Understanding user needs and pain points is a critical component of business success. Abandonment surveys, a specific type of survey designed for customers who have stopped using a service, are a treasure trove of customer information. However, the real power lies in transforming that knowledge into concrete actions that drive sustainable growth and income. Churn often arises from unmet customer needs, leading to loss of subscriptions and revenue. This article delves into a powerful technique: “assign a dollar value to customer problems identified through churn surveys.” You can apply this method to other types of surveys, such as CSAT, NPS, and other VOC tools. By quantifying the financial impact of these issues, you can prioritize which issues to address first, maximizing your profitability. Prioritization is the key to any product development process.
Step 1: Analyze the first question: reveal the root cause
Start your analysis with the main survey question, such as “What is the main reason for cancellation?”
Quantifying the impact
Now, let's analyze the result and quantify it in dollars. This depends on whether the first question is mandatory (all users answer) or optional (only some users answer).
So, to size one of the reasons for abandonment, for example, “it is very expensive”, the opportunity size would be 45,000*$20*12 = $10.8 million ARR (assuming subscription cost per churned user is $20). This is a loss of income only in 1 year; In reality, this would be higher if the customer does not churn and then pays over 3 to 5 years (LTV).
tip: There are statistical methods to determine a sufficient sample size; one of them is provided free of charge here by Qualtrics.
Tip: If the sample does not reflect the churn population, extrapolate only for the population represented by the sample (segment users). And make efforts to find attrition-related information for the remaining demographic. Example: If you have a product abandonment survey and you have customers from small and medium-sized businesses to large enterprises, many times enterprise customers do not abandon the product; they cancel subscriptions through renewal managers; Therefore, to obtain information from them, incorporate an attrition survey through the renewal manager route.
Step 2: Analyze follow-up questions: go deeper
While a $ value is assigned to the high-level problem “It's too expensive,” this provides a starting point; It is too general to develop effective solutions. To get deeper insights, we can use a branching follow-up question after users select “It's too expensive” in the initial survey.
Tip: If you only have one survey question in your product churn flow, consider using an email or post-churn churn tracking survey with branching questions to get more detailed information about the reasons for churn. loss of clients.
For “Subscription is too expensive”, a branching question can have the following options:
The results show that 60% of users in the “too expensive” reason category are churning due to non-price issues such as “I didn't find the value” and “I don’t need the subscription temporarily.” That is why it is important to go one level deeper to understand the real problems. Now let's look at calculating opportunity size for some of the churn reasons mentioned above:
You don't need the subscription temporarily:
Sizing Opportunity: The size would be similar to what we did in step 1, but we must keep in mind that certain users could automatically return as they cancel for temporary reasons. Therefore, we must remove those users from our calculation (organic recovery rate). So if your organic recovery rate for this audience is 2%, then the final addressable ARR would be: (9000 * $20*12) – (9000* 2% * $20*12) = $2.2 million ARR loss .
Possible solutions: Now, as we know, solving the above use case can save substantial revenue; therefore, we can create the solution for these users. One solution could be to introduce a subscription pause option. Since the reasons for cancellation are temporary (such as travel, unexpected weather conditions, pandemics, or even just a busy period that can disrupt users' routines), the pause allows users to keep their subscription without the burden of fees. you continue. This benefits businesses in two ways: First, it builds customer loyalty by demonstrating flexibility and understanding user needs. Second, it increases the chances that users will return to the service once its peak period or temporary outage has passed, generating ongoing revenue.
Studies have shown that offering a pause option can significantly reduce dropout rates (fountain). The famous audiobook subscription service Audible offers a paused subscription.
I didn't find the value:
If users don't realize the value of the subscription, it's critical to understand why. Do the same exercise above to calculate the revenue you are losing because the user didn't find the value in the subscription, i.e. 15700 * $20 * 12 = $3.78 million ARR. This is the revenue you can save by retaining these users. In addition to this, you will also earn expansion revenue (if your business model has that option), since once users realize the value of the service, they are more likely to expand.
Possible solutions:
- Remind users of the value: Highlight the benefits they receive. For example, Instacart shows how many shopping hours users save per order, emphasizing the value proposition.
- Launch marketing campaigns around value: Conduct user research and publish articles that show how your product improves users' lives. Asana, for example, shares stories about how work management tools improve team productivity.
- Offer tiered subscription plans: Allow users to downgrade, encouraging them to adopt basic features before potentially upselling them later.
- Offer flexible billing and provide templates, education and onboarding services.. Offer monthly or quarterly billing to give users time to realize value before committing to a longer subscription, and provide onboarding tools to help users realize value quickly.
I found a cheaper or cost-cutting option: For customers who are price sensitive and are turning to a competitor simply for the lowest price, offering them a discount on the cancellation flow is a good option. option. ANDYou can save up to 20% ARR by creating discounts in the cancellation flow. What discount to offer in the cancellation flow will depend on three factors: 1) Cost of serving the customer; 2) Offer an acceptance rate. 3) Retention rate after offer expires.
By analyzing the “Is it too expensive” follow-up questions, we can see the importance of going beyond the superficial reasons for attrition. Understanding the root cause allows us to develop targeted solutions that truly address user needs and maximize the return on investment of our product development efforts.
As a product manager, I always read the comments left by users in various surveys and do an exercise like the one above to think of solutions and prioritize customer pain points. Let me know if you have questions. Let us create solutions that are customer-centric and at the same time can create sustainable businesses.
