As discussed in a prior section, churn is another word for user loss. Your churn rate is the amount of users you can expect to lose during a predefined time period on average.
The inverse of churn is called retention – which is the percentage of users you can expect to stick around during the same predefined time period.
Just as churn is your bitter enemy, retention is the foundation of all growth.
Think of your growth as a bucket of water. You’re currently working very hard to fill it up (with user acquisition). But then you notice there’s a hole in your bucket that’s leaking water (i.e. your churn rate). You try to plug it completely, but no matter what you do, this hole will always be there.
Churn Rate: A Slowly-Leaking Bucket
As your bucket of water leaks, three scenarios may happen:
- If your bucket’s hole leaks water faster than you can fill it, you’re very quickly screwed and you’ll have an empty bucket.
- If your bucket’s hole leaks water as quickly as you fill it, your bucket will hold water, but it won’t fill up any higher.
- If you work hard and learn everything there is to know about your users and your product, you can reduce the size of that hole to leak more slowly. Then you add water to it – which will lead to a full bucket.
Okay, I’m obviously working towards the third scenario. But before we get there, you’re probably asking yourself one question:
“What does my churn rate have to do with virality?”
Well, let me tell you.
Churn Rate and Virality
First and foremost, we want virality because we want growth. Growth only happens when two things take place:
- You acquire new users
- Those users stick around and remain users
As you saw in the chapters about carrying capacity (here and here), without a solid retention rate all growth will stop. It doesn’t matter how crafty or creative you are with your acquisition efforts, or how revolutionary you believe your product to be, or how often your mom tells you how special you are – growth is a very simple if/then statement.
IF acquisition rate > your churn rate THEN growth occurs.
Based on this, virality and churn are related in a few ways:
- Decreasing churn improves virality as users stick around longer to send more invites
- Virally-acquired users churn less frequently because of factors like higher social proof and social pressure
- Building a viral engine increases your acquisition rate without increasing your marketing spend (aside from the cost of any viral incentives)
Churn: The Silent Killer of Growth
In previous chapters, we’ve gone over how viral cycle time is the most important viral KPI. This included showing how much of an impact cycle time can have on your growth. We then discussed how impactful focusing on your viral factor (K) can be once you’ve optimized ct.
While these are all strong examples of viral KPIs, they both rely on the king of ALL growth KPIs – which is your churn rate.
Having a stellar cycle time and K factor may result in incredible growth for a while, but very quickly you’ll level off. So to give yourself the best chance of growing over a longer period of time your energy is best spent focusing on decreasing your churn rate.
How To Decrease Churn Rate
You can decrease churn by:
- Adding more value to your product, content, or service
- Using “reactivation campaigns,” or strategies to bring users back
- Engineering your product to encourage habitual use
- Fixing bugs
- Talking to customers to find out why they’re leaving, finding patterns in their feedback, and doing what they’re all calling for
- Having incredible customer support to help users through issues
- Provide stellar onboarding documentation to get users to the moment of value faster
Obviously there are more of these, and they’re all case by case – but this should get you started down the right track.
Predict Churn to Prevent Churn
Churn is typically measured using cohort analysis. In other words, showcasing the number of users who have churned over set time intervals relative to the time they were acquired.
For example, say your churn rate over a set period of time is 50%. If you start with 3k users, when that predefined period is over, you’ll be left with 1.5k users.
If you’re not closing in on saturation, and you haven’t yet approached your carrying capacity, many of these lost users will be replenished with new traffic and new users. But when you DO hit saturation and your carrying capacity, adding users at the same rate will no longer help plug the leaking bucket.
On the other hand, if your churn rate is very low, you WILL still see a userbase decline when you hit saturation. It just won’t be nearly as pronounced, and you should have time to scramble and compensate to continue to grow.
The takeaway is to keep up to speed on your carrying capacity as frequently as possible, and you shouldn’t have to scramble as you’ll know exactly when to increase acquisition velocity.
What happens when all the water leaks out of your bucket? Take it from me, it’s not good.
However, knowing what the worst case scenario looks like, is often the best way to avoid it. So let’s take a look at what happens when you “jump the shark” in our next chapter.
Do You Know How To Avoid Reverse Growth?
There exists a cataclysmic event for any business that when reached, will surely spell the end of your happy days. How do you keep from getting swept up in this perfect storm of awfulness? Continue onwards to find out.
- Cycle Time: What the Primary Defense Mechanism of Rabbits Can Teach You About Growth - March 15, 2016
- Viral Infection: How the CDC Can Make You a Viral Marketing Savant - March 4, 2016
- Viral Communication Marketing – How Apple, MailChimp and Hootsuite Used Hotmail to Inspire Explosive Growth - June 25, 2015