Top 12 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).
“Customer is king” is an age-old business mantra that emphasizes the importance of customers or would-be customers in every business. The same is true for SaaS companies. SaaS, or software as a service, is a subscription-based model where customers pay subscription fees for services such as Dropbox, Zoho CRM, or Mailchimp. This is how companies earn monthly recurring revenues (MRR).
The lifeblood of the SaaS business is its customers.
You need to put in countless hours of research and development, relentless marketing campaigns, and tireless sales effort to earn a paying customer. However, if your customer isn’t happy with your product or service, they might churn.
But what causes it? This article will discuss the top 11 reasons why customers churn and how to prevent it.
Customers will use your product as long as it benefits them. However, poor customer service could dramatically impact your business’s reputation and future customer acquisitions. If your customers leave your business for the competition, they’re likely to share their experience with others. So, it’s vital to deal with customer problems immediately and tactfully.
You can combat this situation by implementing a feedback process where customers can share any issues they’re experiencing with your product. Your customer support team can reach out to them and resolve them promptly. A happy customer whose concerns are being dealt with is more likely to become a loyal customer and potentially a brand advocate.
Every product is different. And although your customers value their experience as much as—and on some occasions, probably more than—features, you can’t truly compete with a product that’s reasonably a better fit for them.
So, if your competitors offer a product that helps most of their needs, your customers will be more likely to jump ship.
You can reduce the customer churn rate by identifying the best-fit customers based on their lifetime value with your business.
Pricing is a vital aspect that a customer considers before buying any product. A more price-conscious customer would have it as a higher priority on their list of needs than having a product that fits the bill. And this becomes even more of an issue if they can’t or aren’t finding value in your product within the first few months.
You can help minimize price-related churn by ensuring your customers quickly find value in your product so they see it’s worth the cost. And to ensure you’re targeting the right customer base.
Too many features in the SaaS product can annoy a customer and leave them confused. A complex product might hamper the user experience and make it seem less user-friendly, leading to little to no product adoption and eventually churn.
You can avoid this situation by opting for a tiered billing model and pricing structure to meet the demands of different customer segments. And you can also optimize your in-app copy to ensure it’s working for—not against—your customers.
There could be several reasons. There are scenarios when customers fail to pay their subscription fees to a specific service or product due to credit card expiration, some technical glitch in the payment method, or insufficient balance in the user account. According to 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 aren’t working. They can also 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 it meets their requirements. If the product is not a great fit, they might leave you for your 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. And this can negatively affect the company’s reputation.
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 or 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, you can often lose customers and revenue when your product has bugs, downtime, or glitches. Keeping customers posted on the progress of the product investigation and fix or regular software updates can help you avoid or reduce churn. Plus, this is how you can regain your customers’ trust.
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 that you don’t offer.
You can combat this situation by planning product development strategies in advance. You can gather feedback from the customers regularly and group it by parameters such as client size or annual income. You can then use this data in the future when setting priorities for planning new product features.
When customers do not find the product beneficial or of any use, they tend to unsubscribe to your products soon. And if this is a problem, then you’d likely experience customers churning within months of them subscribing to your product.
And as we stated previously, you should focus your efforts on making sure that they’re able to find value in a reasonable amount of time. You can do this by offering proactive onboarding and having a dedicated customer success team available to help your customers reach their desired outcomes.
If you can invest in your customers, they’re likely to stay with you in the long run.
A customer buys your product not because it looks attractive or has fancier features than your competitors but to fulfill their desired outcome. Your product is just a tool to reach it. 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. The customers and the sales team may clash during the onboarding process due to product- or personality-related reasons, resulting in churn.
You can avoid this situation by proactively pairing customer services reps or consultants with right-fit customers. You can also implement a process to switch customers to different representatives quickly when needed.
It can be discouraging when customers leave your SaaS subscription business due to poor customer service, product problems, technical glitches in payment mode, language barriers, etc. Hence, to reduce the customer churn rate, we need to focus on customers’ needs, wants, and personal reasons carefully and work towards them dedicatedly.
We need to be proactive and have regular follow-ups with the existing customers to check if they’re satisfied with the product offerings and services or if require any other assistance to achieve their goals or resolve problems.
Originally Published August 11th, 2021, Updated October 7th, 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.
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