“If you cannot measure it, you cannot improve it.” – Lord Kelvin
When it comes to your SaaS business, if you aren’t already obsessed with customer measurements and metrics, you should be. After all, SaaS is a recurring revenue business, which means the real profits occur over the customer’s lifetime, not at a single point of sale. And that means understanding which customers are happy and highly engaged and why — and which ones will go on to become loyal and why — is crucial to understanding how to grow your business. That said, if you aren’t measuring the right things you can’t really be armed with the knowledge you need to make informed decisions.
That’s where “Measure This, Not That” comes in. In this series, we’ll show you where popular opinion gets it wrong, and which metrics you should ignore and which ones you should really be focused on in order to gain valuable actionable insights into your customers.
Measure This: Activity Churn
Not That: Customer Churn
What do you usually measure? Customer Churn
Why do you measure this?
Because what you really want to know is how many customers you’re retaining and how many customers you're losing. But customer churn is a lagging indicator, and waiting until after you've lost them isn’t very productive or helpful. Measuring who has cancelled an account isn’t that useful in the end — you’ve already lost the customer, after all, and there isn’t much you can do to change that.
What you should measure instead: Activity Churn.
Why you should do this: Activity churn is a leading indicator — it means the users aren’t using the product, or their usage has dropped off alarmingly. This is a better, more valuable, and more proactive way to measure churn. Think of it this way: Customers don't just wake up one day and decide: “I’m over it, I’m cancelling right now!”
Rather, the drift towards disengagement a slow process. Instead of using the product multiple times a day, the customer starts using it once a day ... then a few times a week ... then once a week ... and so on, until they forget about it altogether. Until that is, they cancel.
You want to keep track of and measure a drop off in usage -- i.e., activity churn -- because you can address that, and potentially fix the problem, before it’s too late.
So the question becomes, how do you identify when customers are entering into the danger zone of disengagement and lowered activity, and what should you do about it? Here are some things to keep in mind:
- For your long term customers, identify and define the patterns that indicate a drop in engagement. Find the common denominators of churn and target an intervention when they’re becoming disengaged — but haven’t yet churned.
- If your product is team based, then group the team together to analyze usage rather than looking at individuals. Teams that are mostly engaged with your product are less likely to churn.
- Tailor your message wherever appropriate — this will not only give your intervention a personal tone, but if there is a particular pattern of disengagement now is the time to address it, as opposed to a generic “We miss you” message.
- Give customers an added incentive to log back in — remind them of features they once found valuable, or tease a new feature you’ve added, as long as it will be of value to them. And remember that hot triggers — triggers that allow for immediate action — are always more effective than cold ones.
- Don't keep pushing — if a customer really wants to abandon your product, continuing to barrage them with emails risks alienating them and ensuring they’ll never patronize your business again.
Even if you do go on to lose a customer after a well-targeted intervention, it’s still a win if you can learn why they stopped using your product. And best case, you help guide them towards a state of engagement, rather than letting them become just another churn statistic.
Check out the other posts in our "Measure This, Not That" series: