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Measurable results drive customer retention. The more measured results achieved, the longer customers stay. That’s why bad customer “fit” is such a massive driver of customer churn. If they can't get good results they will leave. The ultimate objective is to bond with a customer so deeply that you keep them forever. This requires that customer results visibly contribute to the success of their business. There’s no getting around the reality that businesses exist to make money. The ultimate retention strategy is to make or save customers so much money that they can’t imagine operating without you. That’s true CUSTOMER BONDING. Our research consistently shows that customers with an explicitly financial use case stay much longer than those with non-financial objectives. The biggest mistake is to assume all use cases are equal. They are not! Some use cases produce better results and contribute more directly and visibly to business success. Invariably these are the use cases that have the highest retention and expansion. Just because your product can be used for some purpose does not mean that thing will be valuable enough to stay long-term. Since customer retention will always matter more than customer acquisition, these differences are extremely significant and should not be ignored. And it follows that if the use cases and customers are not equal, then there will inevitably be an absolute best one at the top of the list. This is your REAL Ideal Customer Profile (ICP). Here are 3 ways to leverage this insight to reduce churn and improve retention: 1) Identify your real ideal customer by figuring out which customers achieve the best business results. Profile these customers and their use case and push this up to marketing and sales so that you can aggressively target and get more of them. Retention will go up immediately when you acquire relatively more of these ideal customers. 2) Segment your customers by their use case and business results, rather than by size, value, or industry. This will immediately reveal the significant differences in retention by use case. More importantly, it will enable you to support each segment differently with the specific expertise they need to help them achieve and measure their business results. 3) Clearly define the real ways your products and services drive your customer’s business performance. If you sell to companies, then your offering ultimately has to drive business success in some meaningful way. Show each of your customers exactly how you will make their business successful, and the best way to measure these results. Use this to motivate their key behavior changes, then measure and show them the results. I call this the Customer Results Strategy, and it's the most impactful practice I've ever found for radically improving customer retention.

The problem isn’t the idea: expansion is absolutely CRITICAL to success → • Customers won’t stay long-term unless their results are expanding. • Your business won’t grow long-term unless customers are expanding. • The success of everything relies on continually expanding the value you deliver. And the problem isn’t the "expanding" part either, because most customers that exit were never really in a position to expand. •• The real problem with land and expand is the FAILURE TO LAND! •• Think about it this way… • The essence of expansion is getting MORE. • It’s silly to think customers want to expand their “account” or “MRR”. • They want - and will pay for - more RESULTS. • But you can’t get "more" of nothing! That’s why it’s absurd to think that you’ve landed a brand new customer. A CUSTOMER WHO HAS JUST SIGNED UP HAS NOT LANDED! They've landed when they have achieved some results. Only then are they able to want more. So the key to building an effective Land and Expand machine is starting with customer results: 1 • Make sure you know the customer's key results BEFORE you do anything else. 2 • Teach the customer exactly what they have to do to achieve those results. 3 • Measure and materialize the customer's results to keep them on track. Once you’ve done this, you’ve actually “landed” the customer. Now they will be eager to learn what they can do to get more results!

If customer satisfaction has nothing to do with retention, then why do companies with high satisfaction tend to have high retention? Past research consistently shows that companies with high overall NPS scores tend to have higher customer retention. Does this contradict our finding that satisfaction does not drive retention? No, and here's why... ⦿ It’s not a question of correlation but of causality. ⦿ CUSTOMER SATISFACTION IS REAL Customer experience/satisfaction is a real thing, and we know this because it can be reliably measured, and also because there are reliable methods and processes for improving it. But it's not easy to do, which is why only very well-managed companies are able to produce consistently high overall NPS at scale. CUSTOMER RESULTS DRIVE RETENTION The data consistently shows that while customer satisfaction scores do not correlate with how long customers stay, by far the best predictor of customer lifespan is achieving measurable customer results. https://www.churnrx.com/post/new-research-proves-customer-happiness-doesn-t-pay Just like customer experience, customer results are a real thing that we can reliably measure and produce. And, just like customer experience, only well-managed companies are able to consistently produce good customer results at scale because it’s not easy to do. SOLVING THE SATISFACTION PARADOX The real reason companies with high NPS also tend to have high retention is that they are both the result of highly effective management and processes. So that's the answer... ► Well-managed companies produce BOTH high satisfaction AND good results. That's why we tend to see them together, even though customer satisfaction does not cause high retention.

The fundamental idea behind a customer success “touch cadence” is based on the myth that merely talking to customers improves retention. That’s wrong! In fact, doing so can actually damage the relationship by teaching the customer that interacting with you is pointless. That’s why I call this practice “INAPPROPRIATE TOUCHING”. But wait, shouldn’t we engage with our customers?? Of course! Customer engagement is critical! But the reason to engage isn’t simply to “build the relationship” but because every interaction is an opportunity to create CUSTOMER BONDING. •• Customer Bonding is when your customer sees you and your company as a key component of their success! •• https://www.churnrx.com/post/customer-bonding-is-the-driving-force-in-strategy-arnaldo-hax That means the focus of every interaction is bringing the customer closer to results and then improving their results. The key to customer engagement is to: ADD REAL VALUE TO THE CUSTOMER EVERY TIME YOU ENGAGE. Some Quick Ideas for Adding Value to Customers: • Teach them actions they can take right now to get better results. • Show them their latest measured results and explain why they are what they are. • Share examples of what other customers have done to get good results. • Provide tips and resources to help your champion convince others to support their efforts. • … and there are many more ways to add value... Here’s the key… Before you “touch” a customer, always ask: "What value can I add right now to this customer?" If you can’t think of something of real value to the customer, DIG HARDER! You and your organization have a lot of valuable expertise to offer. NEVER merely “touch” a customer and risk sending the message that you are ok wasting their time.

There’s nothing like the feeling you get when you’ve brought a customer back from the brink of cancellation. You’re a hero and your value to the company is proven. → Well, not so fast... I always had an uneasy feeling after a customer “rescue” when everyone was high-fiving each other and declaring victory. Somehow it just didn’t feel like the story was over. Well, that feeling turns out to be justified. We have dipped into our vast store of customer data to ask an uncomfortable question: ● Do rescued customers really stay “rescued"? ● The results confirm my fears. Our data show that most rescued customers won’t stay on track for long. If you look at the very next renewal, the rescued customers already have HALF the retention rate compared to non-rescued customers. And this trend continues moving forward where ultimately the majority of rescued customers will churn. The results actually make sense and confirm my intuition. Which made me wonder why we didn’t know about this already. It seems like this phenomenon should be more obvious. But I realized that I hadn’t previously ever tracked rescued customers separately. It’s as simple as tagging the account record when a customer is “rescued” and then doing some simple reporting periodically. Apparently, this is a rare practice? ► Do you track your rescued customers specifically? ► Have you seen this pattern? ► Are some "rescue" methods more effective than others? Please share what you do and what you’ve seen below.

This statement from the legendary MIT business professor Arnoldo Hax totally changed how I think about everything I do in business. He taught me that the purpose of all activities of the company is to create bonding with the customer. "You don't win by beating the competition. You win by achieving customer bonding" What is “customer bonding”? Hax says customer bonding is when you have become integral to the customer’s success. In other words, you know you've achieved customer bonding when the customer can no longer visualize their success without you in the picture. How does Hax suggest companies accomplish this? His approach is simple yet transformative → ► Customer bonding is the result of taking responsibility for the customer's success.

In this final post on customer churn rates, I reveal the simple yet powerful way to measure and understand customer churn... THE BACK STORY Years ago I was struggling with the problems of customer churn rates when I realized scientists had addressed this in an eerily similar situation. I remembered from school chemistry that the decay of a radioactive isotope has a downward swooping curve just like my cohort churn curves. I also recalled that the metric scientists developed to compare isotopes was "half-life": the amount of time it takes to lose half the isotope. I was frustrated enough at that point to try anything, so I decided to see if this method could work for customer churn. It is not an exaggeration to say that the result of this little experiment has literally transformed everything I've done with customer churn ever since. Customer half-life is the ultimate customer churn and retention metric. Here's why... SIMPLE Customer half-life is simply the amount of time it takes to lose half (50%) of the customers in a cohort. This makes it vastly easier to explain than churn rates to others, a rare dose of clarity in a world of confusion. UNDISTORTED Customer half-life is an accurate measure of churn undistorted by whatever is happening in sales. That's why I refer to the customer half-life as "Real Churn". NONLINEAR Like radioactive decay, customers don't churn at a steady rate. Customer half-life is a clear way to measure the nonlinear reality of customer churn. COMPARABLE Customer half-life is comparable between cohorts not only because it removes distortions, but also because it works with cohorts that are not the same size. This may be the most important benefit of half-life because it's impossible to systematically improve churn if we can't measure the impact of our interventions. The legendary Peter Drucker is famous for this simple insight: “If you can’t measure it you can’t improve it.” BENCHMARK-ABLE For the same reason that you can use half-life to compare cohorts within a company, you can also compare customer half-life between companies. Customer half-life finally allows us a way to accurately measure the retention impact of virtually any factor across different companies and industries. HOW TO CALCULATE YOUR CUSTOMER HALF-LIFE Customer half-life is a simple output of conducting customer cohort analysis. ☞ My instructions and downloadable template for cohort analysis are available here: https://www.churnrx.com/churn-guide THE RETENTION ANALYTICS REVOLUTION These new methods based on nonlinear cohort decay analysis have set the stage for a new generation of "Retention Analytics", empowering companies with the metrics and insights to finally get control over their customer retention.

In this series, I've shown why customer churn rates are useless for improving retention. But there is a more serious problem: using churn rates can actually MAKE CHURN WORSE by hiding the truth. Let me explain... CHURN RATES ARE NOT LINEAR The churn rate implies that churn is linear. But in the real world, customers don't line up to leave in a nice, orderly fashion. For example: a churn rate of 10% per year implies that you are steadily losing about 10% of your customers in each period. But I can assure you that's NOT what's happening. In reality, most customers who churn tend to leave around the same stage of their lifespan. Knowing when customers leave is a HUGE KEY to solving churn because... → THERE ARE DIFFERENT KINDS OF CHURN ← And you can't solve churn unless you know what kind of churn you have. But the real churn pattern is entirely hidden by the churn rate. CHURN RATES CAN MAKE CHURN WORSE Because they conceal the real causes, operating to churn rates can actually make churn worse by... • wasting resources on ineffective efforts • failing to address the true causes • misunderstanding why customers stay • marketing to the wrong "ideal customers" • building the wrong product features WHAT KIND OF CHURN DO YOU HAVE? It's vital to figure out precisely what kind of churn you have so you can focus your efforts on the real causes. The solution is to analyze churn using individual customer cohorts. Cohort analysis simply takes groups of customers that started at the same time and measures the share that remains in each period over time. HOW TO FIND YOUR CHURN TYPE I've made a guide to finding your churn type using cohort analysis with simple instructions and a template you can download here: https://www.churnrx.com/churn-guide/#comp-l6nq4vf2 In my guide, I also explain the three different types of churn and how they reveal the ESSENTIAL INSIGHTS you need most: • what kind of churn do you have • what is causing it NEXT... In my next post, I'll reveal the powerful churn metric you can use as an alternative to churn rate that tells the truth about your churn. The Powerful Alternative to Churn Rate (4/4)

I said in my last post that customer churn rate is not a reliable measure of churn. In this post, I'll briefly explain why… THE DENOMINATOR PROBLEM It’s logical to measure churn as a rate so that it can be used over time and as the company grows. In simple terms, customer churn rate is an equation in which lost customers (churn) is the numerator and total customers is the denominator. The problem is that this makes the metric highly sensitive to changes in sales. Here’s why... CHURN IS DELAYED The churn delay refers to the fact that some amount of time passes between when customers join and when they leave. Although this delay varies, the result is that the denominator changes in response to sales BEFORE the numerator changes in response to churn. The average churn delay for most companies is several months but it can be much longer. For example, when there is a significant increase in sales the denominator (total customers) goes up immediately. However, because churn is delayed, the numerator will mostly not be impacted by that new cohort of customers for some period. In the meantime, the denominator has grown making the resulting rate lower. But this is a temporary illusion caused by the churn delay. Even if the absolute share of customers who churn stays the same, the calculated rate will be distorted downward temporarily to look better than it really is. This also works in the other direction. When sales go down, the denominator reflects the change immediately which distorts the rate upward to make it look worse than it really is. This is the reason so many companies appear to experience an unexpected spike in churn. THE GENERAL RULE IS: • As long as sales are increasing, the churn rate will continually be distorted downward. • When sales are decreasing, the churn rate will be distorted upward. This is why you can’t use the churn rate to manage your churn effectively. WHICH DIRECTION? It also means that your churn rate isn't comparable over time, and can’t be used to determine whether real churn is getting better or worse. And if you can't compare a company's churn rate over time, then it obviously isn't valid to compare churn rates between companies. That's why so-called churn rate "benchmarks" are bunk. Any attempt to act on these distorted metrics will be literally misguided. The common pattern is for companies to underinvest in customer success during the rapid growth phase when the churn rate appears low, and then to panic when churn appears to suddenly spike upwards due to slowing sales. Sound familiar? NEXT UP: In my next posts, I'll explain more problems with churn rates and ultimately show how you can calculate churn metrics that drive results. Churn Rates Lie (3/4)

In this short series, I'll explain why focusing on the customer churn rate makes it harder to solve churn, and show you a better way to operate.→ Business leaders often come to me with questions like this... “Our customer churn rate is X%. Is that bad? What should we do about it?” They're always surprised when I tell them I can’t answer these questions because: the churn rate is meaningless. Here's why... DISTORTED First, I can't determine from the churn rate if your churn is high or low because, the way it's calculated, the churn rate is virtually always distorted either up or down. As a result, the churn rate can’t be used to reliably answer the most basic questions like: • How much real customer churn do you have? • Is your churn getting better or worse? It's essential to understand what the churn rate really measures and why it's distorted. MEANINGLESS More importantly, there's no way to gain any practical insights from the churn rate. It reveals nothing that we really need to know, such as: • What kind of churn do you have? • What is causing your churn? Many people wrongly believe that the churn rate is caused by customer dissatisfaction. But my research reveals that satisfaction has nothing to do with the churn rate. Put simply, the churn rate isn't actionable. It's not a useful guide for decision-making. USELESS What all of this means is that the customer churn rate is the worst kind of business metric: it's a poor measuring stick that also offers zero actionable insights. That’s why the churn rate can't help you improve customer retention. Unfortunately, it's often just the opposite: trying to improve your churn rate can make your customer churn worse! Have you felt frustrated in your attempts to operate to the customer churn rate, and confused when it behaves in ways that don't seem to make sense? I'm going to explain why. Next up in this series: I'll show why churn rates don't actually measure churn and how they get distorted. Continue with the next article in this series: Churn Rates Are Distorted (2/4)

No matter what you believe about your business... • what you think you do and how well you think you do it, • who you think your ideal customers are, or • what value you think you provide... Customer churn is always there as a loud signal that what you believe is often DEAD WRONG. Because churn is the ultimate pain signal in any business. Like your hand on a hot stove, it's there to alert you to grave danger. (Is there another kind?) So if churn is the signal, then what is the danger? The real danger is that our ideas about what we do and who we do it for never really get challenged. The failure to correctly understand what and who we are for is the true existential threat. And customer churn is here pointing us to the truth, if we will listen. Can you handle the truth?

Churn is the most important factor in the ultimate success of any subscription business. Investors and acquirers use churn to judge what a business is worth. CEOs know churn is the key to profitability. But, above all, churn matters because the business can't grow when too many customers leave. It's that simple. You can spend time breaking down how it costs more to acquire a new customer than to keep and expand an existing customer. And that's true. But it really misses the point. Nobody wants to have anything to do with a business that isn't growing. Period. And churn stops companies from being able to grow.