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Customer churn is one of the biggest woes of SaaS companies. Companies spend a hefty amount of money on acquiring a new customer. But when the SaaS customer cancel subscription before the customer acquisition cost is recovered, it becomes a point of concern. Companies have to aim for increasing t
Customer churn is one of the biggest woes of SaaS companies. Companies spend a hefty amount of money on acquiring a new customer. But when the SaaS customer cancel subscription before the customer acquisition cost is recovered, it becomes a point of concern. Companies have to aim for increasing the customer lifetime value (CLV) through various strategies. It can range from providing perks to your customer to having a great Customer Success team in place.
Apart from long-term customer retention strategy, a Customer Success Manager should also prepare for a last minute rescue. They can prove their competency based on how they save a customer who has already requested to cancel subscription. In other words, it is always better to be preventive of customer churn. Nevertheless, a CSM must take reactive measures too to control the situation when the matter gets worse.
Before we go further into this article’s topic, let’s spare some time in understanding why they chose to cancel. There can be numerous reasons for them to discontinue the service and that can depend on their tenure as well. In fact the most percentage of churn usually happens in the initial days of product usage.
According to a survey by Localytics on all industries, 71% of all users churn within the first three months itself. It also depends on the kind of audience your product serves. If it is a B2C then you would expect a higher volume of downloads along with a high churn rate.
Let’s look at some of the common reasons for SaaS customer cancel.
After the initial purchase, there are chances that the customer is not able to drive value out of your product. The reasons could be many. It can be mis-selling by the sales department which is one of the most unfortunate cases. Or it can be due to the complexity of the product that the customer could not adopt it.
And if not these two reasons then it could be due to the CSM failing to give in-person attention to the customer through initial stages. In any case, it is the prime responsibility of CSM to make the customer realize the value of the product.
A customer during the initial stage is most prone to churn if their expectations are not met. It should be understood that the customer is not always free to adapt to your product in their day-to-day work. Hence, if the initial setup consumes a lot of time and causes interruption more than affordable then it’s a problem. The customers may not be patient enough for the initial setup and customer cancellation save cannot be implemented.
If the customer is not engaging enough with your product then they cannot drive value out of it. E.g., out of 20 features if they are engaging with only 5 then it’s a clear sign of churn. The CSM should have kept a check on customer engagement right from the beginning to avoid such a case. They should share a clear set of goals to customers towards product adoption right from the beginning.
There are many more reasons for the customer churn to happen than the above mentioned ones. Few can be prevented through a long-term strategy in place. While others can be mitigated through early warnings. And the last minute rescue has its own conditions to be met in order to be successful. Below are few of the steps you may take to tackle with the last minute cancellation.
A cancellation flow is the workflow through which you make your user follow certain steps while they opt for cancellation. It has to be intelligently designed for the journey of user off-boarding and should be as much automated as possible. Providing an in-app cancellation option is one of the strategies that works in favour of preventing churn.
This in-app cancellation option has a psychological benefit on the customer which makes them realize that they are in control of their subscription all the time. It is frustrating when they have to call customer care to cancel their subscription after they already had a poor experience with the product. With a better state of mind through in-app cancellation, they are more likely to cooperate when guided through exit workflow.
Through in-app SaaS customer cancel workflow you can provide following options to your user:
This is specially useful to address the cost related pain-point of a customer. If they see the cost of using your product is way higher than the derived value then they may consider this option. It can help you buy some time for them to engage more with your product before they finally churn forever.
Although you should ideally gift all the affordable discounts initially to the customer, offering them these during cancellation can sometimes prove out to be a rescue step. This will again reduce their cost until they realize the value of the product adding to their business.
It is mostly beneficial in the cases where there is a seasonal need for your product. Due to low volume of business during off-season, the customer may not want to continue your service. Providing this option will help them save unnecessary expenses during low business months. It would also strengthen your relationship with them due to such considerations.
When they choose this option they are open to have a discussion around cancelling their subscription. This is a very important discussion not just for that specific customer but for an overall retention strategy. This is the time when they would express unfiltered views about the challenges they faced with your product. Your assurance to address those issues immediately may help prevent churn. It would also help you understand other customers facing similar challenges and can prevent further churn at large.
So to answer if SaaS customer cancel can be prevented at the last minute, there is both yes and no. In most of the cases it is difficult to change the customer’s mind in a limited time period yet all attempts to prevent the churn must be executed without delay. But remember that to prevent further harm to the customer, only the right amount of follow up should be executed. Exceeding the limit of customer’s acceptance would take them further away from your brand where they wouldn’t even give feedback.18
In either case, whether you can prevent the churn or not, giving a positive customer experience is crucial. It is important that they leave with a positive state of mind. Even if they decide to finally end the subscription, there are always measures you can take to re engage with old customers. But that’s a topic for another article. Click here to read about that.
Shoeb lives and breathes Customer Success and SaaS. He has a passion to research on the latest innovations happening in SaaS and Customer Success. Shoeb hails from a Software Architecture background where he worked for many years with Indian Tech Giants like Wipro and ITC building software solutions for their MNC clients in the UK and Denmark.
Published 27 May 2020, Updated 6 Jan 2021
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