AI Knows Your Customers Are Leaving (Before You Do)

In business, we constantly predict the future: will sales soar, will customers stay loyal? We rely on metrics, but not all are equal. Understanding leading and lagging indicators is crucial for effective decision-making, particularly for predicting churn.

Recently, FunnelStory introduced Needle Movers, the most powerful way to reduce churn by discovering and mitigating the risk of churn 3 to 6 months in advance. In the article below, we explain how that works.

The Basics: Leading vs. Lagging

Think of it like driving. Lagging indicators are like looking in your rearview mirror – they tell you where you've been. Leading indicators are like looking through the windshield – they show you where you're going.

Leading Indicators:

1. Predict future performance or trends.

2. Proactive – they allow you to take action before problems arise.

3. Examples:

   1. Number of new sales leads (predicts future revenue).

   2. Employee training hours (indicates future productivity).

   3. Housing permits (predicts real estate market trends).

Lagging Indicators:

1. Reflect past performance or outcomes.

2. Reactive – they confirm trends after they've happened.

3. Examples:

   1. Revenue and profit (measure past financial success).

   2. Customer churn rate (indicates past retention issues).

   3. Unemployment rate (shows past economic conditions).

Both types of indicators are essential. Lagging indicators confirm if your strategies worked, while leading indicators help you adjust your course before it's too late.

The Churn Prediction Trap: Lagging Indicators in Disguise

Now, let's talk about churn. Many legacy customer success platforms rely heavily on "health scores." These scores, often based on product usage and engagement, are essentially retention scores. And here's the problem: they're lagging indicators.

Think about it. By the time a customer's health score flashes red, the damage is often done. They've already disengaged, and you're left scrambling to salvage the relationship. You're reacting, not preventing.

The Proactive Solution: Leading Indicators of Churn

True forward-looking churn analysis focuses on leading indicators. These are the subtle signals that customers send before they decide to leave.

Conversations are Key:

1. Think about your customers' conversations: chats, Slack messages, emails, meeting notes, and summaries.

2. These conversations reveal valuable insights into their evolving sentiment.

3. Are they expressing concerns about pricing, product bugs, or competitive offerings?

4. Are they raising high-priority support tickets?

5. Are they expressing adoption concerns or fet requests?

Understanding Business Dynamics:

1. Understanding the overall business dynamics that may drive churn is also essential.

2. A business could be experiencing employee turnover, facing a poor quarter, or generally underperforming.

3. Conversely, a business might have recently secured funding, be in a hiring phase, and be enjoying a successful quarter.

4. Your champion might have left the company or their roles might have changed.

These are the leading indicators that can help you predict churn before it happens. Customers go through phases of product adoption. Initially, they explore, then they express opinions. It is in this opinion phase that early indicators are found.

FunnelStory AI: Leading Indicators with AI-powered Needle Movers

FunnelStory is revolutionizing churn prediction by focusing on these crucial leading indicators. We've filed a patent on our unique technology that analyzes usage, conversation, and business intelligence data to identify early warning signs of churn. We call them Needle Movers.

These needle movers are leading indicators of churn, derived from your historical customer churn data, broken down by usage, conversation and business intelligence patterns, delivered to the CSM 3-6 months before the risk is flashing as red.

This allows us to move beyond reactive retention scores and provide proactive insights that empower businesses to:

1. Identify at-risk customers early.

2. Address concerns before they escalate.

3. Mitigate churn and build stronger customer relationships.

By focusing on leading indicators, you can shift from reacting to churn to proactively preventing it. It's time to look through the windshield, not just the rearview mirror.