Best Practices

Why Product Should Care About Customer Churn

Churn is not the most appealing topic to write about, but it’s a reality that those of us in product must face. “Churn” is both an important and depressing metric to track. No product manager likes to hear that a customer has decided to move to a competitor. It stirs up feelings of failure because we didn’t adequately or painlessly solve that customer’s problem. And as a result, they’re leaving us for someone else. Basically, it feels like getting dumped by someone you loved. Sad face.

However, churn can also be a wakeup call for a company and its product team. It’s a reminder that our product is not perfect, and that our customers feel those imperfections more than anyone else. 

Oftentimes in product, we get excited and energized by building new features or products (innovation). New features are cool and can add a ton of customer and business value. However, the pain that customers experience with existing features is typically what leads to churn. The customer may not know how cool and awesome the new feature/product is or will be, but they do know how good or bad existing features/products are.

What Is Customer Churn?

I have made the assumption that everyone reading this article knows what customer churn is and why it’s important. Oops, let’s change that. Customer churn occurs when a customer decides to cancel or forgo renewing their services or license agreement with a company. For example, when a customer decides to cancel their subscription to Netflix, this is customer churn. Churn is a common metric for companies to track, and it’s typically communicated as customer churn rate. This is a critical metric because drastic increases in customer churn rate can be catastrophic. It could even be the difference between a company transitioning from Startup → Growth → to Enterprise, to StartUp → doors closing.

Pro tip: As a product person, don’t just make assumptions and forget about them. If you do make assumptions, be sure to validate them with data.

Have you ever heard of a company setting a goal to decrease their customer base and revenue by x percentage every quarter? I would go out on a small limb to say you haven’t. Companies do not like losing customers because it goes against their business goals. Customer churn and business goals are indirectly proportional to each other. When new customers subscribe or sign a license agreement, this moves the needle towards the company’s goals. When customers churn, the needle moves in the opposite direction. And companies sound the alarm when their customer churn rate hits a high point.

Why Do Customers Churn?

Many factors contribute to churn. For example, a customer might decide to churn due to a shift in their business strategy or because of budget-related challenges. Maybe they received bad customer service/support. Perhaps they no longer see the value in the product or service and can’t justify the cost. Yet another reason could be that they are experiencing too many pains with the product or service. As a result, they have decided to move their business to a competitor. Reasons for churn differ by industry and market, but the negative impact of churn is universal.

The Role of the Product Organization in Customer Churn

Some factors that influence churn are outside of the product team’s control, but the majority fall within our domain. Product teams play a critical role in taking a qualitative approach to customer churn, particularly when they partner with customer success. Without a qualitative approach, it is almost impossible to identify the reasons for churn. Also, understanding the WHY behind churn helps product teams prioritize current and future roadmaps. 

And in fact, product teams are not without blame when it comes to customer churn. When we release features or products that cause customer pain and they churn due to those pains, that is our fault. We failed to solve the customer’s problem without introducing additional friction. Here are some ways in which product teams might contribute to customer churn:

  • Overlooking common pains shared across the customer base
  • Prioritizing new features to win new customers and deprioritizing current customer pain points (I will admit balancing this is like walking over Niagara Falls on a tightrope.)
  • Prioritizing primarily based on business goals without respect to your customers
  • Designing a poor user experience
  • Delivering a product or service that causes more pain than the value it delivers

I could go on and on about the various customer churn factors that are related to product, but that would get boring. The main point is that when we cause our customers pain, they are more likely to churn.

Pro tip: Don’t prioritize only shiny new features — prioritize current customer pain points as well. 

How Product Teams Can Help Reduce Customer Churn

If product teams can contribute to customer churn, then they can also reduce it. Here are some methods product teams can use to help the company keep its customers.

Know Your Customers

I know this is a cliche in product, but it still rings true. One of the best ways to get to know your customers is to talk to them. I recommend setting a goal to connect/interview a certain number of customers per quarter (remembering to listen more than you talk). This will help you better understand your customers’ needs and the pains they may be experiencing with your product. As a result, you should feel empathy toward your customers and want to solve their problems. And hopefully, this empathy will overcome the desire to work on shiny new features.  

Have a Strong Feedback Loop

I cannot stress enough the importance of getting continuous feedback from your customers. There are plenty of tools out there that let product teams gather and categorize continuous feedback so that they can identify common pain points. One thing I have seen work well is to have your NPS feedback, in-app feedback, customer interview notes, support tickets (high level), and win/loss analysis funnel into one tool for tagging and categorization. It is an effective way to uncover both areas of friction and areas of delight. 

Maintain a Balanced Backlog

Resist the temptation to have a backlog full of shiny new features. Instead, create a balanced backlog of pain points, shiny new (innovation), and delight. Also, throw in architecture-related items because they have a big impact on the technical performance of your product. You can build an amazing feature or product that solves the customer problem perfectly, but if the performance is slow or buggy due to the architecture … Well, you just added a new source of customer pain and reintroduced the possibility of churn. 

Pro tip: Make continuous feedback a habit. Your customers and your company will appreciate it.

Don’t Ignore Customer Pain

Working in a product role is both challenging and rewarding. We get to solve real problems for real customers and help our company trend north towards their goals. On the quest to win new customers, let’s not forget about our current customers and the pains they are experiencing with our product. Customers feel the imperfections of our product more than anyone. And when those imperfections become overly painful, customers will churn.

Be intentional about connecting with your customers and listening to their feedback. This will help you identify common pain points, uncover new ideas, and realize new opportunities for innovation. And hopefully, you’ll feel just as energized and excited about addressing an existing customer pain point as you do about building that shiny new feature.