Understanding customer churn
Jump into users' data to analyze client retention and churn rate drivers
The Challenge
The financial buyer was looking to acquire a company developing and providing a B2B platform in the leisure industry.
The target generated its revenues based on the number of users using its marketplace. During due diligence, understanding users behaviors (by size of revenue) was an important analysis the financial buyer needed in order to challenge the revenue growth assumptions which had been used in the seller business plan.
Therefore, we helped the financial buyer to gain a deeper understanding on key business drivers, and specially levers of revenue growth (backlog, retention and churn rate) and challenge the sustainability of revenue forecasts per segment.
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The Outcome
To perform our analysis, we collected users data, such as number of connection, connection time, number of modules taken, and revenue data by client.
The detailed information allowed us to perform in-depth analyses on the characteristics and evolution of the clients portfolio. Our analyses revealed that the target acquired client easily but it had difficulties to retain medium users over 2 years. This insights had major implications on the revenue growth because medium clients represented 25% of growth over the forecast period.
Jump into the analysis of user behaviors on the platform, we realize an initial peak of users at the beginning of the contract and after 1 year the number of active users decreased significantly. We decided to call some clients in order to learn more. Many of them put forward a lack of learning with some features. We made the correlation with the requests unresolved by the support team of the target. These insights helped us understand the reasons for this lack of client retention.
Such analyses provided clarity to the financial buyer on several key business issues of the target and helped raise accurate and critical questions during Q&A with the target and negotiations.
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