marketing strategy to attract the right type of users.