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Google: 52% of SMB Customer Churn Is Controllable, 48% Is Not

I attended a private Google “Grow with AdWords” partner event in Miami yesterday. This is the first time I had attended.

It was very interesting on many levels: who was there, what was discussed on the stage and off. I’m not sure what I’m allowed to talk about and what I’m not. However, one of the things that was striking to me was a breakout presentation Google gave about small business advertiser churn. (I’m finishing a report using Vendasta data so I’m immersed in this issue right now.)

It was clear Google has done considerable research around this issue. In addition, the company has developed something like a churn-warning tool with more than 200 signals to help partners and sales organizations identify potential churn before it happens. I didn’t see the tool in action (or screens of it) but it’s a fascinating thing I hope to learn more about.

One part of the churn presentation that was very interesting involved the statement embodied in the headline: 52% of churn is controllable, 48% is not. In the latter category Google includes things like business failures, campaigns that are for intentionally limited periods (i.e., seasonal) and several other scenarios. These are things that the sales organization can probably not change or impact.

Google has a definition of churn that is specific to AdWords and may not be identical to the way others think about it. It concerns a period of AdWords account inactivity.

However the the 48% “uncontrollable churn” figure is a big number. It means that there are large numbers of SMB account terminations that shouldn’t be factored into calculating a churn number. On the other had, the 52% “controllable churn,” Google said that these customer losses are entirely preventable.

The top reason given for churn involves a lack of perceived ROI. This has been discussed or found in other surveys and anecdotal conversations with vendors. Missing ROI may be about campaign performance but it may be as simple as the SMB not actually seeing the right data. Google discusses this as “reporting quality”: are business owners actually seeing the campaign data and in a form they can digest?

The second biggest churn factor Google identified was customer satisfaction/customer service. While this might be a matter of common sense, many companies don’t touch their customers enough or have processes in place to retain them.

I wanted to share those numbers because there’s so little concrete churn data in the market. Even the definition of what should be considered churn is somewhat controversial.

What are your thoughts? Does this 52% “controllable churn” surprise you? Does it strike you as low or high? In other words, does the agency or sales organization have more control over churn than that or less?

6 Responses to “Google: 52% of SMB Customer Churn Is Controllable, 48% Is Not”

  1. Perry says:

    Identifying time-limited campaigns as churn seems downright silly.

    Ad spending SHOULD follow seasonality and the situational demand needs of a business, and the ending of a scheduled campaign or an ad-hoc campaign should not be counted as churn – which intuitively implies leaving a product or service.

    By example, we turn on and off campaigns in Facebook and Twitter every single day to optimize and continually adjust on our user acquisition.

  2. admin says:

    How would you define it — a definitive “hell no we won’t renew”? What’s the right definition of churn?

  3. David Mihm says:

    Perry, I completely agree with you. SMBs don’t care about “churn,” they care about advertising when they need business, and saving money when they don’t need business. All of the focus on churn is purely for VC and other investors’ benefit.

    I’m not saying it’s a misleading number but some combination of net promoter and annualized spend is I would directionally be a better metric to pay attention to.

  4. Greg Sterling says:

    David: You’re probably right . . . there’s another set of metrics that probably should be developed that are more SMB-centric. But customer retention is one of the key benchmarks in the industry. Net promoter has been discussed as an alternative.

  5. Bryan Sirak says:

    I find all the comments interesting, as a full-service digital marketing we consider churn rate as when a client no longer retains our services, fortunately, we have less than a 5% churn rate, and we require no contracts it’s always been a month to month service, when a client leaves it is normally as simple as we did not provide a Sufficient ROI. and we have discussed it with a client months in advance.
    Turning on or off a campaign for a client should never be considered churn unless client is leaving.

  6. Greg Sterling says:

    It may be customer service that’s keeping your churn so low? What about that?

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