If your product is leaking hundreds of users, it's smart to first know WHY this is happening and to INVEST in preventing them from CHURNING before bringing in more users that will follow the same path.Bildung Data
If you don't believe us, here is a short explanation on how you can actually save money by investing in a Customer Engagement Platform.
1️⃣ Let's say you invest $10.000 per month in acquiring new users and you have a 30% churn rate (this means each month you lose 30% of the remaining users from the month before ).
Month 1: $10.000 worth of users
Month 2: $7000 worth of users
Month 3: $4900 worth of users
Month 12: only $198 worth of your initial users acquired in month 1!!!
2️⃣ If you reduce your churn rates by 5% from 30% to 25%, you get the following savings at end of each month:
This means that by reducing your churn rate from 30% to 25%, your product has an increase of $500 more worth of users in Month 1, +$725 in Month 2...
After 12 months, you've had +$5861 in savings on users using your product during that year, from the initial $10.000 you've invested during the first month!!!!
--> This means that if you spend $5861 in a Customer Engagement platform and with it you manage to reduce your churn rate from 30% to 25%, the platform would pay itself!!!
3️⃣ Now, if you are investing $10.000 every month in acquiring users ($120.000 a year) this means that by reducing your churn rate from 30% to 25% you'll be saving 12 x $5861 = $70.332 worth of customer using your platform throughout their first 12 months!!
4️⃣ In this scenario, if you invest $50.000 in a Customer Engagement Platform and manage to reduce your churn rate from 30% to 25% then your ROI is of +141% in savings of user's acquired worth!
5️⃣ Finally, let's look at how much you would save by reducing your churn rates at different values:
These charts show the remaining value of the users you've acquired at Month 1 at each following month and at different churn values. And below the savings obtained in user's worth if you manage to reduce each cohort of churn rate by 5%:
As your churn rate is lower, each 1% you manage to reduce will bring higher savings since it has a compounded effect month after month!!
For instance, if your churn rate is 10% and you invest $10.000 in Month 1, and manage to reduce the rate to 5%, you'll have +$20.171 more worth of users throughout the next year!!
Meaning that in this case that it would be better to sttop investing in acquiring users for 2 months and by reducing the churn rate have more users throughout the whole year than if you'd invested $10.000 on the following 2 months.