The Easiest Way To Manage Seasonal Churn

While all the festivities in Q4 means a boost in sales for many retailers, the threat of seasonal churn looms large for SaaS companies. Historically, Q4 is one of the most common times for increased subscription churn. Knowing that, there’s a lot you can do to prepare and reduce the impact on your businesses.

Keep reading to learn all about seasonal churn, why it’s so high at this time of year, and how to manage it with Churnkey’s help.

What Is Seasonal Churn?

Churn happens when customers cancel, fail to renew their subscription, or let their payment method fail. Also called defection, attrition, or turnover, churn is the opposite of customer retention. A high churn rate undermines a business’s ability to make a profit, affects ROI, and can impact your company’s valuation, too.

Churn is often measured in terms of annual goals with monthly stepping stones. Churn rates tend to fluctuate throughout the year, especially if a business is seasonal.

This is known as seasonal churn.

Seasonal churn can be regular or irregular: regular seasonality is when churn increases or decreases based on repeatable cycling events that happen at the same time each year—for example, winter, or “back to school.” The end of November through early January tends to be a particularly difficult time for businesses. Not only does churn tend to peak during these month, but growth tends to be much slower as well.

Irregular seasonality refers to events that affect different markets at different times—for instance, non-annual or regional sports events.

How To Measure Seasonal Churn

There are a few different ways to measure and analyze churn. While you can assess your churn rate quickly using our free churn rate calculator, to model seasonal churn, you need to measure churn monthly over several cycles, or years.

By mapping churn rate on a graph like the one below, you can identify the seasons in which you get extreme high and low points in your churn rate. Even if there’s clear seasonal churn, it’s still important to consider the data across your customer segments and factor in price increases or changes in features that may also be driving churn.

For greater insight into your business’s churn and seasonality, it’s useful to model your churn rate with the following formulas:

1. Your churn rate for the entire year could be skewed by high seasonal churn data, so measure your annual churn rate with a weighted average.

{[(A x B) + (C x D)] / (A + C)} x 100 = E

Where:

A = total customers in high churn period

B = churn rate in high churn period

C = total customers in low churn period

D = churn rate in low churn period

E = weighted average churn rate

1. Measure a change in churn rate in the context of seasonality to assess whether your seasonal churn is increasing or decreasing between cycles.

For example, to see if your seasonal churn rate was higher in December 2020 than in December 2021, use the following formula:

[(X - Y) / Y] x 100 = Z

Where:

X = churn rate in December 2021

Y = churn rate in December 2020

Z = change in churn rate

If Z is negative, your seasonal churn rate has decreased year-on-year (or period-on-period), a sign that your churn management processes are working. But if Z is positive, churn has increased, and you’ll need to take further steps to prevent cancellations.

Why Is Churn High In Late November & December?

Where regular customer churn is usually caused by poor onboarding, weak relationships with customers, and poor customer service, seasonal churn is affected by external events based on the time of year.

Why churn goes seasonal depends entirely on your business. For streaming services like Netflix, for example, voluntary churn may be higher in the summer with users cancelling in favor of traveling and spending time outside rather than watching TV.

With that said, many businesses will find seasonal churn is high in late November and December because:

• Budgets are tighter, particularly for consumers, equating to higher B2C SaaS cancellations
• A high proportion of annual plans renew at this time of year and many users may have inactive or want to cancel before a big renewal
• Changing habits, travel, and being busier overall might mean customers are using your product less

How To Manage Seasonal Churn With Churnkey

Once you have identified how seasonality is affecting your churn rate, the next step is to understand why, before learning to prepare for and combat seasonal churn.

Collect Intelligence On Seasonal Churn

To assess the “why” behind your churn rate, you need to collect qualitative data from cancelling users. Churnkey automatically asks your customers why they’re leaving with our built-in customizable surveys and notifies you when we uncover any trends. Using our cancellation insights, you can figure out what to do to persuade your customers to stay with you all year round.

Decrease Seasonal Churn with Segmented Cancel Flows

Creating cancellation flows is key to preventing churn and can save you big money in the long run. To prepare for seasonal churn with Churnkey, create segmented cancel flows to target users who you can consider to be at high risk of seasonal churn, based on:

• Billing intervals
• Subscription plans
• Trialing Customers
• Account age
• Customer usage data

Target users with billing periods, subscriptions, or trial periods ending in high seasonal churn periods. Use these segmented cancellation flows to collect further insights into why these users are leaving and to make tailored offers persuading them to stick around. Churnkey also lets you pass in you own custom data for further segmentation.

Decrease Seasonal Churn with Dunning (Failed Payment Recovery)

Since credit cards tend to fail at a higher rate during the holidays, you'll need to level up your failed payment recovery efforts. Generic dunning emails do a poor job of cutting through the noise of all the holiday emails your customers are receiving, so highly personalized recovery campaigns are critical to recovering payments at a high rate. You should also be prepared to offer discounts as an incentive to get customers to update failing payment methods. Churnkey supports both personalization and dunning email offers right out of the box.

Tactics To Combat Seasonal Churn

Having helped you identify which segments to target, Churnkey can then make dynamic offers to cancelling users to combat seasonal churn.

Offer Relevant Discounts

When a survey shows a user is cancelling because the price is too high, particularly if—say— they signed up during a discount period like Black Friday, this is a great opportunity to offer them the same or similar discount to persuade them to stay. When comparing this to the scenario where you’re asking these customers to renew at full price, you can see the power here.

Change Their Billing Interval

Perhaps a user isn’t prepared to pay up front for another year’s subscription. Offer them the chance to switch to a monthly billing interval instead.

Let Them Take A Break

For customers claiming they’re too busy to use your product right now, instead of letting them cancel completely, offer them a subscription pause instead. They don’t have to worry about payments during the holiday season and you don’t have to worry about losing a customer. It’s a win-win.

Offer Them a Secret Plan

Everyone loves getting exclusive offers, and secret / hidden plans are a great way to give users something to consider before they cancel. If a customer is prepared to cancel due to low usage over the holidays, why not offer them a plan that's not available on the marketing site where they'll be able to enjoy limited use at a better price.

Keep Seasonal Churn To A Minimum With Churnkey

Stop panicking about the threat of losing customers over the holidays and take advantage of our segmented cancel flows and failed payment recovery to automate your retention efforts. You’ll keep your customers happy and seasonal churn to a minimum.

Find out more with a demo or start combating churn now with a free trial!