Acquiring new customers is always more difficult, expensive, and time-consuming than maintaining or upselling current relationships. 30% of SaaS companies have an unacceptable level of churn of more than 7%.1 All software-as-a-service companies are focused on reducing churn, but you can go a step further and turn churn into a learning opportunity and implement improvements.
Follow these tips to reduce SaaS churn.
How to Reduce SaaS Churn
1. Measure churn accurately. Before you can take steps to reduce churn, you must measure it correctly. You should calculate both customer churn (number of customers lost per month) and MRR churn (monthly recurring revenue lost). Also, calculate customer churn and MRR churn for all of your different subscription packages or bundles so you can identify weaknesses and better target your retention strategies.
For more detailed churn calculations and analysis tips, read this old-but-good post from the founder of WP Engine.
2. Find benchmarks. Do your research to figure out the expected or normal churn rates for your product category and subscription model. Set realistic expectations and churn goals, and don’t overreact to things like higher churn rates for low-price, short-term subscriptions.
3. Set realistic expectations from the start. If your website or promotional materials oversell your product functionality, you’ll lose a lot of prospects during the trial phase. Tout the benefits and features in an exciting way, but make sure your product backs up all of your claims.
4. Focus on upselling to larger, longer term subscription plans. Churn tends to be much higher when the investment is lower. If you can prove your value and wow your customers at the lower-end subscriptions and get them to buy into a larger deal, you’ll have higher revenue customers who will stick around longer. Stability at the higher level will make churn among lower-level subscriptions more acceptable.
5. Constantly seek customer insights to improve your product. A quick exit survey when someone cancels a subscription can give your R&D team valuable insights. Maybe there is a simple fix or tweak you can make that would make customers happy and keep them on board. If you don’t ask, you’ll never know. Also, keep in touch with existing customers to ensure they are happy and ask how you can improve. This type of attention makes customers feel appreciated and gives them a voice, adding tremendous value to your services. (Remember – you are a services company!)
Once you learn more about the behavior patterns of those who cancel their subscriptions, turn those expected behaviors into trackable metrics so you can predict customers at risk of churning and step in to intervene.
6. Group your customers into personas and evaluate their behavior. Which types of customers are long-term? Which types of customers are most likely to upgrade their plan? Which types of customers cancel their subscriptions? These insights will help you decide who is most valuable so you can better target your marketing campaigns and tailor your product improvements.
7. Put your customers’ success ahead of your own. When developing your product, making updates, and marketing to new and existing customers, always keep in mind how you can help them succeed. When your company helps a customer save time, improve workflow, or achieve their goals, they are much more likely to become loyal customers and raving fans. When your customers succeed, you succeed.
8. Build an AMAZING customer support staff. Dedicated mid- to high-level customer service reps who know your product, company, and workflows inside and out are an invaluable resource to retaining and upselling customers. Invest in Live Chat, build a comprehensive Q&A or FAQ page, and be sure someone is available by phone 24/7 to troubleshoot or answer questions. Sit the company leaders near your customer support team so they can hear conversations firsthand. Customers expect answers fast. When they feel they have a personal advocate inside your company, they will be satisfied.
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