Sundar’s experiMENTAL
Hello experiMENTAList, it’s Sundar 👋
I’m a former Head of Marketing Science at Uber where I optimized $1Bn+ in spend across Brand, Performance, and Lifecycle. Now, I share weekly playbooks that help you prove and scale your Marketing ROI.
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How churn resurrection is a trap
It's hard being a lifecycle marketer. You've got a fairly impossible task of using email and push notifications to convince users to change their behavior, and you're often under-resourced with little help from design and analytics.
What a fun place to be.
And to make things worse, lifecycle marketers often fall into what I’m calling “the churn resurrection trap”. It's a very specific trap where lifecycle marketers focus so much on resurrecting churned users that they ignore where the real nuggets of impact can be found.
Why does this happen? Two very specific reasons:
Churned segments are the largest segment.
They become too hard to ignore. Let's say your product's one-year retention is 30%. That means for every 100 people you acquire, 70% will eventually churn and once they churn, they often stay churned.
So over a long period of time, cumulatively, the segment becomes massive.
Using our example, if you acquire a 100 users a week, then in a year you will acquire 5200 users of which 70% will churn, and so by the end of the year, you'll have a churned segment of over 3600. This without fail will be your largest segment by size.
We hate rejection
And churn feels like a rejection. It’s a rejection of our product, brand, and mission. It's why the tone of so many churn resurrection emails is "we're sorry," "we'd love to have you back," "please try us again," or something that makes the company sound like a victim.
In isolation, this doesn’t sound so bad but there’s a reason I call it a trap:
Expectations
Margins
Quality
Expectations
This segment happily tried out your product and was looking for a solution to their problem.
For them to churn, one of two things happened:
Your product was not worth trying
Wrong ICP
Too expensive
Other stuff
They tried it and they were disappointed
Broken promise
Poor UX
This means the churned segment by default has a sour taste in its mouth. Unless you've completely revamped the product (fixing a core issue) or are now solving a new problem (expanding to an adjacent market), it’s a segment that just doesn’t want you (re: rejection)
Margins
The second reason you should not try to resurrect churned users is simply from a profitability perspective. They are going to be one of your worst segments.
Let's think about this. We've already spent money to acquire them. They either have tried your product once or maybe never, and now you're likely going to throw a discount at them to get them to come back.
Throwing discounts at them is a negative margin activity. And this churned user isn't going to come back and be an amazingly profitable customer. So they're likely going to be low to mid-value, and then you've just eroded that value with the discount.
CFOs hate churn resurrection campaigns because from a margin business, it just does not make sense!
Quality
Finally, churned users are going to be low quality. Of course, I don't mean low quality as low quality people because that's a terrible thing to say. They are low quality from an LTV perspective.
If you account for the fact that they are likely highly price-sensitive or discount-addicted, likely scarred by their prior experience, and will have high customer support costs because of that experience, you build a customer profile that really is not valuable to your business.
Now when you look at the value of the pool as a whole, it looks profitable.
“If I can convert 5% of these churned users back, then we would make $20M.”
But the real question is, how much do you have to spend to get that $20M? Most marketing teams aren't sophisticated enough to continuously keep track of how much they've spent on those users, but they might come back for a discount, they buy, and then they churn again.
Once a churn, always a churn.
“Okay, Sundar, so what should I do with my churned segment?”
Learn from the churn
Identify where in the user experience you didn’t meet their expectation. You can dig and dig and dig into why a customer did not use your product to better entice the people that do use your product. Caution: Do not build your product for bringing back churned users. Use feedback wisely
The best way to reduce churn is to increase retention.
Skip the discounts
Instead, try product marketing. What have you done in the last year since they've left? What new features might be solving the problems they had?
Worst case, they unsubscribe and now all parties can move on from the break up instead of clinging to them.
Be picky
Use techniques like propensity modeling to identify churned users that have a high potential for resurrection, and only target them. Don't use a blunt mass email for churned users (unless it’s for product marketing).
You're better off leaving the segment alone or focusing more on community building content.
And remember, when you spend time targeting churned users, you are actively ignoring another segment that will likely be more impactful.
Churn doesn’t earn.
Churn doesn’t learn.
Churn doesn’t yearn.
Churn does burn.
Okay, sorry, i’ve been reading too many Dr. Seuss books for my kids.
That’s it for this week!
Stay experiMENTAL,
Sundar
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