Before we dive into churn, let’s back up.
In the world of virology, mass infection is one of the more terrifying concepts out there. Men and women at the CDC and various disease control and prevention organizations around the world make it their top priority to make sure that an outbreak doesn’t occur. If and when it does, they shift their top priority to controlling the outbreak to ensure it doesn’t become an epidemic.
However, outbreaks and epidemics and zombie apocalypses will sometimes happen. As such, people will get infected by viruses.
Depending on the virus, four things will normally happen:
- Some people who are exposed will get infected and will remain infected.
- Some people who are exposed will NOT get infected because they are immune.
- Some people who are exposed and get infected will then churn, and become uninfected.
- Everyone else simply won’t be exposed at all.
In the case of a disease, the more often churn can occur, the better off the entire population is as a whole. This means that once people are infected, they can get better and eventually stop showing symptoms or risk infecting others.
This is usually due to modern medicine combining with the natural power of the human immune system.
(The man, the myth, the legend, and the doctor who cured polio – Dr. Jonas Salk.)
Churn: Good for Health, Bad for Business
When a product spreads virally, the same four things will occur.
- Some people who are exposed to your product will become users and will remain users.
- Some people who are exposed will NOT become users because they don’t need your product or don’t see enough value in it.
- Some people who are exposed will become users, then churn, and become uninfected.
- Everyone else simply won’t be exposed to your product at all.
Unlike when a disease spreads, when it comes to growing your business #3 is – as the kids say – bad news bears.
The Inevitability of Churn
No matter how incredibly, fantastically awesome you make your product, every month you will have a certain percentage of your users churn. This means they will have transitioned from user to non-user. It will even happen when that user was previously experiencing viral tendencies and could be deemed as “infected.”
Churn may happen for a variety of reasons – such as:
- The experience of ongoing use of the product didn’t live up to expectations
- A competitor with a superior product or price entered the market
- The user simply lost the need to use the product for any number of reasons
- The user got the value they needed from the product already, and no longer has use for it
- The user thought they understood the product, but didn’t, and decided not to learn
- The user lost the ability to use the product
In other words, you can decrease churn to a degree, but many factors will be outside of your control (i.e. a user dying), so churn will ALWAYS exist.
The Impact Churn Has on Virality
Since you’ll often lose converted customers at different intervals, and those churned users will have contributed to various degrees of your viral growth, this loss will have a variable impact on your i value, and thereby your K factor.
Churn is typically measured as an average percentage – and that percentage represents the fixed probability of losing a user in each defined time period.
- Month 1 Churn is the percentage of users who stop using your product within the first month
- Day 1 Churn is the percentage of users who stop using your product within the first day
Here is an example of a monthly cohort analysis on churn rate:
Churn will impact your viral growth even more dramatically if your average user’s most viral period of time occurs AFTER the point where most of your users churn. Therefore, your goal should be to identify the point of maximum virality on average, and focus all of your churn reduction efforts on the periods of time both before and during that viral window.
For most products, most of the churn will occur over the first few days or weeks, and will inevitably level out. Your job is to craft the process of getting repeated value from your product to be as easy and intuitive as possible, while also taking the user’s hand and teaching them how that process works.
It is important to note that churn might not only effect viral growth. If it’s high enough, your product will eventually hit a growth threshold called your carrying capacity. At this point, all growth stops completely UNLESS either churn decreases, or acquisition velocity increases.
Carrying capacity is basically a growth engineer’s worst nightmare. So let’s figure out how to avoid that all costs.
How Can You Overcome Zero Growth?
There can come a point in any business when you’re just going in circles. It’s that dreaded moment when you’ve seemingly reached the limits of your growth potential. But don’t panic. This doesn’t have to last forever, so long as you make the right change. Learn how in our next chapter.
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