This is a guest blog entry by Val Geisler.
In the world of software, there’s a lot of talk about conversions. Everyone’s high on customer acquisition and lead gen and building a growth team and sales pipelines and ads managers and top-of-funnel and email list building, to name a few.
“Let’s give life to this customer base!” can be heard as the rally cry at sales team meetings around the world.
But there’s a way to grow your MRR without looking at new customers at all.
In fact, the most valuable customer you have is the one who you thought was dead.
Let’s talk through why cancelled customers are your greatest ally in the race to increasing MRR and how you can win them back… for life.
According to research from TARP Worldwide, it’s five times cheaper to keep a customer than to get a new one.
And that goes for cancelled customers too.
Even better news?
I have a game plan you can use to win back those cancelled customers using three under-utilized retention strategies. But before we dive into that, let’s talk about the three kinds of customers to consider winning back (and the scary ones to steer clear of).
Let a customer service team get to talking for just a little while and you’ll start to hear stories about customers who sent in dozens of tickets, made daily feature requests, cost the company hours (sometimes dozens and hundreds of hours) in support time, and eventually churned.
These customers are vampires.
They suck the life out of your team and then disappear.
As the founder of Teachery.co, Jason Zook has dealt with his fair share of vampire customers.
“Not all ‘real’ customers are ideal customers. There’s a lot to running a software company and doing customer support, while also running a sustainable business.”
Vampires are customers you can take a hard pass on. Unless they change their habits and come crawling back to you, there’s no need to go chasing after them.
Which brings us to…
As Director of Marketing at Animalz, Jimmy Daly is a time-strapped human with more things to get done in one day than any one person can handle.
So he signed up for TaskRabbit, a task completion service seemingly made for people like Jimmy.
Only problem was…. he was too busy to use it.
“I signed up for TaskRabbit last year, checked it out but never actually used the service. Until I do, I’m in limbo – a segment of users who has expressed interest in TaskRabbit but never really acted on it.”
Customers like Jimmy–those in limbo–should be celebrated. You’ve done the hard work of converting them from casual browser to interested signup. But just because they didn’t convert yet doesn’t mean they won’t ever convert.
As Jimmy said,
“The Internet is a busy place and it’s easy to get distracted.”
So what’s a marketer to do about those customers stuck in limbo?
Are they just ghosts who haunt us daily? Customers who might have been?
While technically a segment of their own, your ghost customers can be a valuable resource in the fight against churn. They won’t impact your true churn numbers (that is, if you use a free trial) but they will impact your win-back rate. Just like…
The walking dead, the un-dead, living dead… zombies go by many names (but they rarely say hello!)
And you have zombie customers lurking just around the corner.
They’re the customers who did convert to a paid account. Who were with you for a month, three months, 12 months, 2 years…
They loved your product at one time. But they left.
They’re still out there, the living dead, using another product or still searching for the right fit for them.
That’s what we need to find out.
Zombies, however can be immune to traditional communication.
Email overload and the onslaught of endless push notifications have made people nearly immune to re-engagement efforts, even if they like the product, but especially if they were “meh” about it in the first place. This noisiness means it’s getting harder and harder to successfully pull users back into your product to help them build a habit of regular usage1
So what’s a business owner to do?
Look, zombie customers are the very best customers you can try to win back. They are already familiar with the platform so they require little onboarding, they likely gave you clues as to how you can win them back, and they’re still out there, waiting to hear from you.
Reviving the un-dead isn’t an easy road, but it can be easier than creating a brand new customer.
Your Scariest Metric
The first thing you need to know to start reactivating already churned customers is what churn is for your business. While the basic formula for churn is always the same: Churn rate = # of customers lost in a period / # of customers at the beginning of the period.
(image courtesy of smile.io)
That period, for almost every purpose, should be Annual.
And SaaS churn rate experts talk often about the “good churn rate” of 7% Annual churn.
That translates to roughly 0.5% monthly churn.
According to Lincoln Murphy,
“This means companies with acceptable churn only lose about 1 out of every 200 customers (or dollars) per month. On the flip side, a high churn rate is the reason you ended [the year] with a whole bunch of new customers… but had about the same amount of revenue.”
And you want more revenue.
If it’s not already, churn will quickly become the top metric you’re discussing in your all-hands meetings. Your team will start to look at retention strategies–ways to keep existing customers happy and out of danger of churning.
Churn matters, yes.
You should care about it and be proactively working toward reducing it.
But how can you get on the offensive line? How can you put some of your team on defense (traditional retention strategies) and flip the script for your offensive line?
Those same retention strategies you use to keep existing customers can be repurposed for those cancelled customers you can still win back.
With that end goal in mind, here are the slight shifts you can make to those traditional retention strategies so that they win over your otherwise lost customers.
It’s easy to look at managing your customer’s support tickets and feature requests as something you only do with current customers. It’s also easy to look at it as a “one and done” situation. Neil Patel’s retention strategy for support follow up takes a single instance and turns it into a world of care:
A typical service request and solution looks like this:
Customer: We have a problem.
Support Team: I’ve helped you. Have a nice day.
I recommend that you add another layer of follow-up to this process:
Customer: We have a problem.
Support Team: I’ve helped you. Have a nice day.
Bonus Follow-Up: Hey, we helped you a couple weeks ago. How are things going now? Anything else we can help with?
But what would happen if you did that same follow up months later?
“Hey, you submitted a feature request a few months ago when you were a customer of ours. Totally appreciate that you might have found a new solution for X in your business, but I wanted to let you know that we did build exactly what you requested. Here’s the run down and I’d be happy to share more if you’re interested.”
Reaching out to cancelled customers who submitted a feature request for something you’ve recently built can open the flood gates of “new” customers.
Let’s Make a Deal
Around the end of the year you can find inboxes stuffed with offers to “go annual and save!”. One last push to get customers to put the expense on this year’s taxes and lock them in for another year, huh?
And, sure, you’re thinking that you send the offer to your whole email list which contains customers who’ve cancelled so you’re covered, right?
Remember how zombies tend to be immune to traditional messaging?
You have to grab their attention and speak right to them.
So send those upsell emails to your current customers, sure. But draft an entirely separate message for your cancelled customers.
Tell them about product updates, position changes, or any other relevant–and exciting–detail.
Then make them an offer that matters.
The customer success experts at Groove found that upselling is a true power move, if you have the right offer and the right audience.
In the book Marketing Metrics, the authors share a fascinating finding from their research:
The probability of selling to a new prospect is 5-20%. The probability of selling to an existing customer is 60-70%.
Check out this graphic for extra emphasis:
While you could argue that cancelled customers are not existing customers, they fall much closer to the Existing Customer than they do New Prospect. After all, they were a customer of yours at one time.
Speak directly to them, not to the masses, and they just might sit up and pay attention to your upsell.
Human With a Capital H
People love to talk about themselves. Ask someone what they’re working on or what inspires them or what they’re most passionate about and you’ll have a friend for life.
Caring about your customers seems obvious but, unfortunately, it’s not.
As a retention strategy, it pays off in dividends to get to know your customers, where they struggle with their business and/or your product.
An advocate for the human experience, Kevin Fontenot has an idea for growing SaaS companies:
While it might not be possible to get to every customer depending on how many users you have, it’s important to have those one-to-one conversations to improve your product and your retention rates.
But what about those cancelled customers?
Guess what? (just guess…)
It’s the same!
Send a message out to a selection of your cancelled customers. Get on the phone with them (Skype or Zoom is best so you can screenshare as needed). Spend actual time talking to actual human customers.
Don’t know where to start?
Here are a few questions to get the ball rolling:
- How would you describe your job title + role at work?
- What are you working on right now?
- What is the biggest problem you’re facing that keeps you awake at night?
About your product:
- What was happening in your world that led you to sign up for [product] previously?
- What happened during your trial that convinced you [product] was the right solution at that time?
- What were you skeptical or anxious about when you signed up? Is that what ultimately prevented you from using [product] long-term?
Take notes or record and then transcribe the conversation. Use some of the above tactics like following up with an offer (double tactic!). People like to be treated like people, not machines. Act accordingly.
If you’ve followed up with your cancelled customers, cared about their business, and given them a customized offer, you likely have won them back by now.
Keeping them around (again) is all in building the habit.
Build the Habit
James Clear, an expert in habit building with the research pieces to prove it, noted in one of his foundational articles on habits:
In his best-selling book, The Power of Habit, author Charles Duhigg explains a simple three-step process that all habits follow. This cycle, known as The Habit Loop, says that each habit consists of…
The Trigger: the event that starts the habit.
The Routine: the behavior that you perform, the habit itself.
The Reward: the benefit that is associated with the behavior.
The image below shows how these three factors work together to build new habits.
This same cycle can be observed in a common copywriting technique called the Problem-Agitate-Solve formula.
Something else makes that thing stand out.
You get to a solution that rocks.
It’s everywhere from Joseph Campbell’s The Hero’s Journey to nearly every movie, sitcom, and fiction book ever produced.
If Hollywood can profit off of getting people hooked, you can too.
And since humans are in the constant rat race of either chasing pleasure or avoiding pain, it’s natural that we develop habits around those things we find pleasurable.
Do you know what someone who was a customer before and is giving you a chance again will not find pleasurable?
The same onboarding they’ve already been through once.
Creating customized onboarding for your newly won-back customers can be a beautiful beginning to a restarted relationship.
At Appcues, Ty Mangin regularly waxes poetic about personalized onboarding (it is, after all, what Appcues does best). Ty says,
People will often have different use cases for your product that don’t easily correlate with their role or location. In these instances, giving users the option to choose how they want to get started will steer them in the right direction and minimize the chances of them getting lost in the product.
Coffee is For Closers
Of course, testing your efforts is the only way to know what works. And you should Always Be Testing.
Choose a segment of your cancelled customers and try a few of these techniques.
Record the results and then pick another segment. Find out what’s effective and go all in on that strategy.
Since we started out talking about churn, let’s wrap up with a new measure to check:
Your win-back rate.
Bring that growing number to your weekly all hands meetings. Talk about it in relation to your churn rate (you’re still implementing changes there, right? good.)
And then make sure those customers who came back to life stay that way.
The last thing the world needs is more zombies.