How a SaaS company reduced annual user churn by 36.23%
If you are in the world of email marketing you have probably heard of ConvertKit. Started in 2013, the company went from obscurity to nearly $20 million in net revenues in just a few short years.
One of the secrets behind this growth was dramatically attacking churn.
In this article I'll show you exactly how they solved it, so you can adopt their strategy for your own churn-busting efforts.
ConvertKit's churn story: 2017 - now
In 2017, ConvertKit had a 7.6% monthly churn rate.
You might think 7.6% monthly churn is OK, but remember with just 6% monthly churn you are losing over 50% of your customers on an annual basis.
In 2017 ConvertKit were effectively having to replace three out of every five new customers within a year. That is unsustainable, no matter how good your inbound growth engine is.
By the end of 2019, they had dropped that to 4.4%, which you can see in the graph below from their Baremetrics open startups profile.
Getting their churn under control had a game changing effect on ConvertKit’s revenues, which grew from $909,928 at the end of 2017, to $1,773,364 at the end of 2019.
While there are a lot of factors at play, there was one surprising tactic that ConvertKit's Head of Customer Success, Matt Ragland, revealed on his Medium channel, as the core driver behind their success.
How ConvertKit used personal video to slash customer churn
Matt stated, “I send a personal welcome video to (almost) every new customer that signs up to ConvertKit. About 50–70 each day.”
These videos are sent to new paid customers and are part of ConvertKit's ongoing effort to build human and authentic connections with their new users.
After implementing these videos, he goes on to say, “Two numbers we can see are user churn for 0–7 and 8–15 days, which are seeing significant decreases. The 0–7 day user churn just completed the best month ever, and 8–15 day churn is the lowest since October 2016”.
Here is an example of a video sent to a new user:
Not only are these videos building goodwill with the recipient and reducing turnover, but they also are commonly shared and give ConvertKit more virality.
3 key reasons why personal video prevents churn
So what is the deal with personal video and why is it making such a difference for customer activation?
First, I think it is important to analyze the top reasons customers tend to churn from software companies.
1. Confused about getting set-up
When customers first start on a new software, it is imperative that they get the core elements of the system set up within the first few weeks. If the UI/UX is confusing, especially if the product is a lower price point system or there wasn’t a substantial upfront cost, they will typically just churn. Also, it needs to be easy for the department picking it up to train everyone on. If you can’t get adoption from the team, you are looking at churn.
2. They don’t see results
As software companies we often overcomplicate things. We obsess about whether customers use feature X or Y, or what behaviors are indicators of early trouble etc. While this is important, it matters far less than if the customer got a result or not. A customer could send 10,000 emails and still churn if they get no results. Another customer could send 100 emails and if they get +2 sales above normal, they might be sold.
3. Poor onboarding experience
If you sign up for a software system and you get only automated “onboarding” messages and generic links to educational resources and have to wait 2-3 days when you have questions to get an answer…. You are going to churn.
ConvertKit was aware of these hurdles and attempted to address them all with a heavily hands-on experience for onboarding.
While many experts warn about the need for “scalable processes”, ConvertKit realized the value of happy customers, and instead invested in approaches like personal video to try and provide the best possible experience.
The hope would be that by adding value and reducing friction during the initial phases of getting started, ConvertKit would earn more life-long customers. Based on the numbers, it looks like their bet paid off.
Why personal video was so effective for ConvertKit's churn strategy
Now not all personal videos are created the same. One person might be human and down to earth and speak to someone's specific use case and another person might record a generic video while reading off a script.
So what were some of the specific factors in ConvertKit’s videos that made them so compelling? Here are a few thoughts:
1. They got personal to their customers' situation:
Not only did the ConvertKit reps call each new customer out by name, but they also took the time to check out their website and prescribe specific tailored next steps. Notice how in this video Matt discusses how to get ConvertKit hooked up with their Wordpress site? This small detail makes a big difference as it shows this is not just a generic or mass sent out video.
2. They acted like real humans:
In ConvertKit’s videos you will notice they pause to wave at people, or run into tree branches or have various other human moments. While conventional or old school wisdom might call that “non-professional”, I would argue it is actually part of what makes personal video so effective. People relate to and feel more trust with individuals that come across authentically.
3. They got outside the office:
I have noticed a trend in top performing Bonjoro videos. People are out for a walk, or touring people through their business halls, or are out in the field meeting people. I think there is something powerful about being able to deliver a video from wherever you are at and I think customers resonate and get more drawn in when the setting is beyond just your desk.
4. Sky high open rates
Another reason that personal video tends to perform well relative to standard automated onboarding is open rates!
According to Harvard Business review, personal video emails get almost double the open rates of standard text emails. This is likely due to a couple of reasons, but one advantage of 1:1 communication is it dodges things like promotions folders or other inboxes that automated communication is sometimes snared by. No matter how good your messaging is, if it doesn’t inbox, it won’t have an impact.
While personal video clearly had a notable impact on ConvertKit’s success, they also noted a few other things they have been doing that are also helping out.
3 other strategies ConvertKit used to reduce churn
1. Improving Ticket Response Time:
This one is huge. If a customer is stuck and you get to their problem right away, you can hopefully catch them while they are still trying to build in your platform and are in that mindset. Wait too long and they will decide to “circle back to it” and feel frustrated at getting confused or lost. It is amazing the difference in retention for businesses that have 0-5 minutes response times vs. businesses that have 2-3 day response times.
2. Product improvements:
Product is integrally involved in retention. If the application is stable, has fewer bugs and generates results more effectively for people, more of them will stick around. Plain and simple.
3. Niche focused experience:
When it comes to tools like ConvertKit that help people deliver newsletters and bulk mail, they can be used by nearly any industry. But what most companies quickly discover is that if you give tailored, specific and personalized use cases and insights to new customers, they are far more likely to succeed. Convertkit realized that one of their biggest demographics of users was creators (bloggers, course creators, membership sites etc.) and they doubled down on that.
In regard to what comes next, Matt Ragland from ConvertKit stated “The second phase for the videos is not just to use them as a welcome tool, but also as a check-in tool for customers who seem to be struggling or simply inactive”.
This is another rising use-case we see for SaaS companies; teams who identify at risk users early (through low activity or lack of using core features), have a far better chance of saving them once they are ready to cancel.
Bonus: If you are currently using ConvertKit and Bonjoro together, we have a native integration! That means if you capture a new lead in ConvertKit you can automatically have the system produce a Bonjoro message. A notification will pop up on your phone via the app and then you can respond right there and then in real time.