MBA933 Guest Teacher: Stefan Pretty – Stop Losing Customers! How to Reduce Churn

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Hey O welcome to the $100 MBA show bringing you the best in the game to teach you the best of business. You're listening to the $100 MBA show daily 10 minute business lessons for the real world. I'm your host, your coach, your teacher Omar Zenholm. I'm also the co founder of the hundred dollar MBA a complete business training and community online over at 100mba.net Today's episode is a guest teacher episode. On our guest teacher episodes I bring in an expert to teach their area of expertise. Today we have Stefan Priddy who is the Found Sublead co a great tool if you want to start a subscription box business. And today Stefan's going to teach you how to stop losing customers and lower Churn. Churn can be the bane of your business existence. This is how many customers are leaving your doors. Getting the customer takes a lot of effort. You got to keep them on. This is obviously true if you have a subscription based business or a SaaS business. But even if you don't, you want to make sure that customers stay customers continue to buy. Stefan's going to break down some great ways to make sure your customers customers stay customers. This is going to be a great one. Let's get into it. Let's get down to business. I've had the pleasure of getting to know Stefan Priddy for the past two years. We're part of a small group of tech founders, and through the years we've been kind of tossing ideas to each other. And I really like the way this guy thinks. He's young, he's energetic, he's smart, and I wanted to make sure that we get him for a guest teacher. Now, his company, Subly, is all about subscription box businesses. So he knows the thing or two about subscriptions and how to make sure you keep people on subscription and how to lower that darn churn. I'm gonna let Stefan take over so he can start the lesson, but I'll be back with my own takeaways of what he taught. But for now, take it away, Stefan.

Hey, pretty people. I am Stefan Pritty, the CEO and founder of Subly, the subscription e commerce platform specializing in subscription boxes. Thank you so, so much for joining me here today. I appreciate you taking the time. Today I'll be teaching you how to reduce customer churn and as a result, keeping more customers. So on that note, let's get down to business and rock on. So before I dive into the strategies and ways for reducing churn, I just want to quickly give a bit of a background on what churn is. So churn is the percentage rate of cancellations or the lost customers, that is the number of customers who cancel in a given period of time, usually a month. And this is mostly applicable to subscription related businesses such as SaaS businesses or subscription box businesses. And churn, when neglected, can actually destroy or kill a business. Churn is a very complicated topic and hopefully today I'll be able to simplify it for you. But churn is also another side of growth. So there's acquiring a customer, which is obviously essential, but on the other side, you want to keep the customer for as long as possible. So another word for churn is essentially retention. So let's get right on to the strategies. So there are three stages of a customer's life cycle that can impact your churn and slow your business's growth. Those three stages are the acquisition of a customer, an active customer, and a canceling customer. The first stage is acquisition, which I'm sure you're very familiar with by now. It's basically before the customer is paying you any money. This could be a visitor on your website, a person on your email list, or someone on your sales funnel in general. And they could be hot or they may be cold, but either way, this stage has a surprising impact on churn. And the outcome at the other end of the customer lifecycle and is definitely worth your attention. So I'm going to share my three main ways in which we can reduce churn for the acquisition stage of the customer lifecycle. Numero uno, your marketing message and targeting. Your marketing message explains your product and what it does and how it does it. It promises an outcome and it attracts your customer to sign up. However, we often overlook this as we just want to get as many customers as possible and we're all guilty of this, including me. And the issue with that is however, that a customer who is over promised isn't likely to stay, which means they'll cancel sooner than you'd like. There's also another component to who you're targeting. Your message at can have a profound impact as well. If you're not presenting your message to the right people. It can also affect the customer's likelihood of staying with your business if it's not really meant for them. So really think about that, who you're targeting and what you're telling them to make sure you ultimately manage their expectations. I call this alignment. So make sure your business is aligned with the right people and giving them the right message. Number two Education. Oftentimes your business success depends on the success of your customer, which is pretty much how our business works. And this means if you take the time to help educate your customer then they may well have a better chance of succeeding. If your customer succeeds, then you succeed and guess what? They stay. Which means your churn decreases. Besides, this is the reason you started your business to help solve someone else's problem and also is likely to help them be successful at it. So consider helping educate your customers. I can't emphasize this enough, it can help keep them around for longer if you do a good job at this and you take the time to invest in educational materials or better still you spend time interacting and engaging with them to teach them so that they can become a success. So education for success. Make sure you do this. This is very important. Number three Onboarding. This one is a hot topic. Actually there's a wealth of resour out there on how to improve your customer onboarding process especially for SaaS businesses. SaaS being software as a service, this can really impact your customers retention. And actually this one is very similar and related to the second point I just shared on educating your customers. So make sure you are walking your customers through or giving them a slick onboarding experience which is similar to your marketing message. Alignment teaches them how to use your product and manages their expectations. It's usually the case that the better the customer is at using your product, the more successful they become from it and the more value they get from it, which means they're more likely to stick around, which ultimately reduces churn. So I guess the main point there is that you're trying to give the customers as much value as possible right up front from the onboarding process, from educating them on how to be successful alongside your product, and then obviously managing their expectations up front with your marketing message and alignment. So that covers the topic of acquisition and that stage in the customer lifecycle. The second stage of the customer's life cycle is the portion where they're actually paying you money, which means you've acquired them. So first of all, congratulations on that. Now again, there are three things I'm going to share with you on how to reduce churn when in the paying customer phase of the their lifecycle. Now let's crack on with those. Number one, the core product. Now this one seems obvious, but actually it's quite a difficult thing to address. Now, oftentimes we believe that building more features is going to lead to better customer retention because more features means better product. This isn't always necessarily true. Sometimes you have to go back to the drawing board and really evaluate what your actual core product is, is doing. And if it's doing so successfully, this is a hard thing to. But sometimes you just have to go back to the drawing board and do the thing that you really don't want to do because it's a massive task. But actually that's the one thing that needs to be done. So always evaluate your core product and see if that aligns with helping your customer achieve their goals. And if it does, then you're more likely to have your customer stick around. Number two is feedback and relationships. So you should always, always, always, always be learning and implementing and communicating with your customers and collecting feedback and quantifying it into actionable points and other different ways of doing that. You could use NPS score systems, there's tools out there to do that, you know, set up calls and basically always be engaged and regularly communicating with your customers. Because relationships matter in business. Businesses don't sell, people do. And if you create a relationship with your customer, they're much more likely to stick around. But whilst you're building that relationship, you can learn from them and find out what is that you can do to improve your business to ultimately get them to stay longer, which will obviously reduce your churn as well. And the last one, number Three is make your product sticky. Now, some products by definition are sticky. For example, for me, Spotify is sticky because I need music and I have all of my music at my fingertips. And I think I've been a paying customer of Spotify for about seven years now. So some products are by definition very, very sticky, which is awesome if your is a sticky product and is a necessity. However, if it's not, then there's ways that we can make our products more sticky. And one is using the hooked model. If you haven't read the book Hooked by Nur A thoroughly recommend it. There's different ways in which we can actually help build habits with users and therefore make it sticky. So always check out how you can make your product more sticky. Now moving on to the third stage of the customer cycle, the portion where you're losing them, which makes me unhappy, and I'm guessing it makes you unhappy as well. So I've got two main points to share with you on this one. So let's get going with that. Number one is surprisingly obvious, but also somewhat neglected. I mean, I've seen products that don't do this, and I'm always surprised that they don't. Now, this is implementing a cancellation process or flow. Now, when somebody's canceling, this is an opportunity. This is an opportunity for you to learn and it's an opportunity for you to turn them around and keep them as a customer. So always be thinking what sort of a process you could put in place to mitigate cancellations, whether that's giving them a discount, if they're saying it's too expensive, for example, and at the very, very, very least, learn from them as to why they're canceling so that you can better improve the product. And the second thing is actually related to the first one of creating a cancellation flow, and that's getting personal and jumping on the phone with the customer. You know, we're talking about relationships earlier and building relationships. Well, this is just as applicable. Pick up the phone, talk to the customer, make it personal, ask them why they're leaving, and see if there's something that you can do to help them. Maybe they don't know that your product does what they need it to do, for example, and that covers the lost customer portion of the life cycle. Okay, awesome. So let's quickly wrap up here and summarize. We covered the three stages of a customer lifecycle and how they impact churn. The first was acquisition, and we discussed the marketing message and alignment, the education of your customers for their success, and the Onboarding flow and making sure the customer gets the most value possible from your product upfront. The second was related to your paying customers and we discussed your core product offering, building relationships and collecting feedback for improving your product. And we also spoke quickly about making your product sticky. Finally, we discussed how to mitigate cancellations using a process and also reframing the cancellation of the customer into an opportunity to learn and improve and maybe just even keep the customer for a little bit longer. Before I go, I have one more bonus tip for you. And it's simple. Basically, instead of charging up front for an annual plan, spread the cost into monthly payments and get the customer on a commitment period so that they can't cancel it. As long as you're clear with them, there should be no backlash. But this is a good way of passing on the savings that they're going to receive by committing to the full year. I've seen a reduction in churn from 25 to 7% in some cases, which is staggering. So it's not that difficult to implement and it's definitely worth it. So give this a try. Okay, guys, this was Stefan Priti from Subly. If you want to continue learning about subscription businesses or subscription boxes, you can visit Subly Co. And thanks again for joining me today. I really appreciate you taking the time and for just now, it's back to Omar.

Thank you.

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Love, love, love. Stefan's lesson. It's so important to really have Churn at top of mind. You gotta cut it at its knees. I love the idea of educating your customers. The more educated your customers are, the more they're going to use your product, the more they're going to stay on. I found that this has helped us lower Churn tremendously. Doing webinars, having great tutorials, having an onboarding system or email system. That gives them great instruction, offering courses. The way I see is if I was selling cars to people that can't drive, it would make sense to teach them how to drive. So you get the point. Education is a great way to lower that churn. And I know that Stefan touched on this a bit, but I want to emphasize understanding why people cancel really helps. Having an exit survey really helps. So you can maybe fix those things so people don't cancel as much. Sometimes we just forget about people that cancel. We say, whatever, they're not paying me anymore, go ahead and leave me. No, those are great people to get some feedback from. Ask them why they're canceling. You can make it super non confrontational. You can be like, hey, I understand if you got to cancel, no problem. But you can really help me out by giving me some feedback. Why are you canceling? I would love to learn so I can make sure I improve our product and service gang. I hope you loved Stefan Pretty's lesson today. His guest lesson on lowering Churn. You can check out what he's doing at Subly Co. They just redesigned their website.

Looks fantastic.

I would just check it out just to see the amazing website they've built. Thanks Stefan for that awesome lesson, guys. Thank you so much for listening. That wraps up today's lesson. But before I go, I want to leave you with this. It is so hard to attain a customer. You spend marketing dollars. You put in so much time and effort in content marketing, you finally get them. Try not to lose them. It's so much easier to keep a customer than to go ahead and try to get a new one. This is essential if you have a reoccurring membership program. Find out what makes them happy, find out what will keep them there and see if you can incorporate it into your business. All right, that's it for me today. But I'll check you in tomorrow's episode where you will learn how to start saying no. I'm going to give you some practical strategies that have worked for me. Sometimes we put too much on our plate. We say yes to everything. How do you start saying no so you can have some sanity and you can focus on the right things. Alright, I'll check you then take care.

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