Posted: 15th Aug 2012
Ouch! The summer has been hard on us. Our conversion rate dropped, visitations dropped and churn increased. What was the outcome? Hard work.
Since my last post it's not all been going so well. You'd think that I would have been chilling out on a beach somewhere with my iPad in one hand and a beer in the other watching the business growing automatically. Not quite.
We experienced the 'summer slowdown' which seems to happen quite a lot apparently in business, most commonly traditional retail businesses and house prices.
Our conversion rate had dropped a little (not as much as it was previously though fortunately) and the amount of visitors coming to the site had dropped. The thing that was really hurting us though was the churn (the amount of people cancelling their subscriptions).
Our recurring revenue graph saw its first dip for a while. It's the first time since last summer in fact.
Although we've experienced some flatlining this year, when the revenue just doesn't grow, it's not really dipped as bad as this. The dips can happen when your rate of growth drops and your churn goes up, meaning you end up getting more leaving than you do coming in.
It's resulted in this month likely being the first to not grow in revenue compared to the last month, which would be a shame, but there's still some hope if you read on.
Anyone Else in the Same Boat?
I did try searching for answers and asking around in the community to see if anyone else experiences the same problem, however I couldn't seem to get much empathy from other SaaS founders as they seemed to report that their businesses were doing quite well, a friend from Wistia being one of them.
I also couldn't find much on the web about other SaaS businesses struggling except for some lone question on Quora. There seemed to be a bit of content about the traditional market as mentioned above, but not very much in the SaaS world.
The only thing that I could lean on was my own data which actually showed a similar trend happening last year. However last year I was hardly doing any marketing at all and didn't have as many channels for customer relationship management, analytics, free trial conversion optimisation etc.
The graph last year showed things didn't pick up again until mid September, however I wasn't going to wait that long.
Rather than searching for answers, analyzing old data and sulking in a corner in the office I decided to get to the bottom of this issue and sort it out.
What are the Causes of the Summer Slowdown?
There's a number of factors we can look at, some of them controllable and some of them not so much. Let's break a few of them down.
Understandably visitations are going to go down in the summer because people book vacations and businesses tend to slow down a little due to the lack of staff. Plans to release new features or undertake massive marketing campaigns get postponed until later in the year. There's not much we can do about this, so we take it on the chin.
- Conversion Rate
Maybe people are less keen to purchase for the reasons listed above, e.g. they might want to wait until after the summer before signing up to a new service. However having even a slight drop in the conversion rate can be costly, so measures need to be put in place to compensate for the lower conversion rate, e.g. a higher overall conversion rate which can drop to a minimum acceptable rate during the summer.
The dreaded churn. Although this is the biggest of the causes and probably the hardest to tackle, it's also probably the most controllable with lots that can be done to reduce it.
What Causes Churn?
I often ask a customer when they cancel why they cancelled. Most don't respond but those that do have similar responses like:
- "We are no longer using it."
- "We loved the application, we just couldn't get the rest of the team to utilize it."
- "We decided to stick to our old workflow, whiteboards and stickies (etc)."
Rarely do people cancel because you hadn't brought out a certain feature, or because they're going on holiday, or because it's just too darn hot outside.
Customers were cancelling because they never really relied on the service.
Why this was happening over the summer more than in other months? I'm not sure, possibly because they've had time to look back over the year and review their spendings in line for the next quarter. Regardless, something needed to be done about the problem listed above.
What is the Solution?
To be honest, I'm not 100% sure yet, but I'm working towards some solutions.
I'm not doing anything to combat the visitation drop but I'm doing something else quite clever instead. For every 100 users that visit the site, about 90% of them will probably never come back. Not because they didn't like what we're offering but because they've just gotten distracted and then forgotten about us.
So we're looking at Re-targeting to make sure that those that leave get reminded about us and encouraged to come back. The results for this are not in yet, but it will hopefully increase the amount of signups we get.
Conversion Rate Drop
We've been tweaking the home page and other pages that don't perform as well in order to get more sign ups, it's been working so far (only a few days of data to go on though). Also I went through the free trial process once again and did my best to make sure users get invested in the application as early as possible, by adding more guidance and help boxes while they use the system.
This has helped a little, and will accomodate for the lower conversion rates in the summer I'm hoping. Our conversion rate this week since doing these tweaks has been close to 20%, which is great!
The High Churn
Customers churn because they don't rely on your service. So we've been looking at features that will make users depend more on Project Bubble for example calendar synchronization, better notification and reminder emails, better messaging facilities with email integration, the list goes on.
I've also found that the other reason people churn is because they don't have a relationship with you, their service providers. They don't feel valued.
When was the last time you had a good, informal and friendly conversation with one of your customers? I had one with someone at Wistia recently and then realized, 'hang on, I've been a customer of theirs for ages and will be for a long time'!
In fact there's a really good article on Fast company about this. I encourage you to read it.
The solution for reducing churn in my opinion is to basically reach out more, and encourage relationship with your customers. If they feel valued and listened to then they will more likely reach out to you when there is a problem or a concern before hitting that red cancellation button. I've even encouraged my support staff to 'go over and above' what they would normally write in emails and just be that extra bit friendly and more helpful. It makes a huge difference.
The graph this week is looking much better. My work though in this area of marketing and customer satisfaction does not stop, and that beach will have to wait.
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