WEBVTT 1 00:00:00.000 --> 00:00:06.200 Good morning everyone, happy Monday, Monday, Monday, Monday, Monday, Monday. 2 00:00:06.200 --> 00:00:10.640 I wanted to make a video today about something that I've been thinking about a lot and 3 00:00:10.640 --> 00:00:13.400 that I've been digging into, which is churn. 4 00:00:13.400 --> 00:00:18.160 Now, I know, before you're like, oh my gosh, this isn't about client acquisition, which 5 00:00:18.160 --> 00:00:19.600 means it's less interesting. 6 00:00:19.600 --> 00:00:26.320 FYI, if you look at charts of businesses in terms of business size, like revenue, you 7 00:00:26.320 --> 00:00:30.200 have the SMB, which is very small business owner, which is like solo printer. 8 00:00:30.200 --> 00:00:33.320 You have SMBs, which are small businesses, and there's typically brick and mortar business 9 00:00:33.320 --> 00:00:38.280 owners who are, you know, an owner with three to five employees, then you have mid market, 10 00:00:38.280 --> 00:00:41.600 which is where you're talking about, you know, 50, you know, 30, 15 employees, and then 11 00:00:41.600 --> 00:00:45.880 you've got, and that's kind of a wide range, and that can go up to several hundred, and 12 00:00:45.880 --> 00:00:48.480 then you've got enterprise, right, big corporations. 13 00:00:48.480 --> 00:00:52.400 And so what's interesting is that if you look at what everyone is focused at each of those 14 00:00:52.400 --> 00:00:57.520 levels, the people who are the most focused on acquisition and marketing and sales and 15 00:00:57.520 --> 00:01:01.640 all that stuff are bottom, bottom part of that ladder. 16 00:01:01.640 --> 00:01:04.880 And the top part of that ladder are the people who are most interested in activation, 17 00:01:04.880 --> 00:01:09.440 lifetime value, client engagement, things like that, happiness scores. 18 00:01:09.440 --> 00:01:12.640 And that should be some sort of an indicator to you of the people who make the most money 19 00:01:12.640 --> 00:01:15.440 are thinking about the things that the people who are not making the most money are not 20 00:01:15.440 --> 00:01:16.440 thinking about. 21 00:01:16.440 --> 00:01:21.760 So I'm going to make this because this is about churn, and about how some of my views 22 00:01:21.760 --> 00:01:25.240 are on churn have changed in digging more into this whole software world that we're 23 00:01:25.240 --> 00:01:26.240 getting into. 24 00:01:26.240 --> 00:01:28.680 And so hopefully, I think you'll enjoy it because it's going to make you money. 25 00:01:28.680 --> 00:01:29.680 All right. 26 00:01:29.680 --> 00:01:31.880 So is churn dead, right? 27 00:01:31.880 --> 00:01:36.680 So we know if you've listened to any of my stuff that lifetime value is like all I have 28 00:01:36.680 --> 00:01:39.880 says about, and it's all I care about, and I try and find as many ways that we can multiply 29 00:01:39.880 --> 00:01:42.280 any piece of lifetime value for customers, right, which is both how much they're spending 30 00:01:42.280 --> 00:01:44.200 and for how long they're spending. 31 00:01:44.200 --> 00:01:50.120 But one of the issues that comes up is around churn is one tracking it, unless people suck 32 00:01:50.120 --> 00:01:51.120 it tracking it. 33 00:01:51.120 --> 00:01:54.680 But let's assume that you actually do track it well. 34 00:01:54.680 --> 00:01:59.600 Is the problem is that it's a lagging indicator, which means that by the time you see that 35 00:01:59.600 --> 00:02:06.160 your churn sucks, it means that you've got issues that happened months prior. 36 00:02:06.160 --> 00:02:11.560 And so when you want to make a change to correct churn, it takes three, you know, it takes 37 00:02:11.560 --> 00:02:13.920 three months plus to actually see it happen. 38 00:02:13.920 --> 00:02:18.840 And we've seen it on our, in our businesses when, when the gyms make start using the 39 00:02:18.840 --> 00:02:22.640 five-course retention, typically the first month, they're churned doubles because what happens 40 00:02:22.640 --> 00:02:23.640 is you shake the tree, right? 41 00:02:23.640 --> 00:02:26.200 You reach out to all these people and they're like, oh, yeah, I meant to cancel that. 42 00:02:26.200 --> 00:02:28.800 And so your churned doubles month one, you're like, what the heck? 43 00:02:28.800 --> 00:02:33.520 And then month two, it takes it from that top line and then it cuts it in half, right? 44 00:02:33.520 --> 00:02:38.400 So it's like, let's say somebody's at eight percent churn right now, month over month. 45 00:02:38.400 --> 00:02:42.560 They go from eight to 12, typically, so it takes you guys about 50 percent, excuse me. 46 00:02:42.560 --> 00:02:46.060 So eight to 12, and then month two, it goes from 12 to six, and then month three goes 47 00:02:46.060 --> 00:02:47.980 from six to three, right? 48 00:02:47.980 --> 00:02:51.240 And then it stays at sub three, after they do that, but it takes 12 weeks and it takes 49 00:02:51.240 --> 00:02:52.980 a lot of intestinal fortitude, right? 50 00:02:52.980 --> 00:02:53.980 Some gonads. 51 00:02:53.980 --> 00:02:57.980 And gonads, by the way, are asexual, so that's, females have gonads too. 52 00:02:57.980 --> 00:02:58.980 I found out now. 53 00:02:58.980 --> 00:02:59.980 Anyways. 54 00:02:59.980 --> 00:03:00.980 That's not sexist. 55 00:03:00.980 --> 00:03:01.980 Anyway. 56 00:03:01.980 --> 00:03:10.300 And so what we are now focused on within our business, slash business is, is not the churn, 57 00:03:10.300 --> 00:03:13.180 but what is the leading indicator of churn, right? 58 00:03:13.180 --> 00:03:16.620 What are the things that happened before someone's going to churn so that we can correct 59 00:03:16.620 --> 00:03:19.620 the leading indicator and we can see that happen faster? 60 00:03:19.620 --> 00:03:23.940 We can also make that the goal of the onboarding experience, the first one or two weeks of 61 00:03:23.940 --> 00:03:27.700 someone coming in, rather than waiting to see if someone churns and then realizing that 62 00:03:27.700 --> 00:03:29.580 we have a massive issue, right? 63 00:03:29.580 --> 00:03:34.940 And so there's a couple of things that can massively affect churn on the front end. 64 00:03:34.940 --> 00:03:39.020 And so what we're going to do is break down what three of those things are, right? 65 00:03:39.020 --> 00:03:40.700 So the first one is expectations, right? 66 00:03:40.700 --> 00:03:44.660 So when a customer is coming in the door, the expectations of both the marketing and 67 00:03:44.660 --> 00:03:49.100 the salesperson of the result they're going to have and then also the experience they're 68 00:03:49.100 --> 00:03:50.780 going to have to get there. 69 00:03:50.780 --> 00:03:56.260 And so in an ideal world, you want to sell cold, meaning selling hot is overpromising, 70 00:03:56.260 --> 00:03:58.660 promising the world, doing anything to close the deal. 71 00:03:58.660 --> 00:04:03.380 The reverse of that is kind of unsettling, selling against people who sell like that to 72 00:04:03.380 --> 00:04:05.380 try and lower expectations of the prospect. 73 00:04:05.380 --> 00:04:08.220 And you're not doing that because you don't want to over-deliver, you totally want 74 00:04:08.220 --> 00:04:09.220 to over-deliver. 75 00:04:09.220 --> 00:04:12.340 The thing is, if you set the expectations to the moon, even if you do over-deliver, 76 00:04:12.340 --> 00:04:16.820 you may still be below the super hot sale that a salesman made, right? 77 00:04:16.820 --> 00:04:20.900 And so what happens is, and we had this early on in gym launch, we had people make 20 78 00:04:20.900 --> 00:04:24.220 grand in the first month using our stuff, but they were like, I didn't make 50, I thought 79 00:04:24.220 --> 00:04:25.220 I was going to make 50. 80 00:04:25.220 --> 00:04:26.780 And we're like, in what world? 81 00:04:26.780 --> 00:04:27.780 How can we do this? 82 00:04:27.780 --> 00:04:31.380 But it was really our fault because we had set, or our sales guy set set, or our marketing, 83 00:04:31.380 --> 00:04:34.540 because we were marketing all these testimonies with people making all this money. 84 00:04:34.540 --> 00:04:38.460 The marketing set, an unstated precedent, that this is how much they were going to 85 00:04:38.460 --> 00:04:39.460 make. 86 00:04:39.460 --> 00:04:44.420 And so to the same degree, if you're doing weight loss, you're going to show some crazy 87 00:04:44.420 --> 00:04:47.780 transformations, but you also want to show really kind of mediocre transformations. 88 00:04:47.780 --> 00:04:52.620 You want to talk about average results, maybe even the bottom 30% results. 89 00:04:52.620 --> 00:04:55.860 And so we've started to talk about this in our sales calls, where these are the actual 90 00:04:55.860 --> 00:04:56.860 number. 91 00:04:56.860 --> 00:04:59.380 We're just trying to be as transparent as possible. 92 00:04:59.380 --> 00:05:03.060 These are the numbers, because we know that if we're transparent, then what happens 93 00:05:03.060 --> 00:05:06.980 is the expectations are properly set, and so then we can actually over-deliver, and then 94 00:05:06.980 --> 00:05:10.860 we can actually delight a customer, rather than just meeting expectations, even though 95 00:05:10.860 --> 00:05:13.260 what we did was actually amazing, right? 96 00:05:13.260 --> 00:05:15.140 And so the first thing is expectations. 97 00:05:15.140 --> 00:05:18.780 The next thing is a huge breakthrough that I had, which is about qualifications. 98 00:05:18.780 --> 00:05:24.620 And so the, like, I don't know if I share this with you guys, but at Gimlaunch, we've 99 00:05:24.620 --> 00:05:27.340 massively increased the qualifications of who we work with, right? 100 00:05:27.340 --> 00:05:29.660 And that's because I did a 90-day experiment. 101 00:05:29.660 --> 00:05:34.300 We took on a bunch of people who were, I would say, lower on the business acumen scale. 102 00:05:34.300 --> 00:05:37.620 Like, they were solar printers, people starting out, et cetera, and our term went through 103 00:05:37.620 --> 00:05:41.060 the roof, the amount of payroll hours that I was ahead of my guys working, which just 104 00:05:41.060 --> 00:05:42.060 went super high. 105 00:05:42.060 --> 00:05:44.420 It's just like, all of it didn't work out, right? 106 00:05:44.420 --> 00:05:47.780 And so we went totally other direction, we're like, okay, let's be super, super high 107 00:05:47.780 --> 00:05:50.140 qualifications, and what we bring in. 108 00:05:50.140 --> 00:05:53.780 And what happened was, in the first four weeks, between before and after, we went from 109 00:05:53.780 --> 00:05:57.860 22 escalation calls to zero, okay, after we implemented the change. 110 00:05:57.860 --> 00:06:01.340 The average revenue that was able to bring in for those guys in their first four weeks 111 00:06:01.340 --> 00:06:04.300 went from six to 30. 112 00:06:04.300 --> 00:06:09.700 We five X the results of the product by changing the qualifications of the person coming in. 113 00:06:09.700 --> 00:06:15.180 All right, so if you think about that, if you can change the result that you were producing, 114 00:06:15.180 --> 00:06:20.060 simply by changing the people that you were bringing in, that has massacrarmic ramifications. 115 00:06:20.060 --> 00:06:26.260 And these people, mind you, required less effort because they were just more able. 116 00:06:26.260 --> 00:06:30.140 Real quick guys, you guys already know that I don't run any ads on this and I don't sell 117 00:06:30.140 --> 00:06:31.140 anything. 118 00:06:31.140 --> 00:06:33.980 I can only ask that I can ever have your guys that you help me spread the word so we 119 00:06:33.980 --> 00:06:38.140 can have more entrepreneurs, make more money, feed their families, make better products, 120 00:06:38.140 --> 00:06:40.900 and have better experiences for their employees and customers. 121 00:06:40.900 --> 00:06:45.660 And the only way we do that is if you can rate and review and share this podcast. 122 00:06:45.660 --> 00:06:48.980 So the single thing that I have to do is you can just leave a review, take 10 seconds 123 00:06:48.980 --> 00:06:52.420 or one type of the thumb, it means the absolute will to me, and more importantly, it may 124 00:06:52.420 --> 00:06:56.460 change the world to someone else. 125 00:06:56.460 --> 00:06:59.820 And so if you're looking at the three things that I was talking about, the first one is 126 00:06:59.900 --> 00:07:01.300 expectations, right? 127 00:07:01.300 --> 00:07:05.500 So psychologically we can over-deliver and what the marketing needs to look like and 128 00:07:05.500 --> 00:07:10.100 that sales conversation and the experience immediately afterwards, which is the onboarding 129 00:07:10.100 --> 00:07:11.100 experience, right? 130 00:07:11.100 --> 00:07:13.260 And I'll get to that as the third piece. 131 00:07:13.260 --> 00:07:15.580 Who you're bringing in the door, who you're allowing to say yes. 132 00:07:15.580 --> 00:07:18.060 So that's why you're not selling too hot because you're like, you know what? 133 00:07:18.060 --> 00:07:21.580 It becomes more of an interview process of, are you really a good fit for us? 134 00:07:21.580 --> 00:07:25.140 Because we only work with these types of people because we know with these types of people 135 00:07:25.140 --> 00:07:27.100 we can help them crush it, right? 136 00:07:27.100 --> 00:07:30.420 And so if you can get super selective on that, then you can have these huge outcomes and 137 00:07:30.420 --> 00:07:34.340 what happens is your reputation also only gets stronger and reinforced because the only 138 00:07:34.340 --> 00:07:38.580 people you serve are good people and they bring good people rather than having kind of 139 00:07:38.580 --> 00:07:43.180 shit people and then they kind of don't bring shit people but then they go and bash your 140 00:07:43.180 --> 00:07:44.820 reputation, right? 141 00:07:44.820 --> 00:07:45.820 Because like they're not able, right? 142 00:07:45.820 --> 00:07:47.980 They're just not very able people. 143 00:07:47.980 --> 00:07:48.980 And so if you're thinking about that. 144 00:07:48.980 --> 00:07:51.860 Now the third one and this is the big one that I was referencing earlier is you have 145 00:07:51.860 --> 00:07:54.260 to figure out what your activation point is, right? 146 00:07:54.260 --> 00:07:56.260 So an example with this is Netflix. 147 00:07:56.260 --> 00:08:02.340 So when they have shows, they can measure how addictive a show is by where the retention 148 00:08:02.340 --> 00:08:03.340 point is, right? 149 00:08:03.340 --> 00:08:06.460 So you can call it activation call, retention point, whatever you want to call it, right? 150 00:08:06.460 --> 00:08:12.380 But there's a key point in most businesses where after something happens, the lifetime value 151 00:08:12.380 --> 00:08:13.620 massively expands. 152 00:08:13.620 --> 00:08:17.700 So for ClickFunnels for example, as soon as they get someone to have their own domain 153 00:08:17.700 --> 00:08:22.460 that says like, you know, Alex.com and it has a landing page, that person stays like five 154 00:08:22.460 --> 00:08:23.780 times longer, right? 155 00:08:23.780 --> 00:08:28.220 And so their whole objective rather than looking at churn is how can we get as many people 156 00:08:28.220 --> 00:08:31.940 to this retention point as seemingly possible because they're leading indicator rather 157 00:08:31.940 --> 00:08:36.100 than a lagging indicator so they can see improvements almost immediately based on process 158 00:08:36.100 --> 00:08:38.260 and change, right? 159 00:08:38.260 --> 00:08:43.500 In Netflix, they know that a show is really successful if the retention point or the likelihood 160 00:08:43.500 --> 00:08:47.860 that someone watches the entire show all the way through the sooner they can get that 161 00:08:47.860 --> 00:08:48.860 episode. 162 00:08:48.860 --> 00:08:53.220 I think breaking bad like episode three or episode four, if you make it to episode three 163 00:08:53.220 --> 00:08:57.140 or four, the likelihood you watch all five seasons is like 70 percent, all right? 164 00:08:57.140 --> 00:09:01.580 And so there's a point that as soon as they can get that, as soon as they can get a customer 165 00:09:01.580 --> 00:09:06.300 to that point, you push them over, then it allows you to much more quickly iterate on 166 00:09:06.300 --> 00:09:09.260 how you're retaining customers and increasing lifetime value. 167 00:09:09.260 --> 00:09:15.060 And so I know Orange Theory, because they announced this at one of the summits that they did, 168 00:09:15.060 --> 00:09:19.140 that they figured out that for them, for their business, now they have different businesses 169 00:09:19.140 --> 00:09:23.940 than a more weight loss centered business, big, big caveat here. 170 00:09:23.940 --> 00:09:26.980 They're a workout experience based business, very different than a weight loss business, 171 00:09:26.980 --> 00:09:29.980 just like throwing it out, but they figured out that if they could get someone to work 172 00:09:29.980 --> 00:09:33.940 out five times in the first month, that the likelihood that the person's going to stay 173 00:09:33.940 --> 00:09:35.580 was be significantly higher, right? 174 00:09:35.580 --> 00:09:39.500 And so that was there big, that's where they funnel a lot of their attention towards 175 00:09:39.500 --> 00:09:42.700 is getting people to work out that fifth time, right? 176 00:09:42.700 --> 00:09:48.420 And so for you, in your business, if you can look at the people who are the most successful, 177 00:09:48.420 --> 00:09:52.260 the easiest thing to do is if you just ran, if you're running a front-end promotion 178 00:09:52.260 --> 00:09:55.060 right now, you're running a challenge, you're running a trial, you're running a whatever, 179 00:09:55.060 --> 00:09:56.060 right? 180 00:09:56.060 --> 00:10:00.020 Look at the people who actually succeeded, right? 181 00:10:00.020 --> 00:10:02.820 People who converted, and then you can also look at the people who stayed for six months, 182 00:10:02.820 --> 00:10:06.420 and you can look at both those as cohorts, as groups of people, and look at the actions 183 00:10:06.420 --> 00:10:08.980 that happened before that, right? 184 00:10:08.980 --> 00:10:13.540 So if you're looking at all the people who converted into the end of your challenge, 185 00:10:13.540 --> 00:10:18.100 for example, whether it's a detox or whatever, if you know that all of those people made 186 00:10:18.100 --> 00:10:22.420 it in for the first two weeks, and they came in six times or whatever, then the likely 187 00:10:22.420 --> 00:10:26.180 that, and then you can see all the people who canceled didn't do that, or didn't continue 188 00:10:26.180 --> 00:10:29.060 had that happen, then you know that that is your activation point. 189 00:10:29.060 --> 00:10:32.180 Now, the thing is, is that this is a huge aha moment for virtually every business. 190 00:10:32.180 --> 00:10:35.700 So you're not going to get it on the first try, and there's a reason that companies, 191 00:10:35.700 --> 00:10:38.660 as soon as they figure out their activation point, they explode, right? 192 00:10:38.660 --> 00:10:41.940 Because then it gives you something that you can quickly iterate off of, that you know, 193 00:10:41.940 --> 00:10:45.140 you can drive everyone towards, which is going to multiply left to right, rather than 194 00:10:45.140 --> 00:10:48.020 the constantly playing in the rear view mirror with churn, all right? 195 00:10:48.020 --> 00:10:52.340 And so churn is important so that you know that there's a problem, but it is very difficult 196 00:10:52.340 --> 00:10:54.580 to implement solutions to try and fix churn. 197 00:10:54.580 --> 00:10:58.900 Now, like at gym lunch, we have the five horsepower attention, and we have figured out how to do that, 198 00:10:58.900 --> 00:11:01.380 right? And so we reverse engineer that into a process. 199 00:11:01.380 --> 00:11:04.900 That being said, there are probably things that are much sooner in the experience, 200 00:11:04.900 --> 00:11:09.700 like the sale, how they are sold, and then the experience they have when they're onboarded, 201 00:11:09.700 --> 00:11:13.540 right? Like do they know how to check, like did someone say, like all of that, all that stuff 202 00:11:13.540 --> 00:11:16.980 that happens super early on, is typically when customers are actually choosing 203 00:11:16.980 --> 00:11:20.740 or making the decision of whether or not they're going to stick with the business in a long term, 204 00:11:20.740 --> 00:11:25.860 right? And so the two times that customers are really making decisions early on 205 00:11:25.860 --> 00:11:30.100 is between the sale and when they onboard or when they start, right? 206 00:11:30.100 --> 00:11:34.900 And then the actual onboarding experience, the first real beginning of them receiving value. 207 00:11:34.900 --> 00:11:38.900 In those two time periods is when the majority of customers are actually making their decision, 208 00:11:38.900 --> 00:11:41.940 believe it or not, whether they're going to come back and stick with your business. 209 00:11:41.940 --> 00:11:45.300 And so despite the fact that they paid you, they're actually not, they're making 210 00:11:45.300 --> 00:11:48.500 decision of whether they want to continue to pay you for an extended period of time. 211 00:11:48.500 --> 00:11:52.660 So the sale really begins after the sale, because what we're shooting for is business is lifetime 212 00:11:52.660 --> 00:11:57.540 value, right? We make sales to get customers, we don't get customers to make sales, right? 213 00:11:57.540 --> 00:12:00.660 So it's an important switch in terms of how you're thinking through it. 214 00:12:00.660 --> 00:12:03.540 So is churn dead? Absolutely not. I just needed a good headline. 215 00:12:04.500 --> 00:12:10.180 But what you were tracking, and this is an iterative process, meaning you try multiple times to 216 00:12:10.180 --> 00:12:16.340 try and reverse engineer it, is if you can figure out what the activation point is in your business, 217 00:12:16.340 --> 00:12:21.220 where if this one thing happens, then the likelihood they stay significantly higher, 218 00:12:21.220 --> 00:12:26.260 then that is where all of your attention, all of your resources, everything you talk about in your 219 00:12:26.260 --> 00:12:30.180 in your weekly team huddles us, how many people did we get through attention point, right? 220 00:12:30.180 --> 00:12:34.500 Rather than rearview mirror, hey, we had x-turn, what are we going to do about it? 221 00:12:34.500 --> 00:12:40.660 Because churn is really an outcome, it's an it's an output, but the process change has to 222 00:12:40.660 --> 00:12:46.740 affect the the cause, and the cause is we have to get more people to this activation experience 223 00:12:46.740 --> 00:12:50.980 so that we can actually keep them longer and multiple after that value. So I hope that was 224 00:12:50.980 --> 00:12:55.460 valuable for you. Maybe you have an operations manager or someone like that, tagging this, 225 00:12:55.460 --> 00:12:59.140 if you're listening to the podcast and leaving a nice review, if you found that valuable, 226 00:12:59.220 --> 00:13:04.100 tell your friends, Alex's podcast.com. Anyways, having an amazing day guys, happy 227 00:13:04.100 --> 00:13:17.380 Monday, Monday, and keep being awesome. Lots of love. Thank you, churn. All right, bye.