Why Churn Happens?

This article is a part of my Churn Combat Kit. Read the rest of the chapters here.

Unless you sell an addictive product or operate in a monopolistic environment, churn is common and natural. Reasons often look like these:

"I did not see value soon enough"

Most churn happens before the very first renewal because people bought a product to solve a pain point and they did not get “real value” fast enough. This typically happens a week or two after sign up.

"I want to cancel immediately so I don't forget"

This happens immediately after conversion. Some companies send reminder emails before an upcoming charge but many don't. So users find it easier to immediately cancel, especially for trials that require a card in place to start. Many users will want to see how easy it is to cancel too.

"It's too expensive"

Budget is typically the most cited reason in cancel flows. It typically stems from a price vs benefit misalignment. Sometimes, they don't need your entire solution but only a part of it and the costs make it seem like they're overpaying. Google's Workspace offers Gmail, Slides, Sheets all in one price. Other competitors often unbundle it so people pay only for what they want. The more sensitive the user is and the lower the price is, the higher the churn rate will be. Price discrimination often works well.

"I don't need it anymore"

Infrequent usage is also one of the leading reasons why people churn. Which is why pauses and hidden plans are so helpful and performant. Many businesses have an on-and-off use case. Seasonal products with lumpy usage will often see this reason quoted most.

"UX or performance issues"

Performance issues is often seen with AI companies where output isn't consistent. Some products often require setup costs or a strong learning curve. Friendster and MySpace lost users as page‑load times and site reliability worsened.

These reasons aren't as common as the other two though, so if you see them often, address them quickly.

"I don't know why my card failed"

20-40% of all churn is involuntary. Which means, the bank declines the auto-renewal charge. People may or may not be aware of declines.

As your segments matures, involuntary charges will grow because their cards will start to expire. Newer cards also require additional 3DS checks which can lead to payment failures.

This is typically common in B2B products where buyer and user of a product are two different people.

"Wrong customer acquired"

If poor ICP fits are acquired with enticing offers, they might end up churning. Unless Marketing has visibility into how a user activates and retains, this will reoccur.

You can also do a gradual roll-up to improve the customer fit of an audience.

For example, Jio in India acquired a completely new market segment with an unlimited free data plan and then gradually increased prices. If the user has the ability and willingness to pay even in the future, it's better to try to retain them than to give them a grand exit.

But it might not be possible in all cases.

Free user churn - "Never reached aha moment"

The steepest drop for free user churn comes from users who never reach their “aha” moment. They didn't take your core action. It's a good idea to send a feedback collection email to users automatically that show intent at first but then don't take core actions.

"Declining quality"

Every piece of content you produce creates a churn opportunity. For example, even a simple email can trigger a decision to churn. If new features are added that aren't up to the mark, it can trigger a decision to walk away.

Do you know why users churn?

• Yes, we have a cancel flow.
• No, we don't have a great cancel flow.

Yes, I know why users churn

A good cancel flow should collect allow you to collect freeform feedback and analyze it so it's grouped into buckets.

If you already have a good cancel flow, I will soon show how to turn it into great using a 3rd party tool in the upcoming chapters.

But for now, analyze the data. ChatGPT can help cluster and group it. You should know what are the top 3 reasons why people churn.

No, I don't know why users churn

You need to add a cancel flow (read chapter on cancel flow). You can even orchestrate it with an email flow when users turn off auto-renew or when their subscription is set to cancel. That way, you won't need to wait on engineering.

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