A founder with 15 years of experience across 120 startups breaks down three types of churn: involuntary (failed payments), voluntary (users cancel), and activation failure (users never engage). He shows how to diagnose each with data and fix them with specific tactics like payment retry flows, exit surveys, and onboarding redesign.
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After working with 120 startups over the past 15 years, I reviewed a lot of churn data. And the thing is, founders who can't move their churn rate are almost always doing everything right on paper. They're shipping new features, redoing the onboarding, and cleaning up key flows. Yet nothing changes. And that's because they forgot there are 2 types of churn: voluntary and involuntary churn. Each has a different root cause and a different fix. And then there's activation failure, which isn't technically churn, but it's a problem that makes both types harder to fix. So in this video, I'm going to walk you through both churn types, show you how to figure out which one you're dealing with, the exact fix for each, and how to address the activation problem that's connected to both. Let's get into it. The first type is involuntary churn, and it has nothing to do with your product. This is when a subscription lapses because a payment failed, not because the user chose to leave. It actually tends to account for more of your churn than you'd expect, and most of it stays invisible until you pull your churn data and separate failed payments from the ones where someone actually chose process to cancel. Once you've confirmed it's happening, here are a couple of things you can do to fix it. First, start with a reminder flow that notifies users a few days before their billing date. You can do this over email or through an in-app notification. Once the payment actually fails, send an email and an in-app notification letting the users know what happened. Give them a grace period to sort it out and do 2-3 follow-ups to make sure the user had enough time to see the message and act. Adding the option to save multiple payment methods also cuts down on failures because it gives users a backup when one card stops working. You still have to notify the user, though, through email or in-app notification, letting them know what happened. Automatic card updaters are worth setting up too. They refresh expired card details in the background and fix the issue without the user needing to do anything. The second type is voluntary churn, and this is the one that needs a diagnosis before you fix anything. A user makes a deliberate decision to cancel, whether they hit a bug, couldn't find a feature, felt the pricing wasn't worth it, or found a better option elsewhere. What makes it complicated is that different users leave for different reasons, so there's no single fix that works across the board. A great place to start with here is an exit form. When a user tries to cancel or downgrade, show them a form that captures their reason before they leave. Categories like product no longer needed, too expensive, hit a bug, and switched to a competitor each point to a different fix. Plus, the more specific the options you give them, the better the data you'll get back over time. But exit form data alone won't give you the full picture. Users tend to click an answer quickly without much thought. That's why getting churned users on an actual call is significantly more valuable when you can make it happen. Amazon gift cards work well as an incentive to get churned users on a call. Typically, $25 to $50 per card is enough. From those conversations, you get the real reasoning, not just the option they clicked in 30 seconds because they were in a rush. Now, what you fix depends entirely on what the data is telling you. If users are citing UX friction or saying they couldn't complete a flow, prototype a solution and test it with real users before committing any dev resources. When the reason is a feature you don't have, weigh it against your roadmap before building it, because not every request is worth the development time. Sometimes the issue is a feature users can't find, and in that case, what you'd update is the flow that shows users how to find it. For users who switch to a competitor, I recommend you map what the competitor offers that you don't and decide which differences are actually worth addressing. And before we get into activation failure, if you're a tech startup founder currently dealing with high churn or a conversion rate that won't move, click the first link in the description to get in touch. And we can walk through your specific situation. Now, activation failure is a related problem and is the one that doesn't always show up in your churn numbers. These are users who sign up, never get activated, and never come back. That includes free users who never see the value of upgrading since they can stay active on a free tier without converting, and trial users who stop returning after their first session. A paying customer has to get activated first, so every user you lose at that step is a potential customer you'll never get back. The way to diagnose it is with product analytics Analytics running inside the tool. Tools like Hotjar, Microsoft Clarity, PostHog, or Mixpanel show you where users are actually struggling or dropping off before they ever leave. The data tells you which flows people aren't completing and which features they are not finding. Alongside that, map what your retained users actually did in the product. Pull the users who converted or stayed long-term and trace what they did from the start, especially in the first session or 2. Then compare that against what churned users did and find where the 2 paths split, because that point of divergence is where the friction lives. From there, redesign your onboarding to guide new users toward that same activation path. The goal is to get them to the sequence of actions your best users took as quickly as possible so they can experience the same value your product can deliver. Every onboarding looks a little different, but what you want to focus on is getting users to experience the core value of the product and closing the loop on what you promised them through marketing. And walking them through account setup and creating their first asset is usually the fastest way to get them there. Now, if you're a tech startup founder working through a churn problem and want help running this kind of diagnosis, click the first link in the description to get in touch. We'll look at your specific product, figure out which type is behind your churn, and help you map out what to fix first. Again, if you want to get in touch, just click the first link in the description. And if you want to learn how to fix your startup's UX, then check out this video next.
