As discussed in a prior section, churn is another word for user loss.
Your churn rate is the number of users you can expect to lose during a predefined time period on average.
The inverse of churn is called retention – which is the percentage of users you can expect to stick around during the same predefined time period.
Just as churn is your bitter enemy, retention is the foundation of all growth.
Think of your growth as a bucket of water.
You’re currently working very hard to fill it up (with user acquisition), but then you notice there’s a hole in your bucket that’s leaking water (i.e. your churn rate).
You try to plug it completely, but no matter what you do, this hole will always be there.
As your bucket of water leaks, three scenarios may happen:
Okay, I’m obviously working toward the third scenario. But before we get there, you’re probably asking yourself one question:
“What does my churn rate have to do with virality?”
Well, let me tell you.
First and foremost, we want virality because we want growth.
Growth only happens when two things take place:
As you saw in the chapters about carrying capacity (here and here), without a solid retention rate, all growth will stop.
It doesn’t matter how crafty or creative you are with your acquisition efforts, how revolutionary you believe your product to be, or how often your mom tells you how special you are – growth is a very simple if/then statement.
IF acquisition rate > your churn rate, THEN growth occurs.
Based on this, virality and churn are related in a few ways:
In previous chapters, we’ve gone over how viral cycle time is the most important viral KPI. This included showing how much of an impact cycle time can have on your growth.
We then discussed how impactful focusing on your viral factor (K) can be once you’ve optimized ct.
While these are all strong examples of viral KPIs, they both rely on the king of ALL growth KPIs – which is your churn rate.
Having a stellar cycle time and K factor may result in incredible growth for a while, but you’ll quickly level off.
To give yourself the best chance of growing over a longer period of time, your energy is best spent focusing on decreasing your churn rate.
You can decrease churn by:
Obviously, there are more of these, and they’re all case by case – but this should get you started down the right track.
Churn is typically measured using cohort analysis.
In other words, showcasing the number of users who have churned over set time intervals relative to the time they were acquired.
For example, say your churn rate over a set period of time is 50%. If you start with 3k users, when that predefined period is over, you’ll be left with 1.5k users.
If you’re not closing in on saturation and you haven’t yet approached your carrying capacity, many of these lost users will be replenished with new traffic and new users.
When you DO hit saturation, and your carrying capacity, adding users at the same rate will no longer help plug the leaking bucket.
On the other hand, if your churn rate is very low, you WILL still see a userbase decline when you hit saturation.
It just won’t be nearly as pronounced, and you should have time to scramble and compensate to continue to grow.
The takeaway is to keep up to speed on your carrying capacity as frequently as possible, and you shouldn’t have to scramble as you’ll know exactly when to increase acquisition velocity.
What happens when all the water leaks out of your bucket?
Take it from me, it’s not good.
However, knowing what the worst-case scenario looks like is often the best way to avoid it.
So let’s take a look at what happens when you “jump the shark” in our next chapter.
There exists a cataclysmic event for any business that, when reached, will surely spell the end of your happy days.
How do you keep from getting swept up in this perfect storm of awfulness? Continue onwards to find out.
In the meantime, hit me on Twitter, Instagram, and LinkedIn!