Businesses that deliver their services through a SaaS model have to prioritize customer retention. Maintaining existing customers is as important — if not more important — as acquiring new customers. But SaaS success goes beyond customer retention.
The right combination of sales and customer success management produces a positive customer relationship that helps customers attain goals while also identifying mutually beneficial opportunities for future growth. It’s all about churn, or more precisely, going beyond reducing churn to achieve net negative churn.
By churn, of course, we are referring to the metric that SaaS and other relationship or subscription-based sales model businesses use to calculate customer attrition. Companies with a high customer churn rate have a large number of dissatisfied customers. This rate is highly informative. It can point to problems with a product or service, or with the sales or customer success management process, or a variety of other factors that influence adoption and use (and the desire to continue as a subscriber.)
Negative churn occurs when your expansion revenue from current subscribers is more significant than lost revenue from existing customers. This beneficial churn rate is a key metric for SaaS companies because it echoes and reverberates with customer success.
Net Negative Churn Formula
The key is to expand existing customers
Achieving net negative churn requires businesses to connect with existing customers overall so they can offer more value. It takes more than just satisfying your customers. You can provide a great product or service, and enjoy positive customer feedback, but it is nearly impossible to satisfy every customer.
Many reasons can influence a customer’s decision to cancel a SaaS subscription, and the SaaS provider cannot control all of them. For growth and to offset churn, businesses have to plan for increasing revenue opportunities from those who already subscribe.
Here are five strategies for achieving a negative churn.
Encourage high adoption
The first strategy is also an effective way to encourage customer success in general. For your SaaS solution to stick, it has to resonate with users. Adoption rate optimization is an essential component of your SaaS’s success. Several factors influence adoption, above all user experience and customization. The adoption rate is a foundation for future success, too, as it can lead to referrals from happy customers who use your SaaS to achieve their goals.
As the cornerstone of customer success, high adoption should be a goal from the onset of the sales process throughout deployment and continued use of the SaaS. Businesses can ensure greater adoption by investing time and resources in understanding your customer’s needs, both today and tomorrow. With high adoption, customers are less likely to cancel, but they also are more likely to find value in add-ons and expansion of the SaaS to other areas of their business.
A high adoption rate can also lead to seat expansion, where your user count grows organically as your customer grows.
Encourage resource expansion
One way to achieve a negative churn is to encourage existing customers to increase their subscription. Depending on the services your SaaS solution offers, you can increase storage, the number of transactions processed, minutes, or other methods of metering services. However, achieving a negative churn requires a little more than just offering add-on services. Your customer success team, or sales team, should simulate to identify how these additions will translate to greater value for the customer. For example, if a customer does not need more storage, then convincing them to sign up for a higher tier of service is only going to lead to churn down the road. Negative churn is not impactful if it is only short-lived.
Upsell your existing customers
When you have high adoption, customers will be receptive to other ways your business can help theirs. In addition to offering tiered services, and encouraging appropriate moves to higher tiers, you should submit a variety of solutions as add-ons that can augment customer experience and increase value for the customer.
Always keep in mind that upselling is primarily about achieving greater customer success, not solely adding to your bottom line. If you have well thought out premium or additional services, carefully determine whether or not they will help a particular customer reach their goals. If so, demonstrate this value to them and strive to find a “quick win.” For example, adding data analytics can provide actionable information with a great deal of value.
Continuously improve your product
On a related note, your product or service should not be stagnating. With SaaS delivery, you are in an ongoing relationship in an ever-changing business world. It would be best if you look for opportunities to improve your SaaS solution, incorporating client recommendations and feedback. Developing your solution gives you more opportunities to ask for more business from your existing customers. It gives you more opportunities to create the value that leads to higher adoption and uses of expanded services. Grow, adapt, and watch your customers grow.
Prioritize customer success
Ultimately, your success is firmly rooted in your customer’s success. Customer success has a role in all of the other tips listed here for achieving a negative churn. Successful customers are happy ones that not only won’t cancel, but they will also buy more from you. Customer success is more comfortable to track and manage today with automation.
Most SaaS companies provide the type of services that benefit the most from customer success automation. With the right automation tools, you can monitor adoption rates, set and track customer goals, and encourage a collaborative relationship that finds opportunities for continually delivering value.
SmartKarrot provides an unbeatable solution for automating and operationalizing customer success and achieving a negative churn. With intuitive dashboards, process management, and metrics to measure customer success, and more, SmartKarrot is your greatest ally in expanding your existing customer business.