Before investing $$$ in acquiring users, save money by investing in reducing their churn rate
If your product is leaking hundreds of users, it's smart to know WHY before spending more on acquisition. Here's how investing in a Customer Engagement Platform pays for itself.
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.
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: $7,000 worth of users
Month 3: $4,900 worth of users
…
Month 12: only $198 worth of your initial users acquired in Month 1.
2️⃣ If you reduce your churn rate by 5% — from 30% to 25% — here are the savings you get at the end of each month:
By reducing your churn from 30% to 25%, your product retains +$500 more worth of users in Month 1, +$725 in Month 2…
After 12 months, you've kept +$5,861 in user value from the initial $10,000 invested in Month 1.
→ If you spend $5,861 on a Customer Engagement Platform and it gets you from 30% to 25% churn, the platform pays for itself.
3️⃣ Now, if you invest $10,000 every month in acquisition ($120,000 a year), reducing your churn rate from 30% to 25% means saving 12 × $5,861 = $70,332 worth of customer value over their first 12 months.
4️⃣ In this scenario, if you invest $50,000 in a Customer Engagement Platform and reduce your churn from 30% to 25%, your ROI is +141% in retained user value.
5️⃣ Finally, let's look at how much you'd save by reducing churn at different baselines:
The charts show the remaining value of users acquired in Month 1 across each following month at different churn rates — and below, the savings obtained on user value if you reduce each cohort's churn by 5%.
The lower your churn rate, the more every 1% reduction matters — the effect compounds month after month.
For instance, if your churn rate is 10% and you invest $10,000 in Month 1, reducing it to 5% gives you +$20,171 more in user value over the next year.
Put differently: in that case, it's better to stop spending on acquisition for two months and invest in churn reduction — you'll have more users throughout the whole year than if you'd kept spending the $10,000 monthly.
In short: it's smarter to invest in reducing churn than in bringing in new users who'll churn anyway.
Get in touch with us — we'll help you understand which tool fits best for your product.