In the last week I’ve talked with a few early stage startup founders about...
Here is an essay version of my class notes from Class 9 of CS183: Startup. Errors and omissions...
Photo credit: Claudio Cicali
Recently I started researching on different ways to keep customers for SaaS companies. Among the other things Churn rate stands out as the most critical metric for a SaaS company.
The term “churn” is used in many contexts, but is most widely applied in business with respect to a contractual customer base. Churn rate, when applied to a customer base, refers to the proportion of contractual customers or subscribers who leave a supplier during a given time period.Wikipedia
Customer churn rates range from 7% to 40% in various industries. Slowing this customer churn rate is crucial to the success of your company.
Customer acquisition is more expensive then to retain them so its crucial to pay attention to the customer churn rate and find ways to retain your customers.
Below are some quick tips to reduce the churn rate:
Are you following any other way to keep your customers? I would love to hear your thoughts on how you are working towards reducing the churn rate.
Thanks to Stephen P. Anderson for his answer. I thought this should be a blog post as it is full of good information.
More general patterns:
Here is an essay version of my class notes from Class 9 of CS183: Startup. Errors and omissions are my own. Credit for good stuff is Peter’s entirely.
Class 9 Notes Essay—If You Build It, Will They Come?
Distribution is something of a catchall term. It essentially refers to how you get a product out to consumers. More generally, it can refer to how you spread the message about your company. Compared to other components that people generally recognize are important, distribution gets the short shift. People understand that team, structure, and culture are important. Much energy is spent thinking about how to improve these pieces. Even things that are less widely understood—such as the idea that avoiding competition is usually better than competing—are discoverable and are often implemented in practice.
But for whatever reason, people do not get distribution. They tend to overlook it. It is the single topic whose importance people understand least. Even if you have an incredibly fantastic product, you still have to get it out to people. The engineering bias blinds people to this simple fact. The conventional thinking is that great products sell themselves; if you have great product, it will inevitably reach consumers. But nothing is further from the truth.
There are two closely related questions that are worth drilling down on. First is the simple question: how does one actually distribute a product? Second is the meta-level question: why is distribution so poorly understood? When you unpack these, you’ll find that the first question is underestimated or overlooked for the same reason that people fail to understand distribution itself.
The first thing to do is to dispel the belief that the best product always wins. There is a rich history of instances where the best product did not, in fact, win. Nikola Tesla invented the alternating current electrical supply system. It was, for a variety of reasons, technologically better than the direct current system that Thomas Edison developed. Tesla was the better scientist. But Edison was the better businessman, and he went on to start GE. Interestingly, Tesla later developed the idea of radio transmission. But Marconi took it from him and then won the Nobel Prize. Inspiration isn’t all that counts. The best product may not win.
1- There is a misconception around how products get built.
Those of us who are following the tech blogs see that many products launch every day. Some of these products become really successful. We often think that the success came overnight which is not true. It takes a long time of hard work and some times many iterations until a product is a success.
Steve Jobs on IPad:
“Years in the making”.
2- The classic product-centric approach leaves most of the customer validation until after the release
We are all passionate about developing the product and often times skip the customer validation and jump on to development. We focus on the solution more than the problem and end up adding unnecessary features to the product. The end result may not be what customers actually want. For this reason we need to involve the customers in both idea validation and product development. Steve Blank calls this feedback loop “Customer Development”.
3- You can not ask the customers what they want
Ash quotes Henry Ford:
“If I had asked people what they wanted, they would have said faster horses”
Customers may have all the answers to your questions about the problem they are having but it is our job to find the solution for them. Like Henry Ford we need to think beyond our time and out of the box and come up with the best solution.