Have you heard the terminology Customer churn or churn rate? What does it mean? How does it impact on your product growth?
There are lot of reasons for customer churn. I have tried to consolidate all the reasons here below:
- Positioning to wrong customer segment: If the product is positioned to a wrong customer segment, then initially the user base might start to grow due to hype. But in long term, they won't stay to continue to use the product. Think of a scenario - Google oculus is targeted to a customer segment where the average age of the users is greater than 60 years.
- Price - Price is a sensitive factor. Let's assume the price is low initially when the product launches. But as organization decides to increase the price to improve the profitability, the customer might not take that as a positive move. Customers will look for substitute products or alternative products for the same solution. Pricing strategy is very critical, too expensive or too cheap might create a negative impact on product users.
- Customer is not aware of the product feature - If the customer is unaware of which feature to use and how to solve their problem, how long do you think the customer will stay in the same product?
- Less user engagement - We can check user engagement using different analytics tool. How much time user is spending on a particular feature or page, whether they are revisiting the same feature or not - these are some basic metrics which a product manager will analyze to check the engagement. When the engagement becomes low, the customer churn starts.
- Incorrect demography or market positioning- The product might not be a fit to the demography or the market. The product might have launched to a wrong market and tried to attract wrong customers. Initially, the product might generate leads or user registration, but going forward the customer might be reluctant to use the product.
- Your customers aren’t receiving their desired outcomes - The product might be developed to solve customer problem. But when users start using it, they found that the desired outcome is not happening. If the company does not provide attention to this, it might lead to increase churn rate.
- Your customer support needs work - After sales or customer support is becoming a key factor to retain the customers. Customer will definitely move away from the product, if the customer support is poor. Companies like amazon has put up an excellent customer support, the retention rate is high for them.
- Better competitors' product - Competitors came up with better product which has better usability, price, durability etc. The existing user base will shift to competitor's platform.
- Bug and issues in the product - In case product has lots of bugs or issues, users will stop using that. No user will pay for a product which is continuously giving problem.
- Less product value - If the Value generated by the product diminishes over time, user base will start decreasing.
- Poor product marketing - Poor marketing of the product, not selection of proper marketing channel, improper marketing value proposition will have negative impact on user base.
- Poor quality - If the quality of the product is low, then user will look for alternatives and shift to other options.
- Investor issue - Investor stop funding in a start-up will impact the product roadmap. If the finances stop, operations, marketing, administration etc. will stop. When the product performance stop, the userbase will start decreasing.
- Legal challenges - Government rules and regulations, might impact directly or indirectly on the usage of a product.
- Failed to pivot - Customer needs evolved over time and the product failed to adapt to the new demand.
Note: I have assumed that the reasons of customer churn are for both existing product and for start-up or new products.
Please comment other reasons if I have missed out anything.
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