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The 3 Types of Churn

As a market research firm, we’ve waded our way through plenty of churn. And by that we mean analyzing our customers’ customers who churn. Churn analysis is an important variant of win/loss analysis, and over the past few years we’ve spent a lot of time knee-deep in it. We’ve learned a thing or two about navigating its murky waters, and have come to believe that churn has three common but distinct forms:

  1. Failure to Thrive
  2. Green Churn
  3. Sudden Change.

While we can’t help you end the scourge of churn forever and lead a life of endless customer retention, (although companies like Gainsight can help you predict its arrival) we believe that, by studying your churn and learning how to understand it, you can be better prepared to limit it in the future.

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So let’s break down the types of churn.

Failure to Thrive

We’ll start with the variant that is easiest to see coming: ‘Failure to Thrive.’ It goes a little like this: from the moment the customer bought the product they have seemed to regret the decision. Their health scores have consistently remained red for one reason or another: their onboarding started slow and got slower, or their usage rates were always terminally flat. These are the clients who never stop reporting problems: something keeps breaking, something never worked in the first place, or the problems aren’t problems so much as complaints: the product and the client have always been a poor fit. The writing has been on the wall from the get-go: the client has Failed to Thrive with your product. When they finally drop you, you’re disappointed, but hardly surprised.

Green Churn

Unfortunately, churn isn’t always so clear-cut. Green Churn, our next variant, is more perplexing. On the face of things, everything seems great: health scores are green, onboarding went well, the usage rates seem healthy, the inboxes at customer service are gratifyingly void of complaints. The future looks good, but for some reason you’ve started to see churn. Before you know it, the client is gone. Your first response is likely along the lines of “Was it I something I said?” But the problem didn’t lie with what you were saying – it’s where you were looking; it’s a matter of perception. Take another look at that green health score: if it really reflected reality, you wouldn’t have had all this churn. What’s gone wrong is that you have not instrumented effectively: in other words, you have not been measuring the right things. Whatever was informing your green health score was not enough; for example, you measure usage but not satisfaction. The client could be using the product fifteen hours a day, but if every other hour is spent in frustration, your product isn’t building a longevity of goodwill.  Had this been considered, that health score would have been more accurate, and you would have had a better sense that something was wrong. Green Churn happens when you keep your focus too narrow and don’t consider the full picture of your client’s engagement with your product.

Sudden Change

The third type of churn is the one that can only ever blindside you: Sudden Change. Like with Green Churn, the health scores are good, but rather than a puzzling decline of service, the end comes almost overnight. You don’t have time to react: one moment you’ve got a satisfied client, the next moment they’ve canceled. Something happened, and it happened on their end: a sudden shift in IT policy, a desperate need to cut-back expenses, a singular event no one could have predicted but has made sticking with your product untenable. In the most severe cases, the client itself has been cancelled: a company that’s gone under has no further need of your services. Sudden Change lives up to its name: unexpected, unanticipated, unforeseen. You can’t counter Sudden Change, all you can do is remember that it’s the type of churn that could happened to even the best of us.

Failure to Thrive, Green Churn, Sudden Change: the three types of churn we encounter in the SaaS world. Now that you’re more familiar with them, where do you go from here? Move beyond deceptive health metrics and start managing client engagement at its source, so that Green Churn doesn’t blind you to real problems, and Failures to Thrive aren’t left to fester until it’s too late. Getting to grips with churn can be a complex process – Check out our Toolkit for Customer Success, which will show you how churn can be understood in the context of our Buyer-As-HeroTM methodology. Also keep an eye-out for our next article on churn: Churn Analysis and the Buyer-As-Hero as well as subsequent follow-ups. Churn analysis is relatively new to the world of Win/Loss, and we mean to see to it that companies start giving it the attention it deserves – and start getting educated on the lessons churn can teach.

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