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Written by Catherine Pearson Content Writer
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25 Feb 2019  |  Saas

How to Reduce Churn in your SaaS Company

5 minute read

It’s easy to view your existing customers as converts to your brand and focus your time, energy and resources on new customer acquisition. With your efforts shifted to incoming customers however, you risk disenchantment in your ranks. Here’s how you can reduce those customer break-ups and keep your profits happy.

What is churn?

Best put by Jill Avery, a senior lecturer at Harvard Business School, “customer churn rate is a metric that measures the percentage of customers who end their relationship with a company in a particular period”. Some companies measure this metric by quarter or year, depending on the industry and product, but SaaS companies with a monthly billing model look at customer churn rate by month. If your glass is half full you may be charting retention rate instead, but it’s ultimately the same information you’re gathering and for the same reasons: you want to get customers on board and keep them on board.

How can my company reduce its churn rate?

Reducing churn is a win all around. Numerous studies attest to the expense of acquiring a new customer - anywhere from five to 25 times more expensive than retaining an existing one, depending on which study you read - so the financial value of nurturing your existing customers should be crystal clear. If you’re billing your customers monthly you’re also already in a strong position. You won’t be presenting customers with any big end-of-financial-year invoices that can prompt churn, so your primary focus can and should be supporting and informing current customers to keep their subscription rolling.

If a high percentage of your customers stick around, it means great things not only for your MRR but also for the strength of your brand. Your SaaS company will benefit enormously from having cheerleaders for your product and your long-term customers are as such for a reason - and likely to sing the praises of your continued support.

Get your onboarding right

There’s nothing more daunting (or boring) than purchasing a product to make your life easier, only to then be faced with reading a big ‘getting started’ manual or being sent a welcome email full of links to tutorial videos and troubleshooting pages. It’s a huge wave of information which kills the excitement of getting started with the product. Some people might not even get past this stage and churn before the next payment.

The best way to avoid this? Keep it simple and let your great product do the talking. Have a simple, actionable welcome email that kickstarts the set-up for the customer and then guide them through the process step-by-step. In no time they’ll be seeing, first hand, the potential of their purchase right off the bat. A smooth onboarding process is reassuring and indicates that any issues will be as smoothly resolved. Something as simple as Upscope’s intro email including an obvious ‘Mailto:’ link helped double their installs:

In Econsultancy’s Digital Trends 2018 report, 45% of companies cited content and experience management as their number one priority, with top-performing companies being 50% more likely than their peers to have “well-designed user journeys that facilitate clear communication and a seamless transaction”. This reaffirms what we already knew: positive customer experience is key to customer retention.

Acknowledge the competition

If your customer churns, there’s a good chance they’re still looking for the sort of service your company provides and are out there searching for another provider who meets their needs (if they haven’t found one already). By this logic, there’s also a good chance that you were part of a potential customer’s initial search but they went with a competitor.

A great way to reduce this churn and improve your acquisition all at once is to openly acknowledge your competition. It’s valuable to highlight to potential customers - and remind your existing ones - what sets you aside from the options out there.

Providing your customers with case studies that demonstrate that your solution remains the best option for their needs is a fantastic way to reinforce why they chose your company from the start (and a little reminder of the services you offer that the competition don’t can’t hurt). This isn’t bad-mouthing your competitors, it’s sharing the benefits of your solution while being transparent with your target market.  If a customer knows from the start that you’re their best option, they’re much less likely to churn to see what another company can offer them out of curiosity.

Pre-empt the churn

Learn to spot the warning signs of a customer who’s on the way out of the door and catch them before they get their coat. The customers who are most likely to churn tend to be those who have not engaged with your product for upwards of 2 weeks. Sometimes there’s very little you can do about a customer who’s planning on churning (it could be that they no longer require your product) but often this pre-churn behavior is unconscious and a gentle nudge to reassure and re-engage the customer makes a big difference.

An example Mixpanel analytics dashboard

Targeted emails or in-app notifications to customers who’ve fallen under the radar can encourage or remind them to make use of your product or seek help with your customer services if they are experiencing problems. If you don’t have built-in analytics, tools such as Mixpanel and Heap are useful in monitoring the usage of your product to help decide which customers need some encouragement to re-engage. Platforms such as Appcues also enable you to monitor usage as well as communicate with your customers in-app. If your efforts ultimately fail, the following step is vital…

Ask for feedback

We can’t save everybody, but we can learn from the experience. If a customer has a negative experience they’re far more likely to share their problems than a happy camper, so you can really benefit from their candor to change your approach and prevent the next customer from churning.

You can collect feedback in a number of different ways, from using in-app bots, to sending surveys via email, to collecting personal feedback through your account managers. Of course, it’s important when gathering this feedback to take into account the type of customer you’re losing. Losing a customer after one month of infrequent use of your product is very different to losing a loyal customer of several years and, needless to say, the big loss carries the biggest lesson for your company going forward.

Once you have enough feedback you can trace recurring patterns and formulate an action plan to seal up the gaps where your existing customers are slipping through. The more robust your plan and the more thorough your support is for existing customers, the lower your churn rate.

Here at Paddle we work with over 850 software companies, helping them to retain their customers and grow their business with our powerful analytics and marketing tools. If you want to see how Paddle can help you then get in touch to speak with one of our experts today.

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