May 23, 2017

208: What to Do When Your First Customer Cancels / Churns?

When a frog is placed in boiling water, it quickly jumps out because it has felt the heat. But, when it is placed in the water before it is boiling, the frog adjusts to the heat and it is too late before it realizes that it is boiling. This holds true for entrepreneurs who focus on customer acquisition and NOT on their retention and churn. You need to understand why customers are leaving you as EARLY ON as possible in order to adjust and make changes. For this episode, Steli and Hiten talk about how to make the most of a customer cancellation and the importance of preventing cancellation from Day 1.

Time Stamped Show Notes:

00:07 – Today’s episode is about what to do when your customers are cancelling

00:32 – Episode 106 is about how to deal with churn in SaaS

00:38 – This episode is specifically about subscription businesses

01:01 – Acquiring customers is different from retaining customers

01:42 – How you react or respond to cancelling customers can set the direction of your business

02:20 – You should have the mindset of trying to learn from the negative experiences

02:37 – Smaller businesses might be losing money so they have to cancel

03:05 – When people say they can’t afford your product, you probably did not provide enough value

03:41 – Ask customers why they are cancelling so you can learn from it

04:08 – If you are on the phone, you can easily do the 5 Whys or keep asking until you are satisfied

04:20 – While customers might say that it is about their budget, it can actually be a misunderstanding with what your product can do for them

04:41 – It might be because you have not shown them how much value they get from your product

05:03 – “What could we have done to keep your business?” is one of the key questions you should ask

05:26 – The goal with the first few customers that are cancelling is to learn from them, not primarily to stop them from cancelling

06:22 – People who are cancelling have already decided to do so a long time before they actually inform you

06:41 – The key is to prevent people from cancelling

07:02 – Spend your time understanding what happened rather than pushing your customers to stay

07:41 – Learn how you can be proactive using the experiences of your customer, so that the causes that led him to cancel will be minimized for future customers

07:53 – When they are cancelling on the app, make it so that they won’t be able to unless they tell you why

08:15 – What is the right approach in allowing a customer to cancel?

09:23 – It should be easy enough for them to cancel and provide you that feedback for why they are cancelling

09:30 – A phone call is an excellent approach, if you can

10:12 – Tell them upfront that they can cancel, but you also want to know what went wrong

10:25 – Show them that you care because they already paid you before

11:03 – When you have reached a larger scale, what would be the best way to elicit feedback?

11:27 – A phone call is still the best way

12:45 – A lot of the development of a product comes from the feedback of cancelling customers

13:08 – The number one goal for you in all of this is to learn and gain insight

14:39 – In the early days, acquisition is the main focus and NOT retention and churn

15:16 – The “frog in the water” is like the entrepreneur who does not worry about churn at the start

16:25 – Retention and churn needs to be a priority from Day 1 and the first person that cancels is the most important, because you get to learn from them

17:31 – Learning and understanding the different factors that cause your customers to cancel should be assessed early on in your business

18:15 – Make it a priority to learn from your cancelling customers

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By Steli Efti & Hiten Shah: Serial Entrepreneurs, Sales & Marketing Experts, Startup Investors & Advisors, CEOs running multi million dollar SaaS Startups

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