Category Archives: Churn

Detractor

The Anatomy of a Detractor

Have you ever had one of those experiences as a customer where you walk away swearing to never return? Where nothing about how you were treated or what you were provided seemed anywhere near acceptable?

I think everyone can relate to an experience like that. In fact, some of you have probably had many experiences like that unfortunately.

Can you remember that feeling? Can you remember the lengths you were willing to go to make sure that your negative experience was heard by anyone with ears?

That’s what it feels like to be a detractor.

To be fair, what I described above is likely a strong detractor (0-1 on an NPS scale), but just keep that feeling in your mind when your customers identify themselves as detractors to your business.

If word of mouth recommendations and referrals are the lifeblood of any business, negative reviews and negative word-of-mouth are the cancer. And, unfortunately they spread fast and with far more impact.

If WOM and referrals are the lifeblood of any business, negative reviews are the cancer. Click To Tweet

According to a survey of over 3,200 random consumers, 75% of them had indicated that they be likely to share a negative experience with their friends and colleagues, while only 42% of them said they’d recommend a product or service that they enjoyed.

What it comes down to is that negative experiences can drastically outweigh the impact that positive experiences can have. That means that for every detractor you have, you need several promoters to advocate for the brand.

This is one of the primary reasons why any positive NPS score (anything over 0) is considered a “Good” score by NPS standards. Based on the calculation, it simply means that you have more promoters than you have detractors. The more that gap widens, the more positive bottom line impact and growth you’re going to see.

Any NPS score of 0 or above is considered good by NPS standards.

Any NPS score of 0 or above is considered good by NPS standards.

We spend quite a bit of time talking about the best ways to leverage your promoters for growth and how to reduce or eliminate your churn by identifying and managing your detractors proactively, but what do those two groups of people really look like?

A few weeks ago we dove deeper into the Anatomy of a Promoter to give you a first hand look at their habits and the potential impact they can have on your business (more than you might think).

This week we’re going to dive deeper into detractors — what they do and their potential impact on your bottom line and overall reputation.

In order to properly manage your detractors, it’s helpful to know what one looks like in real life.

About two years ago my wife and I got a letter in the mail from our (then) cable company, Charter Communications. The letter stated that our contract was soon coming up for renewal and that our new rate would be increasing by 70%.

Having been a customer with them for the previous eight years, we knew that the rate increase was just code for it was time to call and pretend to cancel until they lowered our rate back to normal. Always a pain in the rear, but seemed to be the norm of being a cable customer.

The next day I made a call and asked to speak with the customer retention department (side note: if this is an actual department in your company, you might have a churn issue). Having not received the answer I was looking for from the first person I spoke with, I asked to speak with a supervisor (again, just a part of the normal process).

To my surprise, the supervisor was unable to help. I was told that if we wanted to continue our cable service with Charter, we would in fact need to pay 70% more — for the same package we’ve had for the previous two years.

I threatened to leave, giving them one last attempt to “retain” our business, saying if we leave we won’t be back. I got nothing.

Long story short, we ended up cutting cable all together and switched to Netflix and Hulu exclusively. It stung at first, but I get why companies need to increase rates and quite frankly, it was a blessing in disguise.

But this is where things got ugly.

About two weeks after cancelling our service, we started to receive phone calls from Charter on a weekly basis, offering us deals to come back. Saying they’ll waive the installation fee, discount our rates, etc.

I mean, look, I appreciated the offers, but where was this flexibility before we went through all of this hassle?

At the beginning I was polite in declining their offers and would explain each time that we weren’t coming back. But the calls kept coming and the Charter people kept not listening. And, eventually I cracked. I not only vowed to never give them a dime of my money again, but I also shared my experience as a post on LinkedIn. That post was then syndicated to Inc.com. Combined, it was shared nearly 1,000 times and continues to live online and accessed via search for the rest of eternity.

Bad Customer Service Article

My bad experience with Charter was eventually featured on LinkedIn

I was and continue to be a detractor of Charter.

Now, had Charter originally not increased my rate and/or stopped calling me afterwards, would I have recommended them or written a positive post? Most likely not. But, I also would not have shared a negative experience with 1000’s of people either.

This is the toxicity of a detractor and the reason why it’s important to focus on your them first when you’re responding to feedback.

When working with your detractors, there are a few things you should know:

They are likely to churn (leave you) very soon. This may seem pretty obvious, but remember that a detractor is anyone that scores you up to 6 on the NPS scale. While the 0’s, 1’s and even 2’s may seem like obvious unhappy customers with one foot out the door, the less obvious are the ones that score you a 5 and a 6.

NPS Scale

Detractors are anyone that scores you a 6 or below.

What you need to know is that statistically speaking, up to 40 – 50% of your detractors are going to leave you within the next 90 days (or sooner). If your goal is to reduce churn, it’s absolutely critical that you respond to them as quickly as possible (meaning immediately) and address their concerns.

Detractors speak louder than promoters. As I had pointed out above, detractors are nearly twice as likely to share a negative experience with others than a promoter is to share a positive experience.

DanaQuote

Unfortunately the news gets worse. Psychology Today had written an article that compiled the results of a few different studies in regards to how humans receive bad information versus good. The studies had shown that we care more about the threat of bad things than we do about the prospect of good things.

Simply put, one bad experience shared by a detractor is capable of far outweighing one good experience shared by a promoter.

Over passives, detractors are more likely to be your next promoters. That may sound strange to hear, but generally speaking, your strongest detractors are not all that dissimilar from your strongest promoters. They are both vocal and passionate consumers of your product. The only difference being that, for detractors, there is something missing from their experience.

Remember that detractors want what you have to offer and they desperately want it to match their needs. Your job is to hopefully meet those needs. Once you do, they are most likely to be your next biggest advocate.

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While nobody wants detractors within their business, every company has them (even those considered World Class by NPS standards, such as Apple). The key to managing your detractors is to quickly listen and respond to their needs. If they are unreasonable or cannot be met, something as simple has having meaningful dialog can go a long way in preventing a PR disaster or a nasty online review at the very least.

Give Promoter.io a try to discover who your detractors are, why they feel they way they do and what you can do to decrease their likelihood of leaving.

 

Dana Severson

Dana Severson is the Director of Marketing at Promoter.io and cofounder of Startups Anonymous. Former founder & CEO of Chasm.io/Wahooly and AngelPad Alum. In addition to focusing on growth at Promoter, Dana is a weekly columnist for Inc.com

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How to Turn Churn Into a Competitive Advantage

You would not believe how upset my wife was when the shopkeeper at a local flea market insinuated that there was nothing she could buy at her shop. My wife was fuming at the mouth like a dog with rabies. She was ready to whip out her Yelp and start raving like a mad lunatic.

And then she did something surprising that changed everything.

So many businesses I know focus all their attention on the top of the funnel. They will create content marketing, do lead gen activities, and spend gobs of money advertising to people who have never heard of their brand before.

However one of the most overlooked areas of growing a business is on the back side. When a customer is about to leave. And especially when a customer is about to leave on bad terms.

Which brings us back to the situation with my wife. Just as she was about to march off, the owner of the little tent came up and saw how upset she was. The owner was an older man with white hair and a round belly.

“I’m sorry,” he said. “Are you ok?”

My wife explained the whole situation and the man listened intently. Once she finished, he sincerely apologized. He had recently hired this shopkeeper and explained that he didn’t think things were going to work out if she couldn’t treat his customers with more respect.

That was enough to make my wife feel much better, but what he did next was unnecessary. Above and beyond the call of duty, he gave her a free trinket from his store. We tried to pay for it, but he wouldn’t accept our money.

My wife did end up going on Yelp and leaving a review, but it was a positive one. And the next week, when the flea market opened again, she was back with a friend of hers and they both bought a few small items from his shop.

Lost Opportunities

This got me thinking about the lost opportunities that online business owners have when we are churning customers. Sometimes we spend so much time thinking about the top of the funnel that we forget about the opportunities to reduce churn. After all, if you didn’t know it already, customer churn is killing your business. There are a lot of resources to teach you about churn if you are not familiar with why it is so important yet.

But what if, like the happy old shop owner, we could turn a churn situation into a competitive advantage?

Turn Your Thinking Upside Down

In order to implement a system that pro-actively reverses churn, we need to think a little bit differently from normal.

In normal content marketing rules, you create a free gift that has real value (an ebook, a video course, an email course, a checklist, etc) and offer it as an incentive for signing up for your service.

But remember what the shop owner did. He gave my wife a free gift at her most vulnerable moment, when she was most upset.

So if you turn content marketing rules on their head, can you think of something of real value you can offer to customers who are so angry they are about to leave your service forever?

FACT: Discount coupons are a horrible way to try to turn unhappy customers into happy ones.

Why? Because what value do they have if the customer actually does churn? None. So it’s really a fake gift.

What gift would have value even if your customer never saw you again? Maybe a special exclusive report (one that you do NOT give as a signup incentive) or even a small favor.

For example, if you were running an app to help grow social network followers and a customer came to you wanting to cancel their service, what if you were to offer to help them get 100 more followers for free AFTER they cancelled? They might still leave, but they will probably leave a lot happier and think a lot better of your service.

Don’t make it an incentive that they need to stay subscribed to your service in order to get. That’s the same as giving a discount coupon and defeats the point.

IMPORTANT: You are giving this free gift not to convince them not to churn, but rather to turn churned customers into promoters instead of detractors whenever possible.

How to Put This Into Practice

What if there was a way to predict that a customer was about to churn and offer them this freebie before they come to you fuming and wanting to cancel? What if they were only slightly annoyed and you were to over-deliver on their expectations? It turns out there is a way to know!

Net Promoter Score is the most effective way to predict churn that I know of. Your detractors are the ones most likely to turn into cancelled accounts. So instead of just following up with your detractors, you can send them a free gift. Take the spirit of the shop owner and turn potential failures into great success.

Churn doesn’t have to be a bad thing if you have a strategy for it. Hopefully this article has helped you think outside of the box for ways to start building a churn strategy using NPS. If you want to incorporate the Promoter.io automated NPS management system into your churn management strategy, you can sign up now for free.

Chad Keck

As a product lead and executive for numerous successful ventures (Rackspace, HP Cloud, AppFog), Chad founded Promoter.io to help bring the actionable insights provided by Net Promoter to all businesses. He is a native Texan with a passion for helping other entrepreneurs.

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7 Ways Cognitive Science Can Reduce Churn

What do the magicians Penn and Teller have to do with growing your business?

If you have ever seen them perform a trick, you are being fooled not by their amazing abilities, but by your own brain’s cognitive biases.

In an interview with Teller (did you know that’s his full legal name?), he explained his obsession with illusions and tricking the mind. If you ever got to visit Teller’s house, he would show you a hallway that literally doesn’t exist (you would walk into a mirror) and a toy monkey that could tell you what card you were thinking of.

This article lists the 7 cognitive biases that magicians use every day to create illusions that trick our brain.

The same cognitive biases can be applied to your SaaS business in order to reduce churn and increase revenues without the customer even being fully aware of what is going on. And if you implement these simple strategies, you will have a strong edge against your competition.

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Chad Keck

As a product lead and executive for numerous successful ventures (Rackspace, HP Cloud, AppFog), Chad founded Promoter.io to help bring the actionable insights provided by Net Promoter to all businesses. He is a native Texan with a passion for helping other entrepreneurs.

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The Ultimate Resource Guide to Reducing Churn Rates

We have written about how churn kills SaaS businesses (and how to minimize churn), but we can’t stress how important this is. That’s why we have decided to create a top 11 list for some of the absolute best resources out there for learning more about this serious problem.

Getting Started: Understanding Churn

SaaS Churn Rate: What’s Acceptable? by Lincoln Murphy at Sixteen Ventures

Lincoln has written prolifically on the topic of churn, and this is a canonical piece from him that not only explains churn and its importance, but gives you loads of reference material for learning more about churn.

A Better Way to Calculate Your Churn Rate by Devin Brady from Recurly

Did you know Netflix was sued over how it reported their churn rate? Make sure you are doing it right and read this article now.

How 43 Public SaaS Companies Calculate Churn by Pacific Crest Investment Bankers

If you are curious how big companies report their churn rates, Pacific Crest has created an exhaustive study that’s really easy to read.

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Chad Keck

As a product lead and executive for numerous successful ventures (Rackspace, HP Cloud, AppFog), Chad founded Promoter.io to help bring the actionable insights provided by Net Promoter to all businesses. He is a native Texan with a passion for helping other entrepreneurs.

Website