How to develop a customer engagement score and increase retention in the process

Derek Skaletsky


Founder and CEO


Derek Skaletsky
Derek Skaletsky

Episode Summary

Today on the show we have Derek Skaletsky, Founder and CEO of Sherlock.

In this episode, we talked about how Derek came up with the idea to build Sherlock and why now, how Sherlock determines an engagement score and how CS, Sales and Marketing teams can use it.

We also discussed how Derek’s Head of Customer Success self was arguing with his head of product self back at Kissmetrics whilst leading these two teams, and we dove into Kissmetric’s #1 reason for churn and how Derek and his team halved their churn rate in just 12 months with a scorecard


Mentioned Resources



Why Derek built Sherlock and why now 00:01:57
How Sherlock calculates an engagement score 00:05:04
How do marketing teams use Sherlock 00:06:52
How Derek viewed churn & retention while leading the product and CS team at Kissmetrics. 00:14:30
Close bad fit customers or not. That is the question. 00:18:54
How Derek uses his learnings regarding churn & retention now at his own company as a Founder 00:24:19
How Derek would fix churn and retention for a company in the first 90 days. 00:24:19
The one thing Derek wished he knew about churn when he first started out 00:24:19


Andrew Michael: [00:00:00] Hey Derek, welcome to the show.

Derek Skaletsky: [00:00:02] Thanks Andrew

Andrew Michael: [00:00:03] It's great to have you for the listeners. Derek is the CEO  and founder of Sherlock, a product engagement scoring engine that helps give your sales customer success and marketing teams. The clarity they need to qualify leads. Get ahead of churn risks and never missed an opportunity. prior to Sherlock, Derek was the CEO of Kissmetrics after arriving post acquisition to head up the product and customer success operations. He's a serial entrepreneur to having found a tracker and So my first question for you, Derek is why Sherlock and why now after your experience in the analytics engagement space,

Derek Skaletsky: [00:00:38] Yeah. Great question. So I've been in SAAS for a little while. and one of my biggest pains ever in SAAS, throughout the years has been knowing that product engagement is the lifeblood of everything in a SAAS business. If they aren't using the product, they're not going to pay for the product. That is the basis of the fundamental core of the SAAS model.

this product [00:01:00] engagement data was what I call the lifeblood of that SAAS operation, but it was always stuck in some analytics tool at the product team. Barely. And it was only thought of to be used to help the product team make decisions. and I always said that data is essential for the go-to market team to drive their entire operations.

It should be the basis of everything they do. Yeah. But it was never easy to get them that data. so segment came along and made it easier to distribute that data, but segment didn't translate that data in any way to make an actual useful and helpful for these teams. These teams are not data analysts right there.

so I've hacked the version of Sherlock probably four times in different companies to try and help us, which is how do we take that product engagement data and translate it into some scoring mechanism. Which gives this, these teams, the signals that they need, from the sales, now it's even more important with a product led business [00:02:00] sales teams need the state as much as anybody.

Yeah. If you've got trial accounts that are using the product before they buy it, you need to know how they're engaging with the product in order to engage them, effectively to get them to convert. CS needs to know how their customers are using the product. If they're using the product, how often there is, they need to know all this stuff to determine how to support that customer base and marketing needs it just as much as anybody.

So how do we take that data and translate it into some simple metrics that everybody can understand and take action. And that was the, what I've hacked. Before in the past. And we finally decided to just productize it. Yeah,

Andrew Michael: [00:02:38] very cool.

Derek Skaletsky: [00:02:39] So in many ways in called Sherlock, like a translation engine, you get that data in, you translate it into some simple metrics and signals, and then you can get that data pushed to your CRM and other tools.

Andrew Michael: [00:02:51] Very cool. Yeah. What I loved about the solution as well. And when I mentioned to her last word with the segment, a couple of years back was almost the seamless, just plug and play, and [00:03:00] then you immediately get this value out at the end of it. And sometimes like figuring out what an engagement score should look like and how you're going to go about segmenting your user base and this stuff, can often go into debate to maybe take time.

And then I think the beauty of having something, just plug and play like that Israeli gets like everybody off the ground running. Start making an impact and things that you can improve then over time as you go along, but talking about the engagement score and, talk us through a little bit about the process, like how you go about determining an engagement score, for a user base.

And essentially like maybe some of the top, use cases that you see your customers using them for.

Derek Skaletsky: [00:03:36] Yeah, to your point, we wanted to make it. we wanted to really simplify the process of creating an engagement score. as the data, the product data comes in Sherlock, the users, our users, what we call configure a scoring profile.

so they say here are the events that are important to engagement with my product. And then they can weigh those events between zero and 10, how important they are. and then all we do then is take that list of [00:04:00] events and the weights. And then we go and calculate scores behind the scenes for every user of their product.

And we aggregate up all that stuff at the account level, which is also. One of my biggest frustrations with product data historically, is it's all at the user level. But if you're a SAAS business, you operate at the account level. So if you don't have the data at the account level, it's almost worthless.

so anyway, so we aggregate just from that simple configuration, which events are important, how important are they? That's very simple configuration. We can then go and calculate scores for all users and accounts and also calculate trends, which are just as important as the actual score. So someone who's got a score of 50 is one thing, but if they've got a 50 and that's down 30% from last month, that's a problem.

So the trend in the engagement was also one of the important things we wanted to build, because that is a really important signal across the board for how this account is doing.

Andrew Michael: [00:04:57] Yep. And I can see, obviously that's a very [00:05:00] clear signal as well that you need to maybe pay a little bit more attention to their care.

Karen. So I see like customer success has been a really valuable trick for them to keep tabs on keeping on with the important customers. what are some of the other use cases like marketing? How do you see marketing using the engagement score? So I think sales as well was pretty straightforward.

I led it out in terms of knowing which leads to speak to based on activity they've done in the app. But how does marketing use the product then?

Derek Skaletsky: [00:05:24] Yeah, so marketing is either the product. So we push that data again to these other tools. We push it back to segment. We push the houseboat, we push it to Salesforce.

so marketing is actually using that engagement data. to segment messaging, right? So even at the top of the funnel, right? So there's customers that do automations for, when an account becomes, when a trial account becomes activated and has an engagement score above X, they're going to get a personal message from a rep, right?

Otherwise they're going to get, an onboarding message. It's a little bit more generic about helping push them down the line. but they, you can offer an [00:06:00] actual conversation. Once the account gets to a certain level of activation and engagement. so that's one way marketing uses it.

Marketing is also using it in analysis. So they're looking at, which trial leads are getting to activation what we call kind of product qualified status. which of our PQL is, are coming from which channels, which messages. So they can start to really understand at a more granular lever. What's.

Level what's working not to just get them to sign up, but to actually get them to use the product and get to a qualified level.

Andrew Michael: [00:06:33] Very cool. And then, yeah, so putting a little bit more accountability on marketing, not just bringing a head sort of door, but making sure the quality of those heads that are coming in actually using the product and, other outfits.

that's very cool. yeah. and then like we're going through the intro as well. When I introduced you, earlier I mentioned that you were, Part of a company that you founded was acquired by Kissmetrics and then you joined the company to head up product and customer success. so I think this is definitely [00:07:00] a very unique, role, having the hats, wearing, eating these two teams.

And definitely, I think when it comes to talking about the topic of the show and then retention, like typically these are two of the biggest. Teams within the company that have influence over the metrics. So I'm interested from your perspective first off at this role, and then we'll touch on your other experience there, but how you've viewed churn and retention whilst you were leading these two teams and how they played into one another with the different roles that they play within the organization.

Derek Skaletsky: [00:07:32] Yeah, it's a really good point. What's the unique role was just serendipitous. It wasn't necessarily, it just were a couple of gaps that they had that I could fill. So I feel a little at the time. but it really was a very unique experience. I tell people, like I spent my days fighting with myself, right?

Like customer success. Head of customer success itself was arguing with my head of product self on a daily basis. but it did give me a really interesting perspective on this metric turn. And when I came in like most companies and like [00:08:00] myself at the time, Churn was a metric owned by customer success.

And they actually had comp plans based for the CS team based on churn rates. and then what I quickly realized is, which I say now all the time is blaming customer success. Return is like blaming a waiter for a bad meal, right? They definitely have an impact on the experience of that meal.

However, they didn't create the menu. They didn't pick out the location, they didn't cook the food, they didn't decorate the, there's so much that goes into why a customer. Is unhappy and leaves you, beyond the customer success, the experience they have with customer success can help, can hurt sometimes, but their impact is much less than what we tend to think it is.

so one of the first things I did was to take that metric out of the customer success department and elevate it to a company metric because in my opinion, Everybody owns. And everybody has a hand whether or not those [00:09:00] customers are going to be successful with the product and be retained and stick around.

so that was, but it wasn't early learning

Andrew Michael: [00:09:08] and

Derek Skaletsky: [00:09:09] that's probably due to that. To that dual role.

Andrew Michael: [00:09:12] Yeah, I think that definitely this is something that comes up on the show a bit. And I think ultimately if you have a subscription business, like you don't have a business, if you have a churn problem because people aren't subscribing, they're just leaving.

So it really is a company metric. It is like probably at least in my opinion, the most important metric you can have with their subscription business. leaving it up to a single team, like you say, that has the minimal influence really at the end of the day, compared to all the other steps that happen before it got to that point, is really an unfair metric to place on the team.

A lot of pressure and it ends up probably leaving them demotivated, like realizing, like they can make changes, like fighting with product to try and get things in there that they see are helping, but ultimately having little, like less of a voice there. So I think definitely, yeah.

Derek Skaletsky: [00:09:59] Yeah, one thing I [00:10:00] will also add to that is what we also realized is, and we started to do this analysis.

the number one reason for churn, the number one reasons we found was bad fit from the start, right? Bad fit customers coming in the door, being speed market to being sold, to closing. And we started to understand what course we did a big analysis to understand what good fit is, what bad fit is. And then we had our own scorecard that every time a customer closed and became a paying customer, the customer success team would actually score that customer for fit.

But we call it fit. Some of it was subjective, so it was, was objective stuff, but it was a score that we used and every new, every month we would report on the fit rating for all the new customers. And over time, that was by far the most correlated metric or data point with churn, especially with churn within the first nine to 12 months. [00:11:00]

And that has nothing to do with customer success, right? That has to do with marketing messaging, product market fit, messaging sales, what sales is selling and what they're, what they're communicating during a sale, et cetera. So we really showed out prove that because their assess team, the churn that was happening was mostly due way before customer success even got involved.

Andrew Michael: [00:11:24] Yeah, I think, and this is definitely like a big resounding message that we hear a lot, as well as a general attention. Like it starts with the first message that our user sees. It's that first perception that they get of your product. And then as you go down, it's each fit their needs to like, does your messaging.

Match the product to the value that it delivers, like all along these steps. There's so many different places we use can fall off and bringing in the wrong type of customers is definitely one of the biggest issues we see as well. But I'm really interested in like, how did you get to this point then when you realize, okay, This is a problem, like bad fit customers.

and then what did the process [00:12:00] look like about going about getting the score together? what did it look like internally with the teams? Like how did you get the company to rally around this and to really realize that this was an issue?

Derek Skaletsky: [00:12:10] it's actually a really good question and probably a whole nother podcast, but, about internal politics, all that.

but yeah. No, we did it quietly at first. I get it myself for a little while. Just, I just wanted to get wrap my head around, why are customers churning right when you first get there, you want to. You want to understand here's the last three months of customers that churned, what is, are there any commonalities, right?

Are there any correlations we can draw? and some of that, like I said, it was objective. You could look at company size and roles of the users that signed up and you could do some of that objectively. but what I found is the biggest factors use case. Why did they, what pain were they trying to solve with the product?

What was their use case? And that is hard to. Hard to suss out objectively. Sometimes there are ways you can do it. You can see what features they're using to suss some of that out. But most easily, [00:13:00] customer success conversations are incredibly insightful. And most of the time you could sit down with your CS team and go through the list and say, why were they using the product?

They'll say, Oh, they were doing this. So then, we went through that process and tried to suss that out. what were the use cases? So what we found was that was the biggest factors is what is the use case? Then there was IEM size was an issue or a correlator, but also roles. So roles of who signed up and there was some other things.

So it was probably 10 factors. we weighed, to go into this kind of customer fit. And then we translate that into three sports. Good fit. Okay. Fit, bad fit. We just, my whole life was flying I guess, but so you got to think good feedback or good fit. Okay. Bad fit. and then we'll move then once I could prove I didn't bring it elevated until I really had a good, so the confidence that it was correlating with actual church, so then I brought it to the executive team.

And showed them. [00:14:00] I mapped out six months of churn versus these scores. and I could show them how correlated they were with churn. So that started the conversation about. Okay. There's messaging issues. There's issues in the sales pitch and the sales conversations. you could, we had some slight correlation with specific salespeople, but not huge, but at least they were open to now the conversation, if you're selling this use case, this is a bad fit.

And then it became an open conversation on the executive level that says, are we okay selling to bad fit customers? This is a big philosophical debate, right? Are we going to say, we are going to take their money for six months, eight months, whatever. Knowing that this isn't a good fit, but we're going to do it.

And we're just going to factor that into our projections and our financials. because it's money for six, eight months

Andrew Michael: [00:14:52] fueling the fire.

Derek Skaletsky: [00:14:56] I have an opinion about that. I don't think it's the right strategy, but. there are [00:15:00] other people that are fine with it now,

Andrew Michael: [00:15:02] for sure. Yeah. I think there's a few different things I want to touch on. Cause you mentioned a lot of different things, but the one thing I love as well is like the simplicity of the process.

And I think a lot of times when people think about putting up an engagement score or way to measure customers or Putting together some sort of model. we often think that they're overly complex and complicated, but often the best ones are the simplest ones and the ones that people use.

And I love this sort of like how simple you made the metric itself and the, like the variables that you're looking at that went into it as well. But the biggest thing for me, was that the power of the use case a thing that's definitely, it's like, it's obviously the number one reason when you think about it, people come to foot to solve a problem.

And if your product is. suited to solve their problem and you do it for them. They're going to stick around. but soften, they're not like we don't pay enough attention to what is the use case? What is the job to be done that they're coming to us with?

Derek Skaletsky: [00:15:55] yeah, I think it's, I think it's so important.

I think it's so important [00:16:00] and I think you should segment incoming leads and incoming customers by that. I think just like how common customers are that everyone should really get a handle of. What is the use case here. and like I said, it's hard to sometimes objectively do it. but I have seen, I have talked to a type form.

I remember, I talked to someone over there that they were, using the title of the surveys that were created to suss out use cases. Nice. and an insight and understand, okay, this is a use case. That is cause they had a problem with one-off surveys versus, Yeah, reoccurring usage.

Customers. so starting to understand early on, this is probably a one-off use case. This is the retention use case. And how do we shift resources and messaging accordingly?

Andrew Michael: [00:16:44] Yeah, I like that. It definitely is places in ways you can do it. I think similarly as well, to a Typeform, like at Hotjar where I am now.

we also have this situation where a lot of companies use us, like for one off projects, like they're doing a website revamp and they want to [00:17:00] try and send it. but then obviously we have a lot of other companies that use us on an ongoing basis that are continue to make improvements. And one of the things I think we've done and we've left very late, but starting now is really, this is really trying to understand the use cases better.

And then really trying to understand sort of engagement metrics like retention metrics. Performance metrics against the different use cases, because I think ultimately as well, when you think about tracking performance of your product and how healthy your user base is, if you don't understand what their main use cases they're coming to begin with, you can't really have a good measure on, are they performing?

Are they using your product to its best potential as well? I love that. and then, You put together this data you had around like six months, then worth of stats to show and share with the team. from there, like that, you mentioned like a lot of different things started happening in terms of the mission messaging, positioning.

How did you suddenly then start to see the impact of this? Cause I think also like one of these is that Chernow itself is obviously a lagging metric and it's a lot of these inputs that you mentioned. So how did you [00:18:00] see this start to take shape and make an impact on churn and retention to the company over time?

Derek Skaletsky: [00:18:07] Yeah. So w it also fed product, definitely fed product decisions as well. when we started to hone in on use case, it caused issues, right? cause I also say this is a bit of a hot tape, but I actually think that one of the. Also one of the biggest factors in churn is a sales comp plans.

Andrew Michael: [00:18:28] Yes.

Derek Skaletsky: [00:18:29] So I'm going to say, because we comp salespeople, where most of their comp is based on commission, we pay them, they can't even pay their rent on their basis. So they are, panicked and desperate to close deals. So anything, any messaging that says. To a sales team based on that, would that comp model don't close, this deal is, going to cause all kinds of problems internally.

So it's yeah, it's exactly, you have a business model which is counter to their comp [00:19:00] model. Which I see a lot. so that w that was definitely part of the problem. Cause we, we had this debate. Can we, do we, should we be closing these deals and you have sales saying, I can't eat unless I close these things.

so anyway, that was probably the hardest part of the whole thing. no doubt. It also affects, shorter term, if you're trying to shift, It can affect the top of funnel numbers. It can affect those gross numbers because you're really, you can't do it overnight. You gotta, it's a gradual kind of shift to that. so there's debate over, do we sacrifice growth numbers in the shift to try and make this happen? and if you look at growth as only new revenue, new deals, that it becomes a problem. If you look at growth as net. Then it's an easier conversation.

So that was the next phase is shifts the focus from growth, being new to growth, being net. so net new net revenue for the month, which obviously takes into account churn as a negative. So once that [00:20:00] conversation starts to shift to what's look at net, not new. Now you can see the impact of Cheron and how, if you're making some improvements there that even with the same, or even lower net, new, you can actually have higher net new.

so that was the next kind of phase as she gets the metric kind of the North star metric from new to net.

so that helped a lot. but over time, Summertime there were improvements made. we definitely cut. We cut churn in half. let's shoot in 12 months, which was a huge deal.

and I really credit this whole process, as part of that, there was some product stuff that definitely helped too, but that products stuff was also informed by this process.

Andrew Michael: [00:20:40] Yeah, definitely. I think that's as well, something to take away, like one, obviously with the, misalignment with the sales side, I think definitely that's something we've chatted about on the show before.

I think certainly FDN one of his episodes mentioned like aligning compliance, with. Performance in terms of not just sales, but retention as well. So depending on how long [00:21:00] the customer stays with it, I think it's enough. They're getting comped off to month 12 and six, whatever it was. but really making sure that you have compliance aligned with, having these Rockford customers come through the door.

But I definitely see that being a hard debate though, within an organization where it's okay, Do we want to take a hit in the short-term to have long-term gains or do we want to keep like focused on the short term and just feeling, but ultimately I think one of the things it does do is that if you decide to like stick at it and keep going with these perfect customers is you end up losing, wasting a lot of time and attention on the wrong fit customers.

So you lose out on the momentum that you can be building, actually building a product for who's ideally meant for your products and things. But I definitely say.

Derek Skaletsky: [00:21:41] on the product side, that whole segmentation by use case is also an important piece as you start to get, look at the feedback customer feedback.

Yeah. If you segment that feedback by use case, and you're saying these are the use cases that get the most value, and are higher priority to us that helps you filter that feedback. So [00:22:00] if you're just chasing every piece of customer feedback equally, you ended up building this kind of nothing product for nobody.

so I

Andrew Michael: [00:22:07] think that's

Derek Skaletsky: [00:22:07] a really important part is to, yeah. Exactly. And filtering through the lens of use case, I think is a really important way to do it. We also filter by engagement level, right? who we got this feedback, what's the type of user, this is a user that is very lowly engaged in that, or is this a high re-engage power kind of power user kind of player.

Andrew Michael: [00:22:27] Nice. Yeah. And definitely like you said, like feedback is not all equal and, having these sorts of metrics and bars to measure it by is like super helpful to get focus. but let's shift as well, a little bit now way, from the past and to the present, I'm interested now, like coming into a Sherlock, And previously, maybe a little bit of a later stage company you're dealing with churn and retention. They're like, how has your view on the problem? now shifted focus at an earlier stage startup like Sherlock, versus where you were at previous X metrics. [00:23:00]

Derek Skaletsky: [00:23:00] we have a smaller customer base.

Every single individual churn hurts more. as the founders, there's nothing more painful than losing a customer. it'll set you, if you get, if you lose guests about a Friday, good weekend is shot, as a founder. so it just elevates.

No each individual churn, which, it's part of the game, but it still is, more painful at an earlier stage. And, as the founder of a product, it also is personal, right. Personal rejection, You've poured your heart and soul and this idea and this concept and someone has rejected it.

so it's, amplified. At an

Andrew Michael: [00:23:35] earlier stage

Derek Skaletsky: [00:23:36] from the founder's perspective

Andrew Michael: [00:23:38] and you're approaching like solving for it. Is it any different now? have you bought any learnings or is maybe the stage of the company, I'd say a smaller user base potentially, like seeking you to look at different ways of tackling the problem.

Derek Skaletsky: [00:23:53] I've definitely been more rigorous about the fit part. if you aren't really a good fit for what we've [00:24:00] built right now and where we're going, we definitely don't give you as much tension. we don't try and close you, but we're not going to try and convince you to commit.

Yeah. And oftentimes we'll give you recommendations for other products that are a better fit by now because. It sounds silly, but it actually drained you more to handle a bunch of bad fit customers and try and do a dance, do some kind of, performative dance to convince them that you're what they need when you're in, you're not.

So that takes more energy and Emotion than just

Andrew Michael: [00:24:34] not having them. Yeah. I like that as well. And especially in the leaders, you really need to have that focus. She really needs to like, have all your energy pouring into the single biggest factor that can have an impact on the business and getting into rid of any distractions.

And in this case, Bad fit customers don't have use cases, obviously another great way to keep that focus.

Derek Skaletsky: [00:24:52] Yeah. and early on, if you don't have product market fit, you also, you don't always know that early on. So you're playing with that. but once as [00:25:00] early on, as you can ruling out this, isn't working, this use case isn't working, we may have thought it worked, but it's clearly not working.

let's just cut that off. and we actually have in the kind of onboarding and process. questions around use case. And if it's not a good use case, we just lay it out. Can we just,

Andrew Michael: [00:25:17] alright and nice. And that's both in just to the onboarding flow question that you ask, while they're signing up.

Yeah. Cool. Yeah. so one question I ask every guest that joins the show. Yeah. Let's imagine a hypothetical scenario now that you joined a new company, general attention's is not doing great. and this year comes to and says, we need to make a dent in this. We need to change this fast. we have 90 days to try and make an impact.

What would you want to be doing with those 90 days to try and make an impact?

Derek Skaletsky: [00:25:47] Yeah. my first response would be, turn to the glacial metric, it, it doesn't move overnight. It's something that moves slowly over time. So I try and set expectations about what can happen in 90 days. [00:26:00]

and if you're really trying to do it that quickly, you're probably going to come up with solutions that are not great. stop sending people, their invoices. So they're, they don't remember that they subscribe to your services. That'd be, that's a quick one, right? Yeah. Just don't pull it AOL, but I call an AOL check.

My dad still subscribes to AOA has no idea. It's still charging his credit card. so that's what I was saying. you could do some. Tricky things short term to try and do it. But if you're really trying to think about it as a longterm improvement to make, the first thing I would do is, what we talked about is that really dig into the last three, four or five months of churn and.

Understand use case is the one thing I'd really be trying to understand, other factors as well. Like we said, those objective factors maybe, maybe correlated as well. So really trying to understand that would be my first step. Then I would build a fit model that said, okay, we know what works and what doesn't.

So let's [00:27:00] assess what's coming in and give you some realistic expectations for. what's, churn's going to look like in the next six months based on what just came in. and then I would start to write, make some, then there could be some short-term wins in terms of, and stuff, you can do an onboarding.

And what do you show? And maybe you shift some features into a different tier early on to a lot of times, if you throw too many features early on, it creates confusion. And then, Affects adoption and activation. So there could be some of that going on, but really what I dig into is, what is the use case?

What are the churn customers look like? And what are we bringing in? Is there, are we bringing in more of those, and then start that discussion.

Andrew Michael: [00:27:43] Very cool. Yeah. I like as well. What you said now, in the sense of using the use case and understanding like the customer fits at signup as an indicator, what churn's going to look like in three, six Oh three or six months, because obviously there's a lot of turn prediction [00:28:00] models, but I think one of the things I think, I don't know if I've ever gravitated towards thinking about is like how the use case impacts that.

And like you said, probably one of the. It's probably is the biggest influencing factor. So using the use cases as indicators, like a future predictors.

Derek Skaletsky: [00:28:17] so one of the first things I would do is I make sure that the product data is there and I'd plug it into shucks. I can get a sense of engagement levels, logging camps, Cause that's really important. So to your point, I don't think the churn forecasting models are all that helpful. Yeah. Because use case and fit is to me, the biggest factor. However, having to me engagement data creates the signals for chain, right? Any reason that someone's going to churn almost all reasons that someone's going to churn.

Will be expressed in engagement data or lack of engagement, right? So an early customer that doesn't get activated, doesn't become activated with the product. that's a highly likely signal for China, right? [00:29:00] A, a customer whose engagement has dropped 30%. From a customer, obviously it's inactive for the last 30 days.

Real problem engagement, trending down problem. Figure the customer with very few active users as a percentage of their overall user base problem. So all the, no matter why someone churns, it will generally be expressed in engagement and a drop of engage and engagement. So those are the signals that you need to understand.

Okay, here are the accounts that are in trouble. but it doesn't necessarily tell you why. Someone leaving the company, going into your, your key user leaves goes to another company. you don't know, you will know that for the engagement data, but you will know that you stopped using the product.

Okay. Let's dig into what happened here. Yeah, As they start to look at competitors, you'll see engagement draft. Cause they'll start to, there'll be shifting their focus. It's probably get that competitor hooked up and working and they'll stop using your product as much. So that'll show and [00:30:00] engagement data, and then it'll be a signal for you to try and figure that out.

Andrew Michael: [00:30:03] Yeah, I liked the point as well that you made, like it'll really show you the what, but not always what the why. And sometimes life happens and, they might engagement might be dipping for totally different reasons or outside of control of business. And so I think that it's really powerful, but at the same time as well, like it's also equally as powerful having that, Watson that sometimes I think with our customer success comes in.

Having those like relationships, the one-to-one conversations to match that up with something as powerful, like a Sherlock with engagement scoring is a super powerful tool to have in the arsenal.

Derek Skaletsky: [00:30:36] Yeah. if you asked your CST, you'd be amazed at how good they are at predicting. Who's going to

Andrew Michael: [00:30:41] work out.


Derek Skaletsky: [00:30:42] getting mad. You just ask them that they know. I know.

Andrew Michael: [00:30:45] Nice. last question. Cause I see we're running up on time. What's one thing that you know today about churn and retention that you wish you knew when you got started in your career.

Derek Skaletsky: [00:30:58] number one, how important it is, [00:31:00] right? Because early on is it just, wasn't a focus, right? It almost was acquisition or new customers and top line growth and all that. yeah. number one, I would say how important it is, is something I wish I knew and had a, folk, a better focus on it early, but then, So our point, how use case, how important use case is to turn tangents has really started thinking about that as early as possible, with a company product.

Andrew Michael: [00:31:27] Very cool. it's been a pleasure having you today, Derek really enjoyed this chat. Is there anything like final thoughts you want to leave the listeners with? anything they should be aware of that you're working on the Sherlock? Or how can they keep up to speed with the work that you're doing?

Derek Skaletsky: [00:31:40] Yeah. you can sign up for our newsletter on the blog, or you can sign up for Sherlock. you can offer any of you use as a free demo. I'd be happy to give them a personal demo if they want to. so if they sign up and mentioned the podcast, I can do that. what did I say? I do want to talk about that?

I think is an important topic insurance that isn't talked about enough is [00:32:00] when you talk about churn, you have to think about it as net. Net churn as well. And the other side of churn is expansion, right? The other side of net churn is expansion. When we think about churn, we only think about, the companies that canceled, constantly canceled, but expansion is a focus week is something we do not focus on nearly enough.

And I think. Another thing I've done in the past is take a chunk of that CS team and put it into what I call customer development. You can call expansion, you can count on prompt management, whatever it might be, but that team is in charge of identifying expansion opportunities within your existing customer base and being much more aggressive and personal about.

Nudging that expansion on. And that is a very easy investment you can make is really just say, I'm going to take one or two people. We're going to have a way to identify opportunities in our customer base for expansion. And they're going to start to really focus on that and work on that. And it used to be getting on planes and seeing people, [00:33:00] but it was a much more personal touch, those expansion opportunities, because that is a. A really quick way to effect that turn that the net turn number can really override that the negative churn,

Andrew Michael: [00:33:14] for sure. And I think this comes as a result as well. Like it's a natural, a use case of keeping people around, retaining them longer. They get more value out of the product and over time, if you have good, a good pricing model built in they'll naturally grow with you and expansion then really helps us getting to that.

Holy grail of sauce net-negative and, really having this growth engine that restate some of the most successful companies that have RPO and, but yeah, excellent. I love today. I really great points. I like definitely advise listeners that if you haven't already seen Sherlock check them out, as Derek mentioned, hit them up and he'll give you a demo himself, mentioned the podcasts, but, it's been a pleasure having you today.

Derek wish you best of luck now going forward

Derek Skaletsky: [00:33:51] thanks. You too.

Andrew Michael: [00:33:52] Cheers


Derek Skaletsky
Derek Skaletsky

The show

My name is Andrew Michael and I started CHURN.FM, as I was tired of hearing stories about some magical silver bullet that solved churn for company X.

In this podcast, you will hear from founders and subscription economy pros working in product, marketing, customer success, support, and operations roles across different stages of company growth, who are taking a systematic approach to increase retention and engagement within their organizations.


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