Today, the true yardstick for success is hanging onto people once you get them.
Two status from a recent Adobe study makes this argument plain as day:
In the US, 40% of revenue comes from returning or repeat purchasers, who represent only 8% of all visitors
Marketers in the United States and Europe must bring in 5 and 7 shoppers, respectively, to equal the revenue of 1 repeat purchaser.
This second bullet point is even more exaggerated for subscription-based products, because churning existing users erodes revenue faster than you can replace it.
Josh Pigford of Baremetrics calls churn “a literal cancer to your revenue growth.”
To back up this claim, he uses an example that shows how a 13% churn rate vs. a 5% one, with all else being equal, can literally halve your revenue.
A 13% churn rate might only equal a $36,871 MRR:
While a 5% churn rate would yield a $62,175 MRR:
“If your churn isn’t in the single digits, it’s absolutely the only thing you should be focusing on fixing right now,” recommends Josh.
This topic is near-and-dear to Josh’s heart because Baremetrics was staring at 10% user churn and 13% user churn just a few years ago.
After doubling-down their focus with methods we’ll discuss later in this guide, they were able to get “a 68% reduction in user churn to 3% and a 63% reduction in revenue churn down to 5%.”
This is why retention is critical in today’s world.
Profitability comes from repeat purchases.
That could mean bringing users back to an ad-supported site without them requiring any more of your ad budget, or getting them to commit to a subscription-based purchase.
Churn, which is the opposite of user retention, has the single-handed power to ruin all that.
Churn forces you to go back into the marketplace to spend more to replace revenue, first, before you can ever grow.