New Report on SMB Churn You’re Probably Not Going to Agree With

SMB local

I’ve written a new report about SMB advertiser churn, using Vendasta data. The report is called SMB Advertiser Churn: New Data for an Old Industry Problem. It’s free.

The report doesn’t cover PPC/SEM. However it uses data from more than 275,000 SMB accounts across Vendasta’s partner base, which include directory publishers, TV providers, newspapers, radio and pure-play digital sellers. All sell a number of services and products to local business owners.

The report looks at six churn variables:

  1. number of products sold
  2. product pricing
  3. vertical vs. horizontal sales tactics
  4. media category track record
  5. advertiser category track record
  6. service model (i.e., DIY vs. Do-It-for-Me)

Other potential churn variables, such as customer service quality and contact frequency, were harder to isolate in the data and so not considered in this report. Of the six identified churn variables only “number of products sold” appeared not to impact retention rates. All others appeared correlated with churn. The most prominent factors correlated with churn were product pricing, service model and sales strategy (vertical vs. horizontal).

As we all know from high-school science classes, “correlation does not equal causation.” And while a number of findings seem to fly in the face of conventional wisdom regarding SMB churn it’s important to take a moment to at least consider and debate some of the findings.

I’d be very curious to hear what you thought of the findings — whether you agree or disagree and why. Download the report here (reg. req’d).

At LSA 16 Google is going to present some very interesting data regarding churn and retention. Some of it is pretty eye-opening — like the opportunity for winbacks that most providers never pursue. There will also be a discussion of the evolution of the sales model and the challenges of differentiating in a “commodity marketplace.” 

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2 Responses to “New Report on SMB Churn You’re Probably Not Going to Agree With”

  1. Larissa says at

    Greg, thanks for sharing this study. I found that higher spenders churning more did seem to be against common sense, but this may represent a shift in their perception of the product’s value; for instance they are no longer perceiving an increase in value that is proportional to the increase in price of the product/service. 

    For me the most interesting part was the service model. DIY marketers definitely have different expectations (perhaps lowered) and tend to be more flexible with the time it takes to see results. They ‘freak out’ less! Perhaps it is because DIY products have a value proposition that is well transmitted, whereas the DIFM customer wants to see more ‘quick wins’ and expects a solution that immediately performs well (because often this is exactly how they are marketed), and feels the disappointment and ‘wasted money’ when performance isn’t up to par. With so many successful DIY services, perhaps they are starting to wonder if they should just go ahead and learn while doing it themselves. The need for control over what is being done is also something we have noticed; lots of DIFM clients asking for reports, wanting access to dashboards, etc. They want to be more involved than the traditional DIFM client has been. Maybe the DIWM model is the one that will be most successful in the end. 
    For vendor, one approach seems to be to offer integrated DIY, DIWM and DIFM products in order to present clients with the flexibility to evolve with the vendor instead of going ahead and ‘churning’.

    Finally, I understand the reasoning behind leaving out customer service, but it certainly is something that can be quantified and isolated and should be included in a study like this because of its importance (especially in this age of social helpdesks and software which can be integrated into CRMs and Analytics software). 

  2. Greg Sterling says at

    This was far from perfect. However it represented some new, interesting data to add to the conversation. Customer service has a huge impact on churn. See: http://www.lsainsider.com/is-customer-service-the-new-roi-for-small-business-marketers/archives#sthash.C9J1ck1g.3fy5cnK7.hpvt. In terms of the Vendasta data . . . they simply couldn’t see clearly the customer service policies and activities of their clients. So effectively there was no way to reliably import this into the study.

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