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Fundamentals of Reducing SaaS Churn Rate

The cost of acquiring a new client is 5–25 times more than retaining a new one. Therefore, if you are looking to grow a successful SaaS business, you have to manage churn.

Churn Rate

A high churn rate provides a general perception of unsatisfactory services. Other than losing clients, you will find it hard attracting new ones. If building a reputable brand is your priority, then you need to reduce churn.

Here are some of the top tips to help ensure customer retention and avoid churn.

1. Make it Official

To stop churn, you must first acknowledge the importance of retention. After all, you cannot solve a problem is you have no idea what it is. Once the data comes in and your metrics identify an increasing churn rate, you will have to address it and make sure everyone is aware of it.

Create a vibrant retention strategy that will deal with everything involving churn customers. Your team should identify the churn rate and establish the reasons why the customers are leaving. This can be done in several ways. For instance, you can send out an exit survey, once customers stop paying for their subscription to your product or service. Also, you can reach out to them directly by email or even a phone call. You want to gather up as much information as you can so that you know the specific reasons that led to your customers deciding to go elsewhere.

Once you have all the details, you can move to place the company to fit the customers’ needs going forward. When this is done successfully, there is a reduction in the churn rate.

2. Measure Customer Engagement

Customer engagement is how often the user interacts with your software. How often they log in, and the period of use also determines engagement.

Once you have established the user engagement, you can know how to increase it. Consider providing value or incentives for the customers to log in and use the software regularly.

By encouraging regular interactions, you can easily monitor customer behavior. You will then align your software to match customer tendencies. As long as the users keep engaging with your platform, there is a lesser risk of churn.

When you aggregate enough insightful data, you can identify which customers will be the most likely to cancel their subscription to your product or service. The signs of upcoming churn are there for those who wish to see them. You should be looking out for signs of less engagement.

This could look like a customer visiting your website less than they used to. If they used to log in on a daily basis, but now log in sporadically once every few weeks, that is a warning sign that should lead to taking actions to keep them as customers.

When you are measuring customer engagement and identify users who are engaging less, you can send a re-engagement email to them, incentivizing them in some way to use the platform more regularly.

3. Prepare the Prospect

Whatever field you are on today, you are most likely to face competition. Do not over-promise prospective clients to get them on board or beat your competitors. When you fail to provide what you promise to the customers, they will leave to seek it somewhere else.

Instead of over-promising and failing to deliver, find ways to entice users into a more extended subscription. Give the users a bargain for the annual subscription as compared to monthly. Other than having them for a long duration, they are mostly to stay engaged due to the more money they spend on the product. However, ensure that they are satisfied and are getting value from your product.

You do not want to have Prisoner Accounts.

Churn rate

If you have already over-promised, then you should immediately be working on implementing improvements into your product. In fact, it is always essential to improve your product if you want to keep growing as a company. Every product has weaknesses, and yours is no different. Identify what can be fixed and improved. You should always be striving to increase the value provided by your product so that your customers will never even consider leaving.

Whether you are adding some cutting-edge feature or upgrading the entire product, you are going to be adding value to it and preventing churn. When you offer what your competitors don’t, you ensure you get as close to that pie-in-the-sky 0% churn rate as you can.

4. Be an Adoption Agency

Like most other business prospects, the first impression is essential if you want to keep the customer for long. Have a team of well trained and qualified customer service personnel to handle the customer onboarding. Train the customer on how to operate your systems, contact you in case of anything, and clarify any of their concerns.

It’s unfortunate, but approximately half of everyone that signs up for a free trial of an application or software will only end up using it once, never to use it again. The first impression they had was mediocre and not one that fulfilled a need they had. This is why onboarding new customers and effectively communicating with them is paramount. Whenever you notice a drop-off, where users are logging in, but then not engaging in any other way, you need to take immediate action to prevent churn.

Users are most likely to succeed with your product when they fully understand how to utilize its value. The higher the success rate, the less the likelihood of churn.

5. Revamp Your Customer Service

Poor customer service is the leading cause of clients opting for alternative service providers. 96% of customers choose their loyalty to a brand based on customer service experience.

Providing excellent customer service is an ideal retention tool. You should stay available all the time, be proactive, and look to build relationships. Also, invite customer feedback, opinion, and suggestions.

Businesses often don’t appreciate their customers as much as they should. Many of them do not call or email them besides when their subscription is about to expire. The result of this is that the customer does not feel appreciated. It then leads to a higher churn rate. By providing excellent customer service, you make your customers feel like they are valued. They will be more inclined to stay customers for the long-term.

Landing new customers is not the end of your work. You need to keep them engaged in your product and give them a reason to stick around for a long time. Excellent customer support is no longer an option; it’s a requirement. 

Customer support can come in a variety of ways. An increasingly popular method used is in-app help. This includes support articles within the application or software itself. Additionally, there are call buttons featured that help customers get in touch with a representative who can answer questions unanswered in the supporting articles.

Another popular method of customer service in the 21st century is social media. It’s become vital to successful business operations today. Besides engaging with users, it can also act as a support channel. An option for providing exceptional customer service is using text messaging. Sending information this way provides greater flexibility, especially for people on the go who want to get a no-frills answer right away.

6. Do a Cohort Analysis

It takes conviction for one to spend their money on your product. It implies that everyone must have a valid reason to stop using your services. Go beyond identifying the churn rate and take your time to analyze the factors for leaving.

Once you have the reasons, you can easily fine-tune the products to suit customer needs.

You can go about finding out the reasons in a few different ways. An exit survey is a popular method. You would have a trigger set up that would immediately send this out to users who canceled their subscription to your product. However, you can also engage with former customers in a more direct way, such as via email or even calling them if the subscription was a significant one.

7. Give Value Reminders

The easier it is for customers to leave your products, the more likely they will look for other options at any slight inconvenience. Remind your clients of what they will miss by not using your services. You can also let them know of risks like losing data and other useful information.

Reminders are more successful than some businesses realize. These reassure your current customers that you have the best product for what they are using it for. Whenever you add new features to your product, let your customer base know. Automated emails can also be sent to keep everyone up to speed on the features you would like highlighted. You can send these out on a weekly basis, or once a month. Also, send out real-world case studies that involve the use of your product. Beyond this, you should have an area on your website, such as a blog, where you publish helpful content, including how-to guides, infographics, and more, showing all the value your product provides.

8. Optimize Your Targeting

Create your ideal client to help you come up with a working sales and marketing strategy. Once you understand the perfect client, you will create the right software at the right price and for the ideal use.

A method that works well for many businesses is the creation of the ideal target customer. This is a profile of the perfect customer. Make sure to be as detailed as possible, including their basic information, as well as interests, and even beliefs. The more precise you get on who your product is for, the more successful you will be at targeting them, turning them into customers, and keeping them as long-term users of your product.

9. Identify At-Risk Users

Take note of the clients’ activities before letting go of your products to identify patterns. Some of the possible features are irregular payments, complaints, and low inactivity.

Whenever someone is considering canceling their subscription, they will display some tell-tale signs of doing so. You should be on the look-out for red flags, as far as engagement levels go. If they are visiting your website and logging into your product less frequently, they should be considered as at-risk users.

When you see usage drop across the board, that means you should be sending out a re-engagement email to the entire group that may churn. This move can at least prevent a percentage of those users from going elsewhere.

If you notice these indicators, contact the customer personally. Find out the issue and fix it in the best way possible.

10. Focus on Quality

All the other fundamentals in this list are worthless if you are offering poor services. Your software should ensure customer satisfaction. Having learned your ideal customer, their behavior, and reaching out if you notice signs of leaving, you can provide the best services for assured retention.

You need to stay competitive, but you won’t be able to if you are providing products or services that lag behind others in the space. If what you offer is significantly deviating from what’s expected by users, you will see your churn rate soar. 

Look into the latest trends, advances in technology, as well as product advancements. You should be offering an exceptional product that fulfills the needs of users. What you offer has not only to be high-quality but also to be something that stays relevant.

Bottom Line

Managing churn is vital for the success of any SaaS business. Your ability to manage the clients is, in most cases, the difference between success and failure. Prioritize identification of your ideal client, providing high quality, and solving any arising concern. SmartKarrot is the place to visit when looking for the best solutions for customer satisfaction.

This blog has been last updated on 22 May 2020 to make it more comprehensive.

You might also like:

  • The SaaS Churn Handbook – Everything you need to know for understanding and preventing customer churn.
  • To understand how SmartKarrot helps top SaaS companies predict and prevent churn, Request a Demo.

Responses

  1. Avatar
    Roger Thorne

    I have a lot of competition in my niche so churn is something I have to combat all the time. Customer service is a big deal and I make sure someone is available 24/7. Not only that, it’s good to treat customers like friends, let them know you care and they will surely stick around if your service is also good. Point 9 is a great one, I’ll have to focus more on at-risk customers. I have the data available and can see those who aren’t active or pay late so I think it’s time to ensure they see the value in my service.

  2. Avatar
    Daryl Reed

    My way of keeping customer engagement high is gamification. Offering daily rewards is enough to ensure most check-in for the day and some continue to use it even if they didn’t plan to. I recently revamped customer service on the social media side. They were getting neglected somewhat so I hired a social media manager and that really helped out. Don’t underestimate it!

  3. Avatar
    Sophia Gregory

    Customer engagement is naturally very high in our industry, so a lot of our focus goes into turning our customers into referrers and reviewers. Offering incentives for bringing in new customers and leaving a few positive words around the internet really helps to keep our churn rate negative. We can never rest on it though, it could all change at any moment.

  4. Avatar
    Julian Hammond

    Getting new clients is indeed a challenge. I have been considering a free trial or even a totally free version of the software so people can get a small taste of what we have to offer. I’m very confident in the product, I just don’t know if this is a method that actually works. Failing that, I think some new staff focused on customer success will be needed.

  5. Avatar
    Ron Dempsey

    I’m having an issue with churn at the moment. Step #1 is complete and my team is aware of it, but I wasn’t sure what to do next. I’ll take a look at customer engagement to see what’s going on, maybe a recent update has broken something and it was never reported. I’ll follow along with these other steps as well and hopefully fix this issue.

  6. Pingback: Can a SaaS customer who has requested to cancel be saved? - SmartKarrot l Comprehensive Customer Success

  7. Pingback: SaaS churn rate benchmarks: and how to do better yourself! - SmartKarrot l Comprehensive Customer Success

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