Customer Churn Analysis: Understanding Why Your Customers Are Churning

Churn is a constant challenge for B2B companies, and it may even have you doubting the effectiveness of your customer journey.

While you understand the impact churn has on revenue, identifying potential churners early allows you to proactively intervene and prevent them from slipping away. This is where churn analysis steps in — it acts as your early warning system, highlighting trends and factors that could lead to customer dissatisfaction and ultimately, churn.

In this guide, we’ll categorize the different kinds of churn that impact B2B companies, and then offer ways to analyze, understand, and combat your churn issues.

2 Types of Churn That Impact B2B Companies

1. Voluntary Churn

Voluntary churn is the most common foe in B2B, and it occurs when a customer actively chooses to cancel their account or subscription. While this is (obviously) not a good sign, voluntary churn can happen for a variety of reasons. Identifying these reasons can help you address the root issues and prevent future churn.

When It’s Product-Related

• Lack of Value Realization: Customers just aren’t seeing the expected value or ROI from your product. This could be due to a mismatch between their expectations and the actual capabilities of the product, or a lack of proper onboarding and training leading to underutilization.
• Feature Gaps: Customers might find essential features missing or lack the functionality required to address their specific needs. This highlights potential product development opportunities, or the need for more targeted product communication.
• Performance Issues: Bugs, glitches, or slowdowns in your service can significantly hinder your customers’ experience and lead to frustration.
• Security Concerns: Data breaches, unreliable security practices, or lack of compliance features for a specific industry can raise red flags, especially in B2B where sensitive information is involved.

When Users Aren’t Adopting or Engaging

• Low Usage: Customers who rarely or never use your product are more likely to churn. This could indicate a lack of understanding of the product’s value proposition, difficulty with the user interface, a mismatch with their workflow, or anything else that would discourage them from using your product.
• Lack of Engagement: Even if they use the product, customers may not be actively engaged with its core functionalities. This could signify limited value perception or a failure to address their specific challenges.

When It’s Related to Customer Experience

• Poor Customer Experience: Negative interactions with customer service can significantly damage relationships and lead to churn. This could involve slow response times, unhelpful interactions, or a lack of empathy for customer concerns.
• Lack of Communication: Inadequate communication from your team’s end, whether on product updates, feature changes, or addressing concerns, can create a feeling of disconnection and ultimately lead to dissatisfaction.
• Unmet Expectations: If customer expectations, whether set during the sales process or during onboarding, are not met, disappointment can lead to churn.

When Your Pricing or Value Perception Disappoints

• Price Sensitivity: Customers might find the ongoing cost of your service too high, especially if they perceive the value they receive doesn’t justify the expense. This emphasizes the need for clearer value communication and potentially exploring flexible pricing models.
• Unclear Value Proposition: If customers struggle to understand the specific value your product delivers, they might hesitate to renew their contracts. This once again underlines the importance of clear communication about your product’s benefits and its alignment with their business goals.

2. Involuntary Churn

While voluntary churn may grab the spotlight, involuntary churn can be a silent culprit of lost revenue. If overlooked, it can have a significant impact on your bottom line. Let’s look at some of the common causes of involuntary churn.

Payment Failures

This is the most frequent culprit behind involuntary churn. In fact, 41% of subscription businesses said in a recent survey that “transaction failures” were their top churn concern. Expired credit cards, insufficient funds, or payment processing issues can lead to failed automatic payments, resulting in service disruptions and eventual churn if not addressed promptly.

Related: 5 Ways Vitally Helps Finance and Billing Teams Drive More Revenue

Account Closures

Mergers, acquisitions, or internal restructuring within a customer’s organization can lead to account closures, even if they were satisfied with your service.

Losing key supporters within a company (“champions” like admins or sponsors) is a major red flag for churn in any SaaS business, according to Jay Nathan, (former CCO at Higher Logic, current Head of Growth at Churnkey).

He explains that while users might initially be happy with the product’s value, a change in leadership can reveal any underlying issues with ROI or overall benefit. A new sponsor who hasn’t seen the initial positive results might be more easily swayed by a negative experience, leading to churn.

In short, even satisfied users can become vulnerable to churn if a key internal supporter leaves the company, highlighting the importance of building long-term relationships with various stakeholders across the organization.

Economic Downturns

In economic downturns, B2B customers might be forced to cut costs, leading to service cancellations across the board. Even if your service provides clear ROI, if it doesn’t fit neatly into the new scaled down budget, it could be on the chopping block.

For example, one of your flagship customers loves using your ad optimization software. However, next year’s budget involves investing more in SEO and organic growth, and vastly reducing the reliance on paid spend. This leaves your solution susceptible to being cut. Sometimes these things are simply out of your control.

Addressing These With a Churn Analysis Checklist

Now that we know the difference between voluntary and involuntary churn, we can create a plan of action that allows us to address these churn risks before it becomes a larger problem in your business. This can be planned with a churn analysis checklist and performed with your Customer Success software.

Step 1. Identify Segments and Trends

• Segmentation: Segmenting by industry and product tier is a good start, but you can take this a step further by analyzing customer size and contract length. This allows for a more granular analysis of churn drivers within specific groups.
• Trend Analysis: Analyze time-based variations. For example, identify if churn spikes occur seasonally or after product updates. This can help identify potential triggers for churn.
• Cohort Analysis: Compare churn rates of different customer cohorts acquired at different times. This can reveal issues specific to onboarding processes or product versions used by different cohorts.

Step 2. Analyze Churn Reasons

• Categorize Your Churn: Categorize churn reasons into themes like product dissatisfaction, pricing concerns, lack of support, and so on. This helps identify areas of opportunities and improvement, and allows you to see which themes are most prevalent.
• Focus on Open-Ended Responses: Encourage open-ended feedback during exit surveys/interviews to capture specific reasons and detailed narratives behind churn decisions.
• Analyze Churn Reasons by Segment: See if specific reasons for churn are prevalent in certain customer segments. This can help tailor retention strategies for each group.

Step 3. Analyze Usage Patterns

• Track Feature Adoption: Identify which features churned customers used heavily or not at all. This can reveal gaps in their understanding of the product’s value or potential product flaws that contributed to churn. More importantly, this can inform areas to tweak your onboarding process.
• Analyze User Engagement: Look at metrics like login frequency, time spent using the product, and completion rates of key tasks. Lower engagement could indicate a lack of value realization or difficulty in using the product effectively.
• Compare Usage Patterns Over Time: Analyze how churned customers’ usage patterns changed over time leading up to their cancellation. This could reveal a shift from active engagement to decreased activity, indicating a potential turning point where intervention could have prevented churn.

By going through this checklist and analyzing everything from customer demographics to product usage behavior and how they influence churn, you’ll be able to build the right automations and playbooks that allow you to address churn more proactively.

Alternatively, you can visit our Blueprints library with dozens of pre-built templates from Customer Success experts that help you achieve your CS goals using vetted best practices. For example, the Vitally Churn Report Template designed by Amelia Losciale helps Customer Success teams document and analyze reasons behind customer churn. 

Intended for use at any customer lifecycle stage, Amelia’s Blueprint facilitates the collection of critical information such as churn request dates, mitigation efforts, and specific reasons for churn, utilizing Vitally Account Traits for detailed customer profiles. The template is customizable, especially in the “Churn Reason” section, to suit various SaaS organization needs. It also supports retrospective churn analysis, helping teams identify and mitigate common churn causes.

By the way...Vitally's full-featured Customer Success platform has been built to help B2B SaaS companies prevent and predict churn by delivering world-class Customer Success operations and automation from a single platform. See how you can lower your customer churn rate by taking a guided tour of our platform today!