Did you know that up to 80% of the people that churn are customers with low or no engagement? Such numbers can break your business if you don’t do something about it. This is what I said in a recent webinar on … Engagement Scoring and Churn Prediction for Subscription Businesses.
Why is this important? Customer retention is on everyone’s mind as customer acquisition costs continue to rise. The best way to boost retention is to focus on one key metric: engagement. Understanding who is or is not engaged and how engagement patterns change over time will help you predict who is likely to churn. Even better, when you know what specific actions lead to engagement, you can do even more to encourage those actions among users and reduce churn. This recent webinar revealed the key steps you need to take to make engagement scoring and churn prediction a reality for your business.
Only a small segment of your users will be truly engaged. This chart shows users by engagement:
It’s easy to see that the majority of users are not highly engaged. What you need to do is learn more about your highly engaged users and why those users are engaged, then extend those lessons to grow engagement among the long tail of your users.
To gain a better of understanding engagement, break your customers into four engagement categories: high, medium, low and no engagement.
Users with low or no engagement may need a separate approach to boost their interactions with your product. Over time, you may be able to shift these users to a more engaged category and decrease the likelihood that they will churn.
To keep up with changes in user engagement over time, you need to set up automated ways to track customer engagement by category—and find out when users move between categories. With the right tools in place, you can automatically find out the engagement level of each user and track how it changes over time:
Being able to point to the action(s) that led to a user becoming more engaged will go a long way in boosting your customer engagement and, consequently, retention.
In addition to tracking engagement by individual user, you should look at your larger engagement segments over time as well. After all, you may have converted a few key users, but be lagging behind in overall engagement. Here’s one way you could visualize tracking users by engagement segment over time:
A chart like this shows at a glance that you’re steadily decreasing the number of users who are not engaged at all, and growing the number of users who show at least low engagement. This marks good progress toward the goal of reducing churn.
Once you have your engagement tracking in place and have gathered data on user engagement and churn for a while, you can start predicting churn. Customers who never reach medium or high engagement levels are much more likely to churn, so you can use engagement level as a predictor for churn. Customers who have attained high or medium engagement but slip back to low or no engagement are a good group to target for churn prevention, as it’s usually possible to win them back with targeted outreach from your customer success team.
When customers change engagement level, act! If they decrease engagement, reach out to see how you can help. If they increase engagement, figure out ways to keep up the momentum. Ensure that engagement levels are synchronized with your CRM or marketing automation tool so you can easily track and act on engagement changes.
Here are a few transformative things you can do based on changes in engagement level:
It’s easy to see that the more you know, the better you can engage your users. For the complete scoop on using engagement scoring and churn prediction to improve customer retention for subscription businesses, check out the webinar.
This is a guest blog post by Claudiu Murariu, a data analyst expert who helps SaaS companies expose user behavioral patterns that can be used to increase customer engagement.