Trying to understand churn and the impact that it has on a business is one of the most important yet complicated issues companies face. Churn can be calculated in a myriad of ways, and for that reason can be difficult to measure or interpret properly.
Compounding the difficulty is that the stakes are high for getting the metric right. Churn represents lost business opportunities both now and in the future. A company that doesn’t properly understand its churn rate might quickly find itself in big trouble.
Understanding the Meaning Behind The Percentage
The most common mistake that community managers make when interpreting churn is that they focus solely on the percentage they have arrived at. The infamous question “is a x% churn rate bad?” is completely useless unless placed in the proper context.
In other words, understanding what is actually represented within that percentage is critical to knowing what you are talking about.
What Customer Experiences Are Included?
The most obvious component of a churn percentage is how it interacts with the members. Does the percentage being used include the relationship between gained and dormant accounts? Or does it focus solely on the number of dormant accounts within a given time period?
These are two completely different metrics, yet both have a tendency to appear simply as “churn.” Know the difference and know which one is being used.
Are We Talking Volume Of Interactions Or Number Of Community Members?
Another common mistake is a lack of critical thinking about what is actually churning. Churning highly active community members is a completely different metric than churning those with low activity levels.
Consider a community with eight members that are sporadically engaged and two large contributors who interact every day. Losing the eight sporadically engaged members would send the percentage of accounts that churned sky-high. In other words, a manager focused solely on the absolute volume of interaction might fail to grasp a systemic flaw because the two large contributors make it seem like everything is still doing fine.
Conversely, losing one of the large contributors will decrease interaction. If a community manager is focused solely on that number, they might fail to grasp that their elevated churn rate is due to just a few big contributors leaving - not a systematic problem with the overall health of the community.
Of course, this is obviously an oversimplification meant for illustration purposes, but the underlying concept is sound. The percentage value is secondary to understanding what that value is actually saying.
Identifying Churn Early-Warning Indicators
What community managers need to realize is that measuring churn in the above ways, while important, is like closing the barn door after the horse is already escaped. Sure, it’s good to know that the horse is gone. But what you really want to know is why the horse is gone and, more specifically, how you can prevent the next horse you’re going to buy from escaping.
The best way to do this is to interpret churn as a metric for looking forward. Churn interpretation should always been done with an eye towards not just understanding the what, but also, the why.
Look at the interactions churned community members took before leaving or going dormant across a large sample size. What patterns can you identify? This is known as activity churn, and identifying it is arguably the most critical way to interpret churn.
Remember, it’s good to know to keep the barn door closed. But understanding why it was open in the first place is what really needs to be understood. Once that’s done, damage can be identified and repairs undertaken before it opens again.
An Individualized Metric
No two communities are the same, and so no two community managers can take the same approach to interpreting churn. However, there are certain common threads that should serve as guidelines across the entire spectrum.
For starters, take the time to know what is being measured. From there, analyze the data with a forward-looking eye, searching for patterns that can be used to identify members at risk of churn.
Community managers that take this systematic approach will go a long way towards empowering themselves to keeping their community members engaged, and their overall communities thriving.