In SaaS, customers’ rise and fall can stealthily hurt a company’s growth. Studies show that cutting churn by 5% can boost profits by 25%–125%. For instance, it’s better to keep the same clients than to spend all resources on finding new ones. But why is it that churn is a problem at all? SaaS companies have mostly recurring revenue. Clients are expected to renew their subscriptions monthly or yearly. When customers churn, that stream of income goes away. This blog will discuss 7 Ways On How To Reduce SaaS Customer Churn for the SAAS products and companies to improve client retention. It aims to shift their bias against it.
Understanding Customer Churn
What is customer churn?
Customer churn is the percent of a company’s customers who stop using its service in a given time. Churn can be voluntary or involuntary. Voluntary churn is when customers unsubscribe. Involuntary churn occurs when a payment fails or a credit card expires. Clients then cannot use the service.
Why Should You Care About Churn?
Churn rates generate high costs for acquisitions and retention of customers. It is cheaper to win back a lost customer than to retain an existing one. But it may cost 5 to 25 times more to acquire a new customer than to have brand loyalty. This shows that SaaS firms value understanding and managing customer churn. They focus on processes, not just analysing its causes.
Principal Strategies to Reduce SaaS Customer Churn
1. Enhance the customer onboarding process
How people’s perceptions have been shaped since a new customer gets into a SaaS company is what counts the most. First, if people get a tech product without instructions, they will likely quit if it isn’t useful. The early stages must succeed. This will ensure customers are comfortable and get quick wins.
Actionable Tips
- Interactive Product Tours: They act as a personal guide. They show customers the most important parts of your product. Intercom or Pendo may prove helpful in facilitating this.
- Welcome Emails: Start a welcome email series. It should inform users of possible uses, offer tips, and share success stories.
- Early Wins: Ensure customers see a positive result as soon as possible. This could be a report, time saved, or a problem solved with your tool.
Example
The process one goes through when signing in to Slack is very user friendly. Users are able to send their first message within minutes, showing quick gain.
2. Invest in Customer Success
A proactive customer success team can decide if a customer stays or goes. This can be a deal-breaker. Their aim is to make sure that the consumers do not just use the product but achieve some goals with it.
Actionable Tips
- Regular Touch Bases: Schedule follow-up calls to check these customers’ product usage.
- Customer Loyalty Health Indicators: Determined efficiency using statistics. Some systems, like Gainsight, measure customer activity to spot danger.
- Proactive Management: Assign a seasoned rep to guide valued clients.
Example
When HubSpot’s customers get their new marketing tools, they reach out to help them set them up for value.
3. Provide an Encouragement for a Customer to Go Through the Culture and Situate Your Sales Efforts
Customer loyalty can be achieved through picky targeting of products to users. To expand their products, customers should use tailored communication in their targeting.
Actionable Tips
- Behavioural Triggers: Use data to suggest content based on customers’ product usage. Recommend what you want them to see.
- Targeted Messaging: Send unique, tailored emails/messages to each customer’s journey. For example, you may find other things or features that you do not know anything about.
- Customized Pricing: Explore pricing plans for high-value customers. They are hard to move to a different provider due to their business type.
Example
Netflix uses its recommendation system to harness member data. It aims to entice non-subscribers to return. It suggests movies that match their tastes.
4. Provide Ongoing Value
Pleasing the customer’s first impression is not worth it. You must prove your offering’s usefulness to them over and over again. If customers do not remember the reason as to why they subscribed, churn becomes a real challenge.
Actionable Tips
- New Feature Rollouts: When launching new features, explain their value to the client. Use emails, product webinars, and in-app notifications to spread the word.
- Usage Reports: Monthly, show customers their product benefits with enticing reports. Metrics like time saved, ROI, or engagement statistics will keep them hooked.
- Customer Success Stories: Share testimonials or use cases. They should show how others solved similar problems with your offering. This will add credibility.
Example
Dropbox updates users on their storage levels and redeemed space.
5. Implement a Feedback Loop
Evolving a business with customers is a great stick. Heed the customers’ voices. They can help resolve issues. If unchecked, they will churn.
Actionable Tips: NPS surveys: They measure customer satisfaction with a business. They also identify customers likely too dissatisfied to return.
Customer Feedback Channels: Provide multiple ways for customers to respond. Use banners, emails, or feedback from calls.
Act on Feedback: Provide ways to give feedback. Change things based on the results. This shows customers that their help in solving problems is valued.
Example: Zoom constantly asks users how to improve. They added features, like virtual backgrounds, after user requests.
6. Monitor and reduce SaaS customer churn.
Sometimes, it has avoidable causes. We call these “involuntary churn.” With good systems in place involuntary churn cannot be sustained for long.
Actionable Tips
- Dunning Emails: Send them to customers whose payments failed. Provide alternative billing methods.
- Retry Payment Systems: Test the failed payments in a week. Use a billing platform like Stripe or Chargebee.
- Multiple Payment Methods: To boost renewals, make it easy for customers to pay. Offer a variety of payment options.
Example
Subscription-based businesses like Netflix and Spotify have faced issues with involuntary churn. They have used automated payment reminders and retries to fix this.
Use data and metrics to analyze and reduce SaaS customer churn for customer retention.
As already noted, using data to control churn is a necessity for SaaS companies. Metrics like Churn rate, CLL, and CHS are vital. They help analyze patterns and prevent potential customer losses.
7. Metrics to Monitor
- Churn Rate: It is the percentage of customers who stop using your products over a set period. If your business’s churn rate is going up, then it’s time to find out who your unhappy customers are.
- CLTV: A customer’s worth and how long you’ll keep them is key. It guides your retention efforts and maximizes customer value.
- Customer Health Scores: Track usage to assess and predict churn risk. This allows for proactive measures to boost usage.
Case Study: How HubSpot Reduced Customer Churn Using Customer Success Strategies
HubSpot, a top vendor of inbound marketing software, faced high churn as it tried to grow its user base. To improve retention and gain customers, HubSpot created a task for customer success.
It aims to get customers to use its products longer.
Here’s how HubSpot tackled customer churn:
Proactive Customer Success Team
HubSpot formed a customer success team and sent it to the customers. The goal was to help them achieve their goals with the platform. Said team went a step up by checking in often and guiding their customers on how to fully utilize the software. This individual attention let HubSpot stop problems that could cause churn.
A HubSpot blog post says the success team cuts churn and boosts retention. They do this by testing and engaging customers at different stages of their journey.
Onboarding Programs Customized to the Customer
HubSpot’s onboarding programs were not one size fits-all. They were created for the needs of different customer groups. This included, among other things, training sessions, product videos, and reference materials. They enabled users to use the platform efficiently. HubSpot prevented early churn. Customers saw the service’s value right away.
A strong onboarding process reduces churn. HubSpot knows this. This article on customer success for entrepreneurs shows the value of onboarding campaigns.
Automated Health Scoring System
In a bid to avoid churn, HubSpot developed and deployed a health score based system for customers. The system used engagement measures to find at-risk clients. It tracked product usage, feature usage, and support interactions. The HubSpot customer success team would then contact at-risk customers before they churned.
The practice of using customer health scores to prevent churn is well-known. After discussing this with Byers, I considered several customer success stories, including HubSpot. They are active on that media platform.
Customer Feedback and Iteration
To improve, HubSpot collected feedback via NPS surveys and product usage. It let the firm improve the platform to meet the client’s needs. It also prevented any issues from worsening. HubSpot quickly gained customer loyalty and trust by using feedback to improve processes.
The article shows that feedback looping is a useful strategy. It’s illustrated by HubSpot’s customer retention practices. See HubSpot’s blog for their approach to customer feedback and improvements.
The Result
By focusing on customer success, HubSpot cut its churn rate by 15% in 12 months. Their data analytics and customer success efforts improved their customers’ lives. This, in turn, optimized overall customer happiness.
Conclusion
Every SaaS company out there ideally wants to reduce churn and increase more revenue. Better onboarding and increased post-sale product value will reduce churn. Also, Invest in customer success, too. Use these strategies to cut customer turnover and build client loyalty. Have you implemented any of these strategies in your SaaS business?
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