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Written by Catherine Pearson Content Writer
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10 Mar 2019  |  Monetizing

How to Achieve Negative Churn the Paddle Way

7 minute read

All companies want to reduce churn. Fewer customers leaving means more consistent revenue while you take on new customers and get your figures on that upward trajectory. Even more effective for the growth of your business, however, is to achieve the holy grail for all SaaS companies: negative churn.

We’ve already looked at the steps you can take to reduce churn and the importance of simple, friendly onboarding and keeping a keen eye on your analytics to retain your customers. Imagine if you could find a way - armed with these tips - to continue to increase your profits while the inevitable few customers churn each month, quarter or year.

Negative churn is a positive

You’d be forgiven for assuming that ‘negative churn’ means something pretty dire for your business, but in fact the opposite is true. Growth consultant Lincoln Murphy describes achieving negative churn as "when, for a given time period, expansion revenue more than offsets any revenue you lose from customer churn, downgrades, lower usage, etc." So, even when you’re losing customers, you’re still making more money month-on-month and year-on-year.

So how can you get your business to the point where its profits are offsetting the negative financial implications of churn? To make this a consistent trend, you don’t want to lean too heavily on expected new customers (although of course acquisition is crucial to your company’s overall success). In short, you want to encourage your existing customers to spend more with you.

Get more from your customers getting more

Your customers’ success is yours and, as their business takes off, they’ll be far more open to additional access or add-ons to your product as they scale. Forging and maintaining close relationships with customers so that they believe in your solution is crucial, as we look at later in our 'customer success is key' section. Once your product is integral to your customer’s set-up you’ll find yourself in the negative churn zone, where customer accounts are functioning like high-yield savings accounts: more money with little effort.

Achieving negative churn is much more than just customer retention. It’s all about helping your customers succeed and building on their success by encouraging these customers to expand their use of your product. Kristen DeCosta from ChurnBuster summarizes the ideal path to achieving negative churn here:

“You have to invest in [ negative churn ] from the get-go: dive into your churn, analyze your churn, segment the data for further learning, highlight revenue leaks and plug them quickly, then map out an engagement strategy that promotes true customer success”.

Here are Paddle’s three key ways to make more of your existing customer base:

Upsell : If a customer is happy with the functionality and results of your core product, then they’re likely to be keen to increase its ability. Here at Paddle we enable all our sellers to upsell to their customers, whether it’s encouraging buyers to upgrade, purchase add-ons, acquire additional features or a switch from monthly to annual billing.

The ability to access more of your product will be very attractive to a company already pushing the upper limit of their product usage, saving your customer the hassle of having to limit their work with your platform and the pain of receiving emails and notifications about their usage. It’s a fantastic way to increase revenue while providing your customers an advanced experience that’s likely to make them want even more.

Seat expansion : This involves encouraging your customers to bring more of their team onboard with your product. It isn’t just about selling more of the same, though. Instead, it’s about helping your customers grow their teams, adding value to their experience and catering to their unique needs. For example, building additional features for other employees involved in the processes related to your product, like improved reporting for managers, or broadening your product scope to enable additional value for other team members. This is a fantastic way of increasing your revenue by taking advantage of fast-growing company trajectories, whilst continuing to add value.

Another great way to drive seat expansion is by using the B2C2B model. Used by companies such as LinkedIn and Dropbox, B2C2B (business-to-consumer-to-business) is an effective and increasingly popular way of marketing your product. It involves selling first to individuals within a company on a freemium model and, as these customers integrate your product into their workflow, eventually encouraging the business as a whole to convert to a paid account. Acquisition is a lot cheaper when your product - and some influencers on the inside - are doing the marketing for you, so it’s a win-win in the right hands.

Monthly to annual subscription : Here at Paddle, our subscription billing platform allows end-users to switch billing periods with ease. A great way to alleviate the headache of monthly billing for a product that’s integral to your customer’s business is to move their subscription to one easy annual pre-paid invoice.

Flexible APIs mean you don’t need to ask for your customers’ payment information all over again when switching billing plans. While other companies may have to refund your old package amount and recharge you the new cost, we just work out the difference by automatically calculating prorated credits or charges; Paddle makes switching billing periods an easy, seamless process. With Paddle, you can offer multiple different payment methods to your customers that work for them: credit cards for individuals and small teams, and invoices for larger businesses too.

Customer success is key

Knowing how to encourage existing customers to spend more with you is only part of the story. The true key to achieving negative churn is to get your customers to a place where they’re ready to look into increasing their usage of your product - and keep them there.

You want your customers to believe in your service, testify to the positive effects and results yielded by your product and be a champion for your brand. Their success is your success, and it’s a relationship that requires nurturing. The customer needs to know that they are valued and also be kept informed - the more open the dialogue, the better.

So what are some of the ways that you can maintain a strong relationship with your existing customers while encouraging them to upgrade?

Engage with your customers

For Kristen DeCosta from ChurnBuster, the name of the game is engagement. “From improving onboarding to promoting VIP customers, every retention strategy essentially boils down to building an exceptional experience every time a customer comes in contact with your product”.

First impressions matter, so it’s vital that a customer is walked through how to use your platform from the beginning and knows who to contact for technical support. Once a customer is set up, it’s important that they are (and that they feel) considered when new features are released.

“Every business should develop a high-level map of their user journey and highlight how the customer is being engaged throughout it all. Pinpoint holes in the user journey, where customers are being left to their own devices for long lengths of time, and create educational and valuable connections at each”.

Kristen DeCosta, ChurnBuster

At Paddle we hold workshops and webinars to keep our customers engaged and informed - it's a great way to introduce new features and keep the lines of communication open. “Educated customers are the most successful ones”, DeCosta shares, “and therefore the most likely to expand their use of your product. But, they can only move forward if you continually help them towards greater and greater success”.

Make sure everyone’s in the know

Onboarding is only going to be simple and smooth for your customers if your team are unified in knowing how to introduce your product to new users. Just as important as getting it right at the start, it’s also crucial that your customers have a good experience when it’s time for the annual check-in. Make sure your staff are trained to complete a thorough handover should they move departments or leave your organization, as the last thing your customer wants is a confused phone call around the time of their bill where a new member of staff doesn’t know their needs and billing model.

The annual check-in can be a time of tension, especially if your company has no external facing tools to create recurring billing, so a training session to make sure every customer’s unique needs are shared among staff will result in a far better experience. Create a good run up to the renewal date where both parties are informed of what’s coming and you’re looking at a happy (and relieved) customer.

Crown your brand champions

If your customers are delighted with your service and the positive impact of your product on their business, they’re in prime position to be brand champions. A well-nurtured business relationship can create cheerleaders for your company and the bigger your customers get, the more likely other potential customers hear about your product from them. Don’t forget to let them know that their loyalty means the world to you.

Get talking to your customers

There’s very little you can do to increase your customers’ usage if you’re not asking your major players what they want. Paddle value openness and transparency in everything we do, so we like to check in with our customers regularly to ‘pulse check’ their experience with us.

Approach your customers and ask them what they’d like to see on your platform and liaise with your product development team to make these changes. Not only do you get insight into what your customers want to see, it’s also a great and very personalized experience for your customers, who see their suggestions come to fruition. You could even find yourself with a new brand champion.

Paddle has a dedicated team of experts to guide you through set-up and help with any of your queries. We’re always here to help and want to see your software company succeed. Find out more and request a demo here.

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