How To Perform Churn Analysis - [Free Guide & Templates]

“I need a churn analysis! We recently launched a new way of delivering our product and customer churn is a major pain!” — a concerned friend.

Since I co-founded customer feedback company Thematic, friends who work on software products often ask me how to effectively use churn analysis to identify, fix and prevent customer churn. I can relate, losing customers is what hurts founders the most! In this post we describe how you can use your customer feedback surveys to perform churn analysis.

Why churn analysis matters

When customers leave, it keeps you up at night. We had to deal with this situation over a year ago when we signed more customers than we could onboard. Even without a professional churn analysis here, I know we let our newly signed customers down and thinking about it still makes me feel sad.  

Customer churn is especially hard to continuously predict and prevent in a world where products, services and business models are constantly changing, as companies struggle to meet the rising demands of customers and stay ahead of the competition.

Nobody wants a leaky bucket situation, which means as you spend thousands on marketing to attract customers, a large chunk of that money goes to waste when customers don’t stay. Not only do you lose money, you also lose customer trust. What if they tell others about their poor experience? The reputation damage will be hard to rectify.

We’ve shared before the three most common causes of churn and five tips to prevent churn.

This time let’s look at one specific strategy in detail: churn analysis using customer surveys. This strategy will help fix churn and also accelerate growth at the same time. It worked for us, and it worked for Thematic’s customers.

The Best Ways To Collect Customer Feedback To Reduce Customer Churn

The best way to understand what’s driving your customers is by talking to them. However, if your user base is hundreds or thousands of people, you might not get the full picture needed for a reliable churn analysis by talking to just a few.

Solution: Collect customer feedback at scale and set up a continuous customer feedback strategy (as described below). This will give you valuable insights into the true reasons that inhibit your growth.

Collecting customer feedback at scale means sending out surveys. Yes, people hate surveys. But that is because most companies do it the wrong way. Here are two techniques that will help you do it correctly, by demonstrating that you care about the customer and their feedback.

Step 1. Make it personal

Most companies send out basic templated emails and don’t include any personal information about the customer, not even their name.

Instead, try to include as many relevant personal facts as possible. The purpose here is to show that you care!

“Hi {{First name}},

{{When?}} you signed up for our {{Which product version}}. We noticed that you only used it for {{How long?}} at {{Company}}. We were disappointed to see you go….”

And make sure it doesn’t look like a template, you want to sound human. In order to avoid a templated look use these examples:

Step 2. Send it from the CEO

Often, survey invitations are sent from “the company” or worse, “the survey provider company”. People are more likely to respond to emails from the CEO, especially if the CEO does read them.

If needed, use a email address that looks like it’s CEO’s email, e.g. a.medelyan@getthematic.com can be created just for this and CEO’s assistant could monitor the inbox.

You could include the CEO’s picture or say: “I will personally read all of the feedback”. If you aren’t the CEO, make sure CEO has access to this feedback.

Step 3. Keep it short

A. Don’t ask unnecessary questions!

Most companies ask too many questions. Some ask for facts they’ll never use, e.g. “gender”. Others ask for information they already have, “How long did you use our product for?”.

Most customers who leave feedback want you to do something about it and won’t mind sharing who they are. But it’s also a good idea to offer to submit results anonymously. Otherwise link the responses via customer ids to their data.

B. Use open-ended questions.

Especially if it’s a churn survey, do not use multiple-choice questions. Do not presume. Customers have many reasons why they might have left you and by pushing them to decide you could collect incorrect information and miss the real reasons why they left you. Keep it short and simple with an open-ended question like “Why did you decide to cancel?” It’s more customer-friendly.

Also survey existing customers to find the differences to those who churned.

C. Ratings are overrated.

If it’s a pulse check of existing customers, you’ll discover insights about different levels of engagement with your product. Here, include just one rating question and one or two  open-ended questions.

The rating question could be:

• “How satisfied are you with Product X?”
• “How would you feel if you no longer had access to Product X?”
• “How likely are you to recommend Product X to others?”

You can obsess over which metric is the best, but ultimately, you just want to gauge where you stand.

Use one rating question, not multiple. Different metrics might mean something based on your methodology, but customers just get confused.

D. Give the customer the power to share what matters to them.

Most people want actionable insights, but they end up crafting surveys where the open-ended response is added as a throw-away at the end of a 16-page survey. Instead, use a short survey with one rating and one or two open-ended questions.

The open-ended question could be “Why did you give us this rating?” supplemented by “What can we improve?”. Do not ask people to give their “primary reason”. What if they had two reasons? Don’t make them decide between one reason and the other, it’s not customer-friendly.

One of Thematic’s customers is the bus company Greyhound. They used to run a 32 question survey asking multiple rating questions such as “How do you rate our seats in the terminal?” Once they started using Thematic for analysis of open-ended responses, they reduced their survey to just 4 questions about the trip and one open-ended question “What can we improve?” This allowed them to learn that it’s not that the seats weren’t great, they didn’t have enough seats in certain terminals in the first place. They could immediately turn this into an action plan.

To find out more, read how Thematic helped Greyhound reduce their customer feedback analytics time by 80%

E. Ask for specifics

Finally, you will want as much actionable knowledge as possible. So, add something like

• We would love to hear as many specific details as you would be open to share.
• Which specific aspects of our product or the whole experience stood out to you?
• Please share specific reasons and examples. These will be immensely helpful to us in improving our product for customers like you.

Step 4. Make sure they know how important their feedback is

This brings us to point 4! What is the actual benefit to the customer to respond to this survey?

They invested time into trying out your product. If they churned or aren’t using it often, they may have been disappointed with it. Tell them that if they share their feedback, you’ll make sure to provide a better experience next time. Potentially, you might build the perfect product for them!

Here are a couple of ways you could phrase this:

Here are the best features of these templates:

• There is a clear call to action that also says how little effort it will require from the user: 2 minutes
• They show benefit to the user: ultimately a better product
• There is an indication of what the expected behaviour is: to respond, 70% responded!
• They are written in personable way

Step 5. Follow up

Finally, follow up.

My co-founder used to work at a DJ software company. Not only did they have an insanely high NPS, but they also never had any shortage of customer feedback. But for most companies it’s not the case. Even if you used my tips in the above steps, customers may still not be as engaged. Your only solution is to follow up to get as many answers as possible.

If the CEO sent the initial email, she could send another two emails to follow up. In addition, another person at the company could send follow ups, phrased in their own voice.

Keeping the authentic voice of your company and brand in all of these interactions with the customer is important.

What To Do With Customer Feedback for Churn Analysis

Now that you’ve collected hopefully hundreds if not thousands of responses, it’s time to digest all that feedback. You can read it. But, beware of bias and make sure your analysis is complete and actionable. Here is how.

1. Avoid bias

Once a university collected 250 responses from its students and let four other students read the responses and identify top 5 things they could improve. The overlap was tiny! Each student agreed with the other three on only 2 out of 5 things. One of the four students was French. Only two responses said, “Accept less French students”, but for her it’s what stood out the most, as one of the top 5 things! Don’t fall into the bias trap. Analyze feedback methodically!

2. Find the themes in all comments

We’ve written a guide on how to analyze open-ended responses. The gist is:

1. Build up a set of themes as you are reading the responses (and not in advance)

2. Continuously review and re-tag responses as your set of themes evolves and until you have exhaustively tagged all comments with all the themes.

This will ensure that you won’t miss any themes you didn’t think were important and you’ll have accurate counts of themes across all responses.

3. Analyze the responses

Turn themes into actions by looking at who left which responses. Here are some sample questions which could help you guide your churn analysis:

• Who do you think are your customers? You may have already gone through an exercise of building the ideal customer profile.
• What are the characteristics of the customers who are happy with your product? (You will only find out this if you survey everyone and not just those who churned.)
• Why are they happy?
• Do they match your ideal customer profile?
• Which customers are churning? What do they have in common?
• What are the common themes among their responses?
• Do you want to win them back?

Depending on the answers to these questions and your product strategy, you might need to cut and combine the responses in a different way, but ultimately, you should end up with a data-backed plan of attack on how to reduce churn and improve your growth.

4. Align insights from customer feedback with marketing messaging

One thing that I recommend paying close attention to is the alignment with marketing.

There are two main points here:

1. Do you market something as your core value proposition but your product under-delivers?

Fix that first!

For example, if your marketing is “Our app is the fastest way to deposit checks on the go”, but the actual process is cumbersome because of a failing fingerprint ID on the phone, you aren’t delivering on your promises and you are losing trust with customers.

2. Do you market attributes of your product that excite your happy customers?

When it comes to things that people love about your product, marketing could use this material. Sometimes it’s the unexpected benefits that you didn’t think were important that turn out to be.

By aligning marketing on customer feedback you will avoid attracting customers for who your product isn’t the best fit, which will result in churn. Conversely, you will find marketing messages that result in happy customers who are more likely to stay.

Track Your Progress Over Time For The Most Effective Customer Churn Analysis and Prevention

The strategy described above shouldn’t be a one-off exercise. You should continuously run such surveys and track how your action plan is working out. Have you done enough to fix an issue? Are there new things that emerge when you collect feedback?

How often should you be tracking progress?

This depends on how many customers you have and how quickly you can iterate on your action plan. Most companies collect feedback either continuously, each month, or each quarter. Different sets of customers are surveyed each time. Smaller companies could survey all customers twice a year.

Conversations with customers can help identify whether a customer noticed a difference between the previous and the current version of a product or service, to allow you to dig deeper into what worked and what didn’t.

How should you report on progress?

Don’t just report on results, make sure all data is accessible. Reporting on customer feedback is another guide in itself that I’ll definitely write at some point. But the one thing I’d say is that if you are reporting to a higher up, you’ll want to back up your report with methodology and ultimate data.

Brainstorm devil advocate’s questions in advance of the report and have answers. People will try to discredit your results because of their own biases. So, be prepared for questions such as “But how many customers are actually affected by this?”. Having the data accessible will help you answer these questions on the fly.

Talk in $$$ values. Let’s say you have 1,000 customers and you surveyed all of them. Out of these, 400 responded, and 10%, i.e. 40, complained about a specific issue. You can assume that at least 100 customers are affected by that issue.

What is the average revenue that these 40 customers bring in? Multiply by 100, to report on the total amount of revenue at risk for that issue.

How much does marketing currently spend to attract a customer? Multiple by 100, to report on the total amount of spend to acquire these customers.

If you work with NPS we have a free toolkit for calculating the ROI for both growing revenue and reducing the costs of customer acquisition.

Continuous learning

In this guide, you learned how to get the right customer feedback, how to analyze it effectively and how to report on that feedback in a way that makes people take action.

But this is just our own learnings over the past 4 years. What methods have helped your teams to collect more actionable feedback? What analysis techniques did you use? What kind of pushbacks did you receive on your reports and how did you combat those?

Email me at alyona@getthematic.com

I’d love to learn from you!

P.S.: You might also be interested in our e-book on how to end customer churn for good.