A streaming service's monthly churn has doubled in a year. How would you find out why?
Define churn first and split voluntary cancellations from failed payments. Then find who is leaving by cohort, plan, tenure and sign up channel. Match the timing to changes in price, content, competitors or billing, since a price rise or a lost hit show stands out.
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Example answer
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I'd ask why people are cancelling.
Then there are the causes I'd test. One is price. Was there an increase, and did cancellations jump after it? Two is content. Did a big show end or a sports contract lapse? Three is competition. Is there a new rival or a cheaper bundle?
I'd survey people who cancelled to see which one it is. Then I'd fix the biggest one, maybe with a discount.
What holds it back
It goes straight to three stock causes and a survey without asking who is leaving. People who cancel rarely answer surveys honestly, and a discount is proposed before any cause is found.
First, a definition. Is churn here the share of paying subscribers who cancel in a month, and does it include people whose payment failed? Before I look for causes, I'd find out who is leaving. So I'd cut churn four ways. By signup cohort, to see whether recent joiners leave faster than older ones did at the same point. By plan, meaning ad-supported, standard and premium. By tenure, because leaving in month two and leaving in year three are different problems. And by acquisition channel, such as a free trial, a paid ad or a bundle with a phone plan. Then there are the causes I'd test. One is price. Was there an increase, and did cancellations jump after it? Two is content. Did a big show end or a sports contract lapse? Three is competition. Is there a new rival or a cheaper bundle? Four is involuntary churn. That's people who never chose to leave. Their card expired or the payment failed. Once I know which group is leaving, I'd match it to one of those causes. I'd start with monthly churn by cohort and channel. Can we get that?
First, a definition. Is churn here the share of paying subscribers who cancel in a month, and does it include people whose payment failed? I'll assume it does, and that churn went from 3% a month to 6%. Before I look for causes, I'd find out who is leaving. So I'd cut churn four ways. By signup cohort, to see whether recent joiners leave faster than older ones did at the same point. By plan, meaning ad-supported, standard and premium. By tenure, because leaving in month two and leaving in year three are different problems. And by acquisition channel, such as a free trial, a paid ad or a bundle with a phone plan. I'd also check the mix. If the service doubled its promotional signups last year, average churn can rise a lot while no group behaves any differently. Then there are the causes I'd test. One is price. Was there an increase, and did cancellations jump after it? Two is content. Did a big show end or a sports contract lapse? Three is competition. Is there a new rival or a cheaper bundle? Four is involuntary churn. That's people who never chose to leave. Their card expired or the payment failed. It gets missed, and it's the cheapest to fix, with payment retries and card reminders. Each cause leaves a different mark in those cuts. A price problem hits all tenures at once, when the new price lands. A content problem hits the viewers of one show. Failed payments show up as accounts that end with no cancel click. My hypothesis is that most of the rise sits with subscribers in their first three months who came in on promotions, with failed payments as the second piece. I'd start with monthly churn by cohort and channel, split into voluntary and involuntary. Can we get that?
What the interviewer listens for
- Do you ask how churn is defined and whether failed payments count?
- Do you find out who is leaving before you ask why?
- Do you separate people who chose to cancel from people whose payment failed?
- Do you consider that the mix of subscribers changed and nobody's behavior did?
- Do you say how you would tell one cause from another?
Common mistakes
- Listing price, content and competition straight away, with no cut of who is leaving.The list is fine, but it could be said about any subscription business.
- Treating all churn as a decision to leave.Subscribers lost to an expired card never chose to go, and they need a billing fix and not better shows.
- Relying on an exit survey as the main evidence.Few people who cancel fill one in, and viewing and billing data already show what they did before leaving.
- Comparing this year's average with last year's without checking the mix.More trial and promotional signups raise the average even if each group churns as before.
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