Churn is dying, let’s save it

You can calculate churn however you want. The problem? Churn as a metric will start to lose meaning.

Toni and Mikkel discuss the different options to make it useful.

• (00:00) - Introduction
• (01:58) - What churn was used for
• (04:35) - The intention behind churn
• (07:36) - Churn definitions from public companies
• (10:46) - The most brutal churn
• (12:42) - So what do you do with churn?
• (18:43) - Collateral damage
• (21:19) - Churn defined, now what?
• (23:11) - Vintages of customers
• (25:09) - Creating future churn
• (26:45) - But.. How to improve it?

Sources
You can check how different companies report churn here (http://christophjanz.blogspot.com/2017/12/how-public-saas-companies-report-churn.html )
Watch Dave Kellogg's presentation on churn here.

Something you want us to cover? Drop us a note on [e-mail]

Creators and Guests

Host

Mikkel Plaehn

Marketing leader & b2b saas nerd

Host

Toni Hohlbein

2x exited CRO | 1x Founder | Podcast Host

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[00:00:00] Toni: hey everyone. This is Toni Holbein. You are listening to the Revenue Formula.
[00:00:04] In today's episode, we are going to talk about churn. All the unfortunate things that have been done to it, making it virtually a useless metric. Today we're gonna talk about how you can fix it. Enjoy.
[00:00:17] My sister was over, uh, with her family. It was like four kids running around. Yeah. What we realized is despite us being four adults, Oh, we're still tougher with four kids running around. You know, it's a little bit like when you scale up your company and you suddenly have so many more sales reps, but you have, you know, so much more management layer.
[00:00:44] Mikkel: Yeah, yeah, yeah. It
[00:00:44] Toni: change things that it's still so much more like headache, you know?
[00:00:49] Mikkel: well, we just started letting anarchy rule, like it's opening the bottle, sit down in the sun and just let the kids run. And then after a couple of hours you like, Where's Robin?
[00:00:57] Toni: Yeah. Stuck in a ditch. Like,
[00:01:02] Mikkel: Yeah. Yeah. No, you just need a fence. That's what you need. Guardrails, you know? Um,
[00:01:10] Toni: of engagement, that's what you need.
[00:01:12] Mikkel: Yeah. That's what you need. At least. That
[00:01:13] Toni: so great if that was the topic
[00:01:15] Mikkel: Yeah, exactly. No, but at least no one is dying,
[00:01:17] Toni: Oh. That would mean
[00:01:19] Mikkel: that, but churn is kind of dying.
[00:01:21] Toni: Yeah. There you go. So,
[00:01:22] Mikkel: perfect segue again. You know, I've been spending my entire weekend thinking about how am I gonna introduce churn here? Um, and that's how, so, no, exactly. So we're gonna try and save it in this episode, actually. That's what we're gonna do. we're gonna talk a bit about the problem that we see with churn today.
[00:01:40] We're gonna get into what is it actually trying to measure, and then hopefully, We're gonna have a solution, some steps you can take to remedy that, and maybe also a little bonus on things you can do to improve churn, meaning decrease it.
[00:01:56] Toni: Wonderful. Let's get into it.
[00:01:58] Mikkel: So churn. I saw, our wonderful, investor, Dave Klock do a presentation about churn.
[00:02:09] And it was, I think it was titled, Churn is dead long, live ndr, something like that. And he really got into the nitty-gritty around churn, uh, how we started basically breaking the definition because there's not a, it seems like there's not a standard definition for what it
[00:02:27] Toni: the, the thing, so obviously, so ndr, net dollar retention or net retention rate, kind of how we're gonna, you know, piece it together.
[00:02:33] What, what, I think so flawed on that statement, and you obviously love Dave, but what I, what I think is so flawed about the statement, well, if churn is kind of broken, How do you, how do you calculate net dollar
[00:02:44] Mikkel: retention? I mean, it's, it's literally
[00:02:46] Toni: based on churn. Right? And then the other thing is, uh, ulu and I, we just, uh, a week or so ago, we did, uh, uh, go to market life on hacking NRR Yes.
[00:02:56] You can also, you know, play around with the NDR and NRR metric and you know, also break it in the same way. Right? Yeah. So it's like, I think all of that stuff is a little bit all over the place. Um, and all of that has its own little.
[00:03:10] just say, uh, little failures. Failures that are starting to appear more and more, right?
[00:03:15] And kind of especially, churn.
[00:03:18] You know,
[00:03:18] The idea was usually to use that as a, as a way to figure out, how long your customer cohort is gonna be. Yeah. You know, that was kind of one idea of that. So if you have 10% churn, then, you know, maybe some cohorts could be like for 10 years or something like that.
[00:03:33] Yeah. But the thing is, um, you know, in, in many cases that just also doesn't work anymore because now you have, you know, uh, maybe negative churn. Yeah. And then it's like, oh, our, our customer lifetime is gonna be infinity. Yeah. The investor, right? And then, oh, we need to kind of do something else to cut it here somewhere else.
[00:03:50] But, uh, it's, it's really difficult, to kind of make it, make it work. But also what we are kind of seeing more and more is, People are just fiddling around with this churn definition, like quite a lot, right? So you have, um, you have a lot of stuff that is basically, uh, not clearly outlined. What, what is actually churn and what isn't churn.
[00:04:09] We're gonna dive into some of that stuff a little bit later on, but that's kind of ultimately the problem here, right? So that , churn itself as a metric has so many ways of defining it, which make it kind of fake. which make it kind of, uh, also less usable internally, by the way, for actionability purposes.
[00:04:28] And then at the end of the day, you know, if, if you played around with this thing so much and you can't use it anymore, why, why do you, why do you even drag it
[00:04:35] Mikkel: Yeah.
[00:04:35] Yeah. It's busy work. That's what it is. No, it's, it's also kind of, it, it's, it's a funny thing, right? Because I can see it's used on the investor side for one purpose, and then internally it's also pretty difficult because it's already done. When you see the trend, it's, it's done. What are you gonna do? You know?
[00:04:52] It's, it's kicked in as in the books. So,
[00:04:54] Toni: So, no, I mean, honestly, I think, I think the real intention behind churn, is actually really nice and clean and clear. It's like who opts out of your Yeah. Product and service.
[00:05:11] Right. who who is doing that and at what rate, rather.
[00:05:14] Right. And that gives you some really cool indications of are you providing value to those folks that you're selling to? Um, and, uh, and how much value Exactly. And, and so forth, right? It could be actually a treasure trove of, of understanding. Hurtful understanding. So this is negative feedback, right?
[00:05:31] Negative feedback is usually something that you. Learn the most with, and also respond the, the most to. So actually churn, you know, as itself. So while I hate the metric, obviously, and I don't wanna actually see it, but churn as , as an idea is extremely useful for you as a business, unless you start distorting it to a degree where it's kind of starting to be, uh, not so useful anymore.
[00:05:52] Right? There
[00:05:52] Mikkel: There also some challenges with it, right? So we, we talked about when, when is it actually churn versus upsell?
[00:05:59] So if you have multi-product, then a customer, has product A and then decides to go for product B, is there actually churn and then new biz, or is it up? Like, there's a couple of things that also just makes it, difficult for people to at least navigate. Yeah,
[00:06:12] Toni: I, uh, so, and I think that's true and I think that's sometimes, um, Clouding the picture quite a lot, and in that case, for example, people would opt for the, um, Hey, this is upsell. Yeah. Right. They would basically say like, well, if you kind of churn from, uh, product A, but you are net upselling then, towards product B.
[00:06:31] Yeah. We as a company see you as one account. Then the account now increased their money with us. Yeah. Upsell. Right. So it's, it's pretty straightforward. I, I can totally see that, uh, that starts to become suddenly difficult. If you wanna, if you wanna report on a product level mm-hmm.
[00:06:49] Mikkel: Mm.
[00:06:50] Toni: And then you say, actually no, this month actually we had churn here.
[00:06:53] And then there's something new coming up there and it's, uh, I think it's hard to reconcile, but at the end of the day, you probably wanna optimize, towards showing the net result per account at the end of the period, which usually the month. Um, and then report on that. So I think that's okay. Kind of let's, let's not kind of, let's not make it kind of too holy.
[00:07:11] Um, but generally speaking, kind of that, those, that, that's the approach at least to, to NDR and nr and upsell kind of in that case, right. But, so now that, some of the, I think I wanted to actually mention some examples of how people calculate churn. Yeah. You know, just to kind of clarify on, is it actually really a problem, Toni, I just, I just.
[00:07:31] guys just
[00:07:32] Looking for a podcast episode here.
[00:07:35] Mikkel: both can be true.
[00:07:36] Toni: Both. It's not mutually exclusive,
[00:07:39] my Um, so, but one, one really interesting thing here is, so, uh, and we looked into, and I think we had this conversation a while back, right? Yeah. But there's a, there's a cheat sheet somewhere of, churn definitions of public SaaS companies.
[00:07:54] And, there are more than 30 of them.
[00:07:58] Mikkel: Are you gonna name names now? Or
[00:08:00] Toni: I'm gonna do it here. And I think we kind of pulled this from a different source, maybe. I'm not sure this is, uh, um, but, uh, uh, you know, let's us think in, sink in for, for for a second here, 30 more than 30 different churn definitions of publicly listed.
[00:08:15] Subscription based companies. Yeah. So, and, and obviously this is not audited, right? This is not g a p audit or anything like that, so no one kind of cares about it, but obviously people care about it. and they come up with all kinds of different ways to calculate it. and, you know, just some examples that we have here.
[00:08:32] So, for example, box, right? The Dropbox competitor or. I dunno, winner in the market. I'm quite sure who's winning. This includes only customers with more than 5K annual contract value, and annual contracts in their quote unquote customer
[00:08:48] Mikkel: Yeah, that's a neat heck.
[00:08:52] Toni: Al Alteryx, I don't actually know what they do, who they are, uh, considers only customers which have been paying customers for at least one quarter.
[00:09:01] Wow. AppDynamics does the same thing, but only for customers at least for one year. Zenex excludes customers on the startup plan.
[00:09:14] Mikkel: Jesus.
[00:09:15] Toni: and this is, this is just on, you know, how you basically kind of play around with the actual customer base that sits behind it. Yeah. Right? Um, then you have, then you have things where , and I think that's maybe you kind of, uh, comment on the, the, the bracket above.
[00:09:29] You
[00:09:30] Mikkel: So yeah, there's different ways o overall what, you know, we'll drop the source into the, the show notes, right? But overall, there are three, three areas you might want to change the, the definition, right?
[00:09:40] So you can focus on monthly, quarterly, or annual retention. You can exclude customers, that churn within the first, couple of months. And then you can include customers that only represent the core of your business. Meaning what, what box did right above a certain a cv. That's the general pattern.
[00:09:54] Yeah. That's been noted. Right?
[00:09:56] Toni: and, and then so it in the calculation, it goes even further than that
[00:10:00] Mikkel: Mm-hmm.
[00:10:01] Toni: you can say, the customers that churn this quarter, And compare that to the customers you acquired last year?
[00:10:09] Yeah. You can say you wanna compare to, uh, your customer base that you have today.
[00:10:14] Mikkel: Mm-hmm.
[00:10:15] Toni: So, and obviously that's, that's the, the sweetest of deals. Right. You know, if you, especially if you're a high-growth company, you want to actually take the. Uh, the highest base definition possible and compared to the ones that you lost, right?
[00:10:28] Um, so that's where you would say like, okay, people that churn today compared to my base, right? then you could do things like, okay, uh, churn, uh, compared to the baseline that we set, you know, the beginning of this year and so forth. I mean, there's like multiple, multiple, multiple, multiple ways to kind of go about it.
[00:10:46] The most brutal one, is really the. Who could have churned versus then who renewed? Yeah. Yeah. And, and I think this is the f well, it's, I'm not sure if the fairest one, but it's definitely the most brutal one, which basically then means if you have annual contracts, You can't compare your whole base against your, your churn this month because large, large, uh, uh, amounts of your customer base were simply not up for renewal.
[00:11:15] No. They didn't have the chance to churn. Right. Same if you compare to, uh, you know, last year's, uh, acquired customers. If you are a business that, and many, many enterprise companies work like this, if you're a business that basically only has multi-year deals mm-hmm. Guess what's gonna happen in the first year after it's like, you know, no one is gonna churn there.
[00:11:37] Right. Um, and basically kind of really kind of stacking it in a way where you say, like, who, who has the chance to churn? Yeah. Compared to the ones that then actually did that is the most brutal gross retention rate. You can, you can calculate.
[00:11:49] Mikkel: So, uh, question for the professor. I couldn't, couldn't resist.
[00:11:54] Right. So when you start tampering with churn, let's say you only include those with 5K and above, don't you also. Do the same when you count ar because what's gonna happen when, you know, some of those actually churn that are below, well then your AR would be decreasing if, if it was included. Right. So I bet they also do stuff on the AR metric or what do you think?
[00:12:16] Toni: I am actually not a hundred percent sure because the thing is, if you get a dollar from a customer, you will have to book it as revenue. There's just, you know, that is, there's very clear rules around that. Yeah. You can't just forget about that. So there's, there's revenue that you get, whether or not you book into your ARR number, that's a different question.
[00:12:36] I think many people probably still do,
[00:12:37] Mikkel: Mm-hmm.
[00:12:38] Toni: you know,
[00:12:40] Mikkel: Let's optimize all the numbers.
[00:12:42] Toni: I think they like, uh, happily take the best of both worlds. Yeah. Um, and again, right? Um, it's, and, and we'll get to that actually in a second and maybe we're gonna get into it now. So what you should, what should you be doing about this?
[00:12:54] So I think, um, and I think this is something that, uh, I've been doing wrong, uh, um, earlier in my career, um,
[00:13:01] Mikkel: heard it here first.
[00:13:04] Yeah.
[00:13:04] Toni: Um, is, it's totally fine to have two different churn definitions in your business. Totally fine. One, internal, one external. Yeah. And, you know, the internal, maybe you can share this with the board, maybe not, doesn't matter, but definitely with investors, you know, when you go out fundraising, you don't.
[00:13:23] Right. and the way I would split it is internally I would use the most brutal, most honest, and my eyes most correct way to calculate, which is who could have churned and who actually did churn. Mm-hmm. That's the truest way of looking at this. and this is how we should maybe, I'm not sure, incentivize, but monitor your CSMs, monitor your products, monitor your segments, and so forth.
[00:13:48] Um, so really kind of splitting by those different areas and then kind of seeing how that performs. And then on the external side, go in and dig into the 30 different ways to calculate it and find the one that. Tells a good story or where you can tell a good story around. Yeah. Uh, plus that obviously makes sense with your business.
[00:14:09] Yeah. So if you have only annual contract, uh, if you only have monthly contracts, um, across your whole, company and yeah, s and b and so forth, um, you totally can go and it's even the right thing to do to go for, you know, who churned this month versus my whole base. Yeah. Because guess what? If you have monthly contracts, your whole base is up for renewal every month.
[00:14:31] Um, so then, then that metric makes a lot of sense. if your enterprise, you know, you can kind of stitch it together however you want. I think we are, you know, the, the ideas here from Box and from AppDynamics and Zendesk is, it's not bad at all. You just exclude the high churning segments. Yeah. Right.
[00:14:48] That's what they do. and, uh, you can. Uh, you can also say and, and talk about, maybe only specific ICP areas. Yeah. You say like, Hey, this is, this is the ideal custom profile you're focusing on, and, and that churn is actually pretty fantastic compared to the rest. I think where some people go a little bit too far is.
[00:15:09] They define the ICP based on their churn metrics. Yeah. and then say, Hey, this is the 20% of our customer base that, that retains really well. Yeah. Let's call that my icp and the 80% is like non icp. Yeah. I think that's, that's an issue. I think this is a story that you wouldn't be able to tell. Yeah. if it was the other way around though, if you said like, Hey, this 80% is my icp.
[00:15:30] And they are, you know, I'm including them in my churn calculation versus the other one. I think that's okay. Right. And again, I don't have all the different kind of ideas how to calculate churn present right now, because there's just so many. Yeah. Uh, go out and try and, um, try and kind of come up with the best one.
[00:15:45] I think one piece of advice though, to keep in mind is you need to make sure that this then still works with your net retention, calculation and definition. right of here playing too much around with. Uh, the G r r, , and it doesn't translate well into your net retention anymore. Yeah. Then it's starting to have an issue around this.
[00:16:05] Right. You would then actually need to say that you're only, considering the upsell of I ICPs.
[00:16:10] Mikkel: Yeah.
[00:16:11] Toni: For example, right? Because otherwise you're starting to muddy the water
[00:16:14] quite a lot.
[00:16:15] And then, then it starts, you know, you get like these weird looks from the investors on the Zoom calls and like, what, what are you talking, how does that, how does that add up?
[00:16:22] You know? And I can't see it. and equally so, when then, you know, one of those customers here, for example, from Zendesk, you know, goes from starter to a pro plan. Yeah.
[00:16:32] you actually can't call it upsell act, you know? I think maybe, maybe they do. Uh, you actually can't call it upsell. It's basically then a newbizz source.
[00:16:42] A newbizz source is then startup plan. Right. And, and those are then couple of things where you just need to make sure you're not, not fudging it up completely. Yeah. , and it's similar to your question with ARR where are, they're counting this into ARR. I think what they're probably gonna do is they're gonna have their whole ARR and then one.
[00:16:59] One segment of that is gonna be our startup plan. This our ARR from startup
[00:17:03] Mikkel: Yeah,
[00:17:04] Toni: I think that's kind of probably how they're going about it. Et cetera, et cetera, et cetera. So really try and make sure that when you then put up this metrics tree that you're gonna be using GRR, NRR, ARR, all of these, uh, all of these, uh, things, that they're kind of working together and that you have like a clean logic connecting them.
[00:17:20] Yeah. Um, and it's totally fine to have a clean logic for what you want to exclude. Yeah.
[00:17:24] Mikkel: Yeah.
[00:17:25] Toni: Totally fine. And same with CAC, by the way. We talked about this a lot. Customer acquisition costs. You can put in everything and anything and take anything out. Just have a clean logic connecting these things, and then it's
[00:17:35] fine.
[00:17:36] Yeah.
[00:17:37] Mikkel: So silly, silly question, but there's this I tendency to discuss. Do you look at logo churn or revenue churn? I mean, my, from my perspective, I've never really understood why you would even look at logo churn, but what's, what's your perspective on that one?
[00:17:50] Toni: no, I think you should totally look at both of these, items.
[00:17:53] I think, um, the difference between your logo churn and your overall churn might give you some clues where you're moving as an organization, right? Yeah. if you have higher logo churn, uh, then you have net dollar churn. Yeah. Um, that means that the smaller logos are churning. Mm-hmm.
[00:18:09] Right. And that's a, that's a great conversation to have with the investors. Like, oh, you know, look at this. We with more logos churning than, than dollar churning because, uh, it's the small ones. Yeah. We don't want them anyway. If that thing is flipped around, then suddenly that, that is not a cool conversation anymore.
[00:18:25] It's like, ah, we're not really focusing on these guys and it's just an outlier here. so I, I would, you know, I would probably, Analyze both. Yeah. But I wouldn't look at both an ongoing basis. I would, I would prefer the the the dollar retention. Yeah. Over the logo retention. Yeah.
[00:18:43] Mikkel: The, uh, the other thing we also talked about and why the definition you choose is so important is that there can be collateral damage.
[00:18:50] Right. This is also kind of, I think how Dave Kellogg basically framed it, that you are using this metric for other metrics as
[00:18:56] Toni: well.
[00:18:57] Yeah, exactly. So it's, it's really, and he talks about it in this, Uh, so one knock on effect is obviously on net dollar retention.
[00:19:03] Mm-hmm.
[00:19:04] Like if you have it here, then you need to do it there.
[00:19:06] but the other thing is in lifetime value, you know, um, and, and lifetime value. Again, how that calculated. You have your churn number, it's like 10% and then you understand, oh, okay, I have a 10 year lifetime times the money that I get from them. So they have a 10 year lifetime value. Um, and if you, so if you use the wrong churn number, yeah.
[00:19:25] you're gonna get to the wrong ltv. That's kind of pretty straightforward. But now the thing is that you are taking this LTV number now, putting it into, relation to your customer acquisition cost, um, that you also forged by the
[00:19:38] Mikkel: way. Yeah.
[00:19:40] Toni: And
[00:19:40] Mikkel: let's not include
[00:19:41] Toni: and now, now you get. You know, you get like some number that may or may not actually help you.
[00:19:46] Right. And again, the logic needs to be clean, connecting all of these different pieces. So, and I haven't done this myself, so I'm not even sure. Would you then exclude your acquisition cost from the segments that you excluded in your churn? And, and how does that whole thing
[00:20:02] Mikkel: actually, but I think it's also back to the point you made earlier, you need to have a metric that you in an operational purpose can use. You need to be able to use it. And means, means the number needs to make sense. So, and you can have the split, right? You can have the internal.
[00:20:18] Toni: I think that's, that's kind of the, the important differentiation here is, the external stuff. It doesn't need to be actionable at
[00:20:26] Mikkel: No, no.
[00:20:26] Toni: no. it
[00:20:26] can be like all kinds of weird shit.
[00:20:28] What it needs to make, uh, but needs to happen though, is that it needs to make
[00:20:33] Mikkel: Yeah.
[00:20:35] Toni: If it doesn't make sense. and you know, you can, there are only two options here. Either the investor thinks you're stupid. Yeah. Not good. No. Or you're trying to cheat them also. Not good. You know, both of these options not good.
[00:20:48] So you need to kind of figure out, um, you know, how do you kind of stitch these things together to make sure for the outside perspective, um, and then obviously for the inside perspective, it needs to be super action. And those two things can live in separate worlds, right? If you. If you plot them on a graph and squint at them, I think they will probably move in the same direction over time.
[00:21:07] Um, because they're affected by the same baseline underlying moderator effect of like, what's actually happening here. Yeah. Um, but the, um, the, the overall piece, the investor side doesn't need to make so much fucking sense.
[00:21:19] Mikkel: So
[00:21:21] let's
[00:21:21] say you've now gone and defined. Your metric for churn, you have an external one, you don't care about it. That's the fuzzy one. And then you have the internal one. It's brutally honest, uh, it's a clear, clearly defined metric.
[00:21:35] How do you then start looking at churn?
[00:21:37] Toni: Yes. So, um, I think one thing is split it out by the areas that are important to you. Um, by product. If you have multiple products by segment, if you're servicing different sizes of organizations, it could be by region.
[00:21:56] and why would you, for example, why would you do region? Well, that might tell you something about the, um, two things. One is maybe your product is differently adopted in two regions for whatever. Um, Cultural or language reason, I don't know. but the other thing could be, well, maybe it tells you something about the team that onboarded them, or the team that sold them, or the team that you know is, is servicing them, right?
[00:22:18] Kind of that, that might kind of give you some hints around that. And then obviously there might be other areas for you to, you know, slice and dice the, the customer base with, and, and you should, you know, please feel encouraged to look at those in different ways and calculate the, the gross retention rate on that.
[00:22:33] And you'll, you might, you might find some things that, you know, maybe it won't be game changing. Oh, wow. Now we need to kind of set the company up
[00:22:42] Mikkel: Yeah.
[00:22:42] Toni: But they will help you to understand, um, that kind of customer will actually be better for us than that kind of customer. Yeah. Right.
[00:22:49] And having that as a shorthand in management organ, uh, management conversations, I think is extremely powerful. Obviously go and measure it and track it and have an expectation how it, you know, should evolve. I think if you are looking at churn, On those segmentations, on those dimensions, I think you will have a better understanding how your churn will actually end up being.
[00:23:08] So, you know, look at churn in that way.
[00:23:10] Mikkel: Mm-hmm.
[00:23:11] Toni: Another way to then, let's just say analyze it. Actually, to split it out into different cohorts. And in this case, cohorts, uh, we were really talking about time cohorts. So let's call it vintages, right? Different vintages of customers.
[00:23:27] And this then really means, okay, you've acquired this customer or this set of customers in Q1 2020, and now you isolated. Look at how many of those are still left. So that would be logo, churn.
[00:23:41] Mikkel: Where is
[00:23:42] Toni: that, uh, cohort in terms of revenue? Is it above a hundred percent? Is it below a hundred percent? If you're only looking at churn, obviously it's only gonna be below a hundred percent.
[00:23:50] but what you wanna do is you wanna, uh, create a graph that plots each of these cohorts, as a, as a line graph starting, all of them. At, basically zero days as a customer. So it's like very, you know, it would be great if we could pull up a, um,
[00:24:09] Mikkel: a visual. Yeah. Yeah. Visual.
[00:24:10] Toni: Yeah. But what you wanna see is that your older cohorts
[00:24:14] Mikkel: Yeah.
[00:24:14] Toni: are what they are. They're probably bad. Yeah. But each consecutive next cohort that you add to that graph, Starts to be better and better and better. Yeah. Yeah. And basically, kind of slowly, the cohorts are rising. Um, and that gives you an idea of maybe the product is getting better, maybe the way you've been selling it is getting better.
[00:24:34] Maybe the way you kind of servicing them is getting better. So this is really something that investors love to see. Yeah. as like, uh, the, the double click on churn, it's not to understand, okay, where's your churn number right now, but is it, uh, from a core perspective trending in the right per uh, direction?
[00:24:49] Right. That's really, that's really what they wanna figure out. and obviously you can split all of this by all of those different dimensions, but it's just gonna get insanely difficult. And, uh, lots of, lots of data to crunch around that. And, uh, really kind of think about it as. You know, um, uh, this more as a vintage perspective versus a dimension perspective.
[00:25:09] Mikkel: I guess that's also where you can unearth whether you're making future problems for yourself Yeah. That you need to address later on.
[00:25:16] And then it's gonna be really difficult as you grow a base of like a cohort of customers that actually, you know, churn really terribly.
[00:25:23] Toni: Yeah. I think what I would also just encourage everyone, and I actually haven't done that myself, um, but what I encourage everyone is like, look at the cohorts that went really well.
[00:25:31] and check what their, what their composition was. Yeah. Um, in terms of which kind of companies did you sell to, um, and so forth. And then have a little bit of the same lens, like it could be in, in our case was 50 50 US emea, um, 80 20, normal B2B to agencies or something like that. Right. And have that as your expectation going forward.
[00:25:55] Uh, now when you close, the next quarter, when you close q2, look at your customer base and check if some of these things are veering in a different direction, right? You might have more or less agencies, which might be good or bad for you. Yeah. Um, but, but track it. You can even track it on an analysis basis like that to understand okay, are we.
[00:26:15] Uh, to your point, are we setting ourself up for failure by creating worse cohorts based on the composition of them? Right. And that still doesn't talk into how you maybe have improved, uh, in know servicing them and so forth and selling them. Uh, but it might be one indicator whether not that was a good Yeah.
[00:26:31] Good vintage or like a bad vintage, right?
[00:26:34] Mikkel: Yeah. You
[00:26:34] Toni: It's like, you know, it's like
[00:26:35] Mikkel: wine. Yeah,
[00:26:35] exactly. It's like you're so close to the analogy. Just one step further. Yeah. Then we're there,
[00:26:41] Toni: And I think then the last item on this list would actually be kind of
[00:26:45] Mikkel: how to improve it.
[00:26:46] Toni: How to improve it.
[00:26:47] Mikkel: change the definition. It's easy.
[00:26:49] Toni: So, and, uh, we talked about hacking it, easy going, going low, you know, upsell, no problem. churn, just change the definition. Just throw everyone out of the metric that churns. Then you have perfect churn. Yeah. Just, you know, just do it like that. Um, so those are the, the , the non. Non-sustainable tricks.
[00:27:09] Yeah, you can. You can use. At the end of the day, it comes down to two main things. Yeah. Uh, one is your, product and service. Improve them. Yeah. Get better, build a better product. Listen to your customers, uh, listen to your onboarding calls. You know, read the tickets that you guys are writing, uh, back and so, you know, get better at all of that stuff.
[00:27:30] That will over time For sure. Improve your, uh, gross retention rate. Your churn for sure. It's a really slow and boring needle to move, but it's the most impactful, right? And then number two, acquire the right customers to begin with. So if you're starting to say, Hey, listen, you know, only these kind of customers are, you know, really in our customer base that we consider churn.
[00:27:54] These other ones, we couldn't keep them out, but, they might grow into this over time. So that's why we are doing it. But really kind of, hey, this is, this is the ICP and the non BS non bullshit ICP that we're kind of gunning for. I need to ask yourself the question. Cool. How can I get more of those? Yeah.
[00:28:13] And the really, really important difference here in the, in the phrase, uh, and phrasing the question is not about how can I get only those? Really, how can I get more of those? Which really means that what I've seen and, and people kind of get this wrong, is some people just choke the funnel. Yeah. It's like, okay, we only want companies that look like that.
[00:28:34] Let's disqualify everyone else. I think that's silly. I think you shouldn't be doing that. Uh, the real question you need to ask yourself is, how can I get more of the ones that I really want? And that is, you know, that's a whole other episode in itself, but it's. Uh, you know, on your, on your outbound, your s e r team Yeah.
[00:28:51] Talk to accounts that match your happy
[00:28:53] Mikkel: customers. Yeah, Yeah.
[00:28:54] Toni: On your messaging. Tailored specific to, um, the kind of, uh, accounts that. that you want and it resonates extremely well with, you know, on your targeting, on LinkedIn, you know, focus it in and, and so forth, right?
[00:29:07] And, um, and when you do customer interviews and trying to understand better what to build or how to talk about it, focus on the happy, happy ones. Don't focus on the ones that. you know, maybe aren't core to you anyway. Right. And there's a, there's a bunch of other things you maybe can do in order to try and tweak it in the right direction.
[00:29:24] Mikkel: But that's, again, kind of, that's just scratching the surface on how to
[00:29:28] improve
[00:29:28] I think the interesting piece is here, often you look at churn and go, Hey, how do we improve it? You discuss product onboarding, service support, but there's the entire step before Yes. To look at.
[00:29:39] yeah.
[00:29:41] We've been churning out a lot of episodes.
[00:29:43] churning out a lot of episodes.
[00:29:44] Toni: There. Go now.
[00:29:45] Mikkel: now. I'm, now I'm tying it into, um, my wonderful segues into the outros.
[00:29:50] Toni: You know? That's right, that's right.
[00:29:53] Mikkel: Getting better. 1% at a time,
[00:29:55] Toni: dude. I mean, we, we made, we had so many qbr. I'm so happy
[00:29:59] Mikkel: something is,
[00:30:00] Toni: finally sticking. You know,
[00:30:01] Mikkel: we didn't implement any of this, but I remember that thing about just 1%. I remember that.
[00:30:07] Toni: That's it. Thank you, Mikkel.
[00:30:09] Mikkel: Thank you, Toni. Thank you, dear listener, everyone. Bye-Bye. Bye.