Top 11 Reasons Why SaaS Customers Churn
It is important to understand the reasons why customers churn from your SaaS business. Here are the top 11 reasons and how you can avoid them
“A customer is a King”, an age-old business mantra that emphasizes the importance of customers or would-be customers in every business. The same is true for companies who are dealing in SaaS products. The lifeblood of the SaaS business is its customers. SaaS, or software as a service, is a subscription-based model where customers pay subscription fees for services such as Dropbox, CRM, or perhaps Mailchimp, and this is how the companies earn monthly recurring revenues (MRM).
You need to put in countless hours of research and development, relentless marketing campaigns, and tireless sales effort to earn a paying customer. However, at times, a SaaS customer is not happy with your product or service and may decide to unsubscribe, which is really disappointing. About 90% of Americans use customer service as a deciding factor for whether they want to do business with a company. And nearly 60% switch companies based on poor customer service.
Here are the top 11 reasons why customers are leaving your SaaS business behind and decides to unsubscribe to your services:
A customer is connected with your product as long as it is fulfilling his/her demands or resolving problems. However, poor customer service could impact your business’s reputation dramatically as the customers leaving your business for the competition are likely to share their experience with others. It could affect your future customer acquisitions drastically. So, it is of utmost importance to deal with customer problems immediately and tactfully.
You can combat this situation by implementing a feedback process wherein customers can share their grievances and your customer support team can reach out to them and resolve the issue immediately. A happy customer whose concerns are been dealt with on priority is more likely to make another purchase from a business.
Every product is different and if the competitors offer better products to customers than the competitors and which have more user-friendly features, your target users will be persuaded to go for the purchase. The new product might have more functionality aligned with the user’s needs. The competitors might have developed something that closely matches the needs and wants of your target users.
You can reduce the customer churn rate by identifying the best-fit customers based on their lifetime value with your business. This value is the benefit that the customer has been deriving from your product over the years and the overall satisfaction with your service.
Pricing is a vital aspect that a customer considers before buying any product. A smart customer always keeps a tab on a product’s prices so that it does not pinch their pocket in the long run. Charging more from a customer could be the reason they are leaving your subscription service. A customer is likely to be lured by the competitors if they are offering cost-effective products, unique expertise, product features, and services. Hence, you need to keep your pricing competitive to retain the existing customers.
Too many features in the SaaS product can annoy a customer and leave them confused. A complex product might hamper the user experience and can result in a faster unsubscribe rate to your product. If you find a competitor that offers a user-friendly product and is available at cheaper prices, you are at the risk of losing your customer.
You can avoid this situation by opting for a tiered billing model and pricing structure to meet the demands of different customer segments.
There are scenarios when customers fail to pay their subscription fees to a specific service or product due to credit card expiry or due to some technical glitch in the payment mode or due to insufficient balance in the user account. There could be a number of reasons. As per ProfitWell, 20-40% of SaaS churn and cancellations are due to payment delinquencies.
You can diminish the churn rate by using in-app notifications to inform customers when their cards are about to expire. The customers can be reminded about the payment failure via email or SMS so that they can take the desired action accordingly.
It generally happens that a customer signs up for a product or a service without understanding whether a product meets their requirements. If the product is not a great fit, the customers will leave you behind for the competitor. SaaS companies often end up closing the wrong deal either through a lack of understanding of what your ideal customer looks like or through unclear product information. This affects the reputation of the company adversely.
You can deal with this situation by analyzing your ideal buyer persona in-depth as possible. You can use marketing methods such as surveys, conduct personal interviews, or distribute sample products/services to understand buyer persona, customer buying behavior, and patterns.
Customers rely on your products to resolve their complex business problems and to run their business smoothly. However, when your product has bugs, downtime, or glitches, you may lose revenue and productivity immediately. You can avoid this situation by keeping customers posted on the progress of the product investigation and fix or regular software updates. This is how you can regain the trust of the customers.
There can be a scenario where clients have demands that are difficult to meet. They might need new functionality or integration in a product or service, and you don’t have that offering. It is a tedious task to keep with their growth and requirements.
You can combat this situation by planning product development strategies in advance. You can gather feedback from the customers regularly and group it as per certain parameters such as client size or annual income. You can then use this data in the future at the time of setting priorities for planning new product features.
When a customer does not find the product beneficial or of any use, they tend to unsubscribe to your products immediately. It does not hold any value to them as they are non-essential for them. The companies should make efforts to retain customers such as offering lucrative product discounts, interactive and amazing features, or providing longer contracts. If you are able to invest in your customers, they are likely to stay with you in the longer run.
A customer buys your product not because it looks attractive or it has incredible features than your competitors but to fulfill their desired outcome. Your product is just a tool to reach their specific outcome. If your products fail to meet their desired result, they are likely to leave you behind and look for better alternatives. Customers are quickly disengaged when the key features don’t seem to work effectively. You need to ensure that your product helps customers reach their goals. Besides that, your onboarding process, customer success teams, and self-service education play a significant role in reducing customer churn rates.
It’s very essential that a sales representative/ customer success manager of your business knows the native language of your customer. There are instances where you are planning to expand your product into new markets. In such a case, your sales team should have experts who know foreign languages and are skilled to communicate with international clients fluently. The language barrier can be a major reason for the high churn rate.
You can avoid this situation by translating your help resources such as documents, videos, or help center into different languages. You can start with the most popular resource and work on increasing the number of available languages.
A SaaS business is all about onboarding early-stage customers personally or offering consultation services to work alongside the product. During the onboarding process, the customers and the sales team may not bond well, probably due to product or service issues or personality clashes. This may result in customer churn.
You can avoid this situation by proactively being involved in pairing customer services reps or consultants with right-fit customers. You can also implement a process to switch customers to different representatives quickly.
It is very heart-breaking when customers leave your SaaS subscription business due to poor customer service, product problems, technical glitches in payment mode, language barrier, etc. Hence, to reduce the customer churn rate, we need to focus on customer’s needs, wants, and personal reasons carefully and work towards them dedicatedly.
We need to be proactive in approach and take regular follow-ups with the existing customers to check if they are satisfied with the product offerings and services or if they require any other assistance to achieve their goals or resolve problems.
Originally Published August 11th, 2021, Updated August 14th, 2021
Anshi has over 12 years of experience in demand generation, digital marketing, and managing global teams. In her prior role as head of marketing operations for a high growth US healthcare tech organization she transformed marketing from cost to revenue center.