How to use Product Metrics to Predict and Prevent Churn
By: Kate Hopkins
How steep is the current decline going to be for your industry? How much is business slowing down for your customers? Will your customers renew their license?
These are all good questions to ask in a time of economic uncertainty. Thanks to the data that is readily available to us, you may already have the answers you need to see into the future for your company. Better yet—you may be able to influence that future.
Data you should be tracking
Usage volume metrics
Every software company can and should look at trends in customer usage to gain insight into the health of customer relationships. During volatile times, compare a customer’s usage to their “normal” levels to flag customers who need attention. Tools like Pendo, Mixpanel and Heap are perfect for monitoring this type of data.
Pay attention to:
- Daily/weekly/monthly usage events (clicks)
- Daily/weekly/monthly active users
- NPS
- Performance of key actions in your product
Customer business health metrics
If you provide a core operating system for your customers (e.g. a CRM, GL, or other operations hub), you likely have access to operational data that can help you gauge how your customers’ businesses are faring. Business activity metrics like jobs created or orders received can help you understand not just the health of your product usage, but also the overall health of your customer’s business.
To get at these, you may need to go beyond usage tools and leverage database queries of your app.
Pay attention to:
- Customer new business metrics: bookings, orders, etc.
- Customer continuing business metrics: revenue, jobs, projects, etc.
- Usage volume metrics: payments, SMS messages, etc.
If product usage activity is low, beware of voluntary churn
If you have customers for whom usage is falling off (or newer customers for whom it never picked up), they could be seeing your solution as a “nice to have” and a place to cut. Pay extra attention to usage if your product is one that replaces a homemade solution like excel spreadsheets, or if you’re an expensive point solution.
A helpful way to prevent voluntary churn is to implement classic customer success tactics. Determine which customers need extra attention (because they’re critical customers, or because they’re at-risk customers) and create a plan to proactively engage those high-priority customers. Make the communication two-way by simultaneously offering education and resources and soliciting feedback.
If business activity is low, but product usage remains high, beware of involuntary churn
If you see business activity fall off, it’s likely your customers are hurting. But if customers are still using your product, that’s a good sign that you’re still an integral part of their operation. The problem is that they may not be able to afford to pay. If paying full price on time or canceling are their only two options, they may cancel.
Consider employing defensive pricing strategies like downgrades, pause options, or free periods in the face of potential involuntary churn. By giving a little on price, you may be able to keep more of your base on the platform for the long run. Plus, by showing them that you are in this together, you will strengthen your connection with your customers.
If business activity and product usage are high, look for opportunities to upsell
If both business activity and usage are high, your customers are still plugging away and your product is a part of their continuing operations. Awesome. Continue to monitor these metrics in case already in-progress work is delaying an impact that’s still coming.
If you’re fortunate enough to find yourself in this situation, think about upselling. While things are busy, customers and prospects may have blinders on that make it both harder to sell new deals and easier to increase the level of support you provide existing customers. Your customers have already partnered with you—what more can you do for them? Think about products you can cross-sell, and ways to expand your footprint within your customers’ organizations.
Use your metrics as leading indicators
Pull together a few metrics that will help you keep a finger on the pulse of your customer base in coming weeks and months. If you already have good KPIs, consider adding one or two temporary ones that help you gauge not just the health of your relationship with your customers, but also the underlying health of your customers’ businesses. Discuss the trends of these metrics at your cross-functional leadership meetings and use those insights to prevent and plan for oncoming revenue implications.
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