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Insights into Customer Churn

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What factors have significant impact on your customer churn? Find out so you can reduce your churn rate and drive down your CAC>=.

Publicado en: Marketing
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Insights into Customer Churn

  1. 1. SMB Digital Churn
  2. 2. Vendasta’s Data 275k 1250+ 5+ SMBs Markets Years of Data
  3. 3. Genesis of Report Vendasta’s customer data has revealed patterns that may be triggers or causal factors for churn. This is an opportunity to understand churn and what may be causing it.
  4. 4. Compare Three Sales Profiles 1 2 3 Digital Committers Digital PurePlay Digital Extenders
  5. 5. Digital Extender1
  6. 6. Digital Extender Profile1 Traditional Only Sales Force Characteristics ● Cherry pick top existing customers ● Usually bundled with traditional products ● Usually DIFM High Gross Dollar products ● Salesforce sells both digital and traditional Results ● Digital account base shrinks along same profile as traditional customers ● Loss of verticals and categories ● High churn “Doom Loop”
  7. 7. 2 Digital Committer
  8. 8. 2 Digital Committer Profile Digital & Traditional Sales Force Characteristics ● Cherry pick top existing customers early on ● Digital-only sales force (often telemarketing) ● Typically a spectrum of DIY - DIFM - DIWM ● Traditional sales force can sell digital Results ● Rapid growth until saturation of existing traditional customers ● Growth continues as sales force opens up new and/or former verticals and categories Sustainable Growth
  9. 9. 3 Digital Pure Play (DIY)
  10. 10. 3 Digital Pure Play (DIY) Profile Digital Only Sales Force Characteristics ● Outbound marketing ,Telesales , Self-serve ● Very low CAC ● DIY - DIFM - DIWM ● Full service and products upwards creep Results ● Steady Growth with Low Churn ● Increasing services and products Sustainable Growth
  11. 11. What’s Really Important? What is the one thing that is more important than getting new customers? All SaaS companies know this answer.
  12. 12. What’s Really Important? Retaining the ones you already have! Churn is a KILLER!
  13. 13. Potential Churn Variables Which of these variables have an effect on churn? Number of Products SMB Category Vertical vs. Horizontal SMB Service Model Partner Type Pricing Sold as a Offering / Bundle ie. Restaurants, Real Estate, etc. Specialization of the Partner DIY, DIFM, DIWM ie. Newspaper, YP, Radio, TV etc. Of the Offering / Bundle ? ? ? ? ? ?
  14. 14. About The Data ● Churn data from March 2014 - March 2015. ● Partners that were Vendasta customers for the entire year. ● Based on Reputation Management; used as a proxy for entire digital bundle that our partners are selling. Excluded DataIncluded Data ● Atypical data / outliers. ie. Directories which closed ● Customers with 0 churn. ● Customers with more than 90% churn in any one period. ● Customer with less than 10 accounts. ● Accounts that were created and deleted in the same month.
  15. 15. SMB Category Vertical vs. Horizontal SMB Service Model Partner Type Pricing Potential Churn Variables Which of these variables have an effect on churn? ie. Restaurants, Real Estate, etc. Specialization of the Partner DIY, DIFM, DIWM ie. Newspaper, YP, Radio, TV etc. Of the Offering / Bundle ? ? ? ? ? Number of Products Sold as a Offering / Bundle ?
  16. 16. Number of Products & Churn 75% 50% 25% ChurnRate Total Digital Products in Bundle/Offering 9 16 23 0% 100% Average Number of Digital Products = 11
  17. 17. 75% 50% 25% ChurnRate Total Digital Products in Bundle/Offering 9 16 23 0% 100% Average Number of Digital Products = 11 Summary A weak relationship found between the number of products that an agency sells and their churn. Number of Products & Churn
  18. 18. Key Points ● Partners sell, on average, 11 different digital products. ● A weak relationship was found between number of products that agencies sell and churn. ● Number of products sold does NOT equate greater stickiness. ● Thoughtful product pricing, packaging & fulfillment make the difference. Number of Products & Churn
  19. 19. SMB Category Vertical vs. Horizontal SMB Service Model Partner Type Pricing Potential Churn Variables Which of these variables have an effect on churn? ie. Restaurants, Real Estate, etc. Specialization of the Partner DIY, DIFM, DIWM ie. Newspaper, YP, Radio, TV etc. Of the Offering / Bundle ? ? ? ? ? Number of Products Sold as a Offering / Bundle ✕NO
  20. 20. Pricing & Churn 60% 40% 20% ChurnRate Monthly Price $100 $200 $300 0% 80%
  21. 21. 60% 40% 20% ChurnRate Monthly Price $100 $200 $300 0% 80% Every hundred dollars that a package increased, it resulted in 8% higher churn. Pricing & Churn Summary Companies with lower prices (below $100) had avg. annual churn of 28% Companies with higher prices (above $100) had avg. annual churn of 50%
  22. 22. Key Points ● SMBs are more time-taxed & budget-starved than ever. ● They require clear ROI, especially with so many digital options . ● The higher the price point, the higher the demand for discernible return. ○ Especially in a DIFM relationship where they're essentially hiring a company as their outsourced marketing arm. Pricing & Churn
  23. 23. SMB Category Vertical vs. Horizontal SMB Service Model Partner Type Pricing Potential Churn Variables Which of these variables have an effect on churn? ie. Restaurants, Real Estate, etc. Specialization of the Partner DIY, DIFM, DIWM ie. Newspaper, YP, Radio, TV etc. Of the Offering / Bundle ? ? ? ? Number of Products Sold as a Offering / Bundle ✕NO YES ✔
  24. 24. Vertical vs. Horizontal & Churn 45% 40% 35% 30% 25% 15% 10% 5% 0% 20% Vertical Partners Horizontal Partners 31% 42%
  25. 25. Vertical vs. Horizontal & Churn 45% 40% 35% 30% 25% 15% 10% 5% 0% 20% Vertical Partners Horizontal Partners 31% 42% Summary Clearly horizontal media & agencies continuously evaluate. Horizontals often tune their packages to verticals. Verticals are able to provide a higher specialized ROI.
  26. 26. SMB Category Vertical vs. Horizontal SMB Service Model Partner Type Pricing Potential Churn Variables Which of these variables have an effect on churn? ie. Restaurants, Real Estate, etc. Specialization of the Partner DIY, DIFM, DIWM ie. Newspaper, YP, Radio, TV etc. Of the Offering / Bundle ? ? ? Number of Products Sold as a Offering / Bundle ✕NO YES ✔ YES ✔
  27. 27. SMB Category & Churn Annual Churn Rate 0% 20% 40% 60% 80% Mining & Agriculture Transportation Shopping Financial Services Industrial Goods Arts Restaurants Auto Professional Home Services Education Hotels & Travel Beauty Services Food Health Active Other Event Services Real Estate Local Services
  28. 28. Annual Churn Rate 0% 20% 40% 60% 80% Mining & Agriculture Transportation Shopping Financial Services Industrial Goods Arts Restaurants Auto Professional Home Services Education Hotels & Travel Beauty Services Food Health Active Other Event Services Real Estate Local Services SMB Category & Churn Summary Generally speaking, the higher the value of a lead (for the SMB) the lower the churn & greater the retention (ie. Local Services, Real Estate, and Health). Financial and Auto are exceptions. Highly competitive and often churn as large cohorts (ie. Brands/Franchises). Under siege by vertical players.
  29. 29. SMB Category Vertical vs. Horizontal SMB Service Model Partner Type Pricing Potential Churn Variables Which of these variables have an effect on churn? ie. Restaurants, Real Estate, etc. Specialization of the Partner DIY, DIFM, DIWM ie. Newspaper, Radio, TV etc. Of the Offering / Bundle ? ? Number of Products Sold as a Offering / Bundle ✕NO YES ✔ YES ✔ YES ✔
  30. 30. Partner Type & Churn Annual Churn Rate TV Agency IYP SEO / SEM PurePlay Newspaper Vertical Radio 0% 25% 50% 75% 100%
  31. 31. Partner Type & Churn Annual Churn Rate TV Agency IYP SEO / SEM PurePlay Newspaper Vertical Radio 0% 25% 50% 75% 100% Summary Churn Relates To: ● Bundling and trajectory of traditional sales. ● Experience and length of time selling digital. ● Pricing of digital by partner type. ● Types of SMB categories partner types sell to traditionally.
  32. 32. SMB Category Vertical vs. Horizontal SMB Service Model Partner Type Pricing Potential Churn Variables Which of these variables have an effect on churn? ie. Restaurants, Real Estate, etc. Specialization of the Partner DIY, DIFM, DIWM ie. Newspaper, YP, Radio, TV etc. Of the Offering / Bundle ? Number of Products Sold as a Offering / Bundle ✕NO YES ✔ YES ✔ YES ✔ YES ✔
  33. 33. SMB Service Model & Churn 60% Annual Churn Rate 45%30%15%0% DIFM DIWM DIY
  34. 34. SMB Service Model & Churn 60% Annual Churn Rate 45%30%15%0% DIFM DIWM DIY Summary DIY ● DIY still has the lowest churn…by far! ● Self selected / Engaged users. ● Reinforces the need for media & agency to have low-cost DIY solutions. DIFM ● Highest churn and by definition highest priced. ● SMB demand an “ROI” DIWM ● DIWM "middle ground" as a safe & sought-after spot. ● SMBs outsource “work” but still engaged.
  35. 35. SMB Category Vertical vs. Horizontal SMB Service Model Partner Type Pricing Potential Churn Variables Which of these variables have an effect on churn? ie. Restaurants, Real Estate, etc. Specialization of the Partner DIY, DIFM, DIWM ie. Newspaper, YP, Radio, TV etc. Of the Offering / Bundle Number of Products Sold as a Offering / Bundle ✕NO YES ✔ YES ✔ YES ✔ YES ✔ YES ✔
  36. 36. Okay, So What? What is really important? What model do you need? What is the prescription?
  37. 37. Given the SMB Realities 1-4 5-9 Yearly Spend $2,506.00 10-99Employees EmployeesEmployees (Core/VSBs) Yearly Spend $20,694.00 Yearly Spend $53,440.00 Total % of SMBs 63.3% Total % of SMBs 17.5% Total % of SMBs 19.2% Preferred Model DIWM / DIFM Preferred Model DIWM / DIFM Preferred Model DIY In-Premise Sales Rep Value Indifferent In-Premise Sales Rep Value Minimal In-Premise Sales Rep Value High SMBs 10 to 99 employees - Advertising & Marketing Trends SMBs with 2 to 9 employees - Advertising & Marketing Trends LCM Wave 18 Advertising Trends of Core SMBs
  38. 38. Given the Market Realities DIY Low Cost Digital Solutions DIFM / DIWM High Spend That the traditional business model is under attack!
  39. 39. Given Traditional Media Co Realities ● In-Premise sales force ● High cost of customer acquisition ● Shrinking verticals / customer base ● Few (if any) DIY / DIWM products ● Multiple products & reporting options ● Scaling issues
  40. 40. To Succeed You Need A platform solution that allows you to sell to SMBs in the method, pricing, and model that they want to be sold in. Must Include: ● Marketing automation to lower cost of customer acquisition ● Sales force management and measurement ● Scalable solution to provide DIY/DIWM/DIFM ● Low cost DIY/Freemium Solutions with a clear path to upgrade ● Digital sales force / Tele sales ● Single Solution for partner and SMB ● Extensive Customer Reporting and deep integration of products ● Easy and cost effective onboarding and support ● White label branding ● Integration with back end systems
  41. 41. Competitive Landscape
  42. 42. Mobile: 306-717-3808 Twitter: @BrendanKing bking@vendasta.com Brendan King Co-Founder and CEO Vendasta Technologies Inc.

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