Churn can be an indicator that a customer isn’t experiencing success using your SaaS product. Reduce churn and you’ll instantly make more money. Here’s how to reduce churn rate for your SaaS product.
Table of Contents
What Is Churn Rate?
At a high level, Churn Rate is an indicator of how many customers you lose. For a software-as-a-service (SaaS) company, the customer churn rate reflects the percentage of subscribers to your SaaS product that do not renew each month.
When you reduce churn rate, you retain more customers and therefore make more money with little additional effort. Your customer acquisition cost, or CAC, is usually much higher than the cost to retain an existing customer.
Reducing churn also saves you money on marketing because it means that you have increased customer satisfaction, which leads to more referral business.
Also read:
- SaaS Marketing Plan Template – this is the exact strategy we used to create a multi-million dollar SaaS product business.
- Marketing Plan Example – download a free sample marketing plan template to create a custom one for your business.
How to Reduce Churn Rate
A SaaS product company can reduce churn rate by following these 6 proven steps. We learned these techniques through trial and error as we built our SaaS company and refined them to reduce churn.
1. Analyze When a Customer Cancels
Knowing when a customer cancels their subscription for your SaaS product will provide much needed insight.
- Is it before they activate, during the trial, within 30 days after signup, 60 days, 6 months or longer?
This tells you if there’s a specific bottleneck at some point(s) in the buyer’s journey or if the issue is something bigger like missing features, poor user experience, or pricing.
2. Find Out Why They Canceled
We added a tool to record user sessions of people signing up as well as using our service. Services like Lucky Orange can do this for as little as $10/month. When we reviewed our user session recordings, wow were we surprised! Things that we thought were logical were actually confusing.
As a result, we made many tweaks to reduce obstacles to client success. This included our user interface. We did lots of testing and research of other tools to see what the design trends were for our line of products. In addition, we modified our drip emails to focus on the issue at hand: increase activations, improve onboarding satisfaction, teach customers how to be successful using our product.
Also, our customer exit surveys from those canceling indicated that we were missing some features that clients wanted. We were getting good reviews, but customers were leaving for features that a competitor had that we didn’t. So, we immediately started work on building those features to become more competitive.
3. Increase Frequency of Initial Contact
New customer activation and onboarding are two of the most common steps where customer retention falls apart for a SaaS product.
Activation is getting a person who clicked on your Free Trial option to activate their account. Onboarding is getting a new customer or prospect well-acquainted with your product so they keep using it.
Using the information we uncovered in steps 1 and 2 above, we revamped our entire process to provide more hand holding at each step of the journey. This website conversion optimization included:
- Multiple confirmation messages as needed to increase activation. We were able to get our activation rates to about 98% for those who signed up for a free trial.
- Include a Quick Start video that’s no more than 10 minutes. New trial accounts usually don’t want to sit through a 1 hour full video tutorial. We created one of those long videos too, but our most popular one was the 10 minute Quick Start video that covered the nuts and bolts to make clients successful with our tool.
- Add a drip email series on “Here’s how to <do something useful with your service>” to show them how to do common tasks. You can usually pull this out of your support knowledgebase and tweak for email.
- Add case studies (and drip them out via email, post to your website) to show customers how others like them have solved similar problems using your SaaS product.
- This was our touch frequency: day 0 (signup day), 1, 4, 7, 14, 30 and then monthly (at least) after that.
4. Keep In Touch Regularly – Without Fail
Post blogs and send newsletters on industry trends, product news, how to info, anything that your clients will find useful.
Host webinars on trending topics, case studies and new features. We regularly got amazing feedback on our webinars, which were so high value that people said they would have paid for the information.
5. Provide Ways for Customers to Share Their Happiness
We never had much luck with contests or promos. So, we simply asked clients to share a tweet about our educational material. They did so regularly and we built our follower base from 200 to 9,500 in two years.
A competitor of ours offered a rewards program where clients earned points towards discounts based on how many referrals they sent. I’m not sure how successful that was, but it’s worth a try.
6. Take Great Care of Your Best Customers
Contact your best clients personally. Few companies with low cost SaaS products do this because it’s time consuming (and can’t be automated). Your clients will appreciate the outreach and will be more inclined to share thoughts about missing features or user experience concerns.
Create a hotline just for them. We set up a Google Voice number that texted our support manager and two engineers whenever a top client called in after hours. They couldn’t get this white glove service anywhere else and stuck with us for many, many years just because of this option. They rarely used it, but loved having it.
Churn Rate Factors That You Can’t Control
Churn is also caused by two other factors that you have less control over:
- People change jobs and the new person taking over the role is used to using a different product so they cancel yours, even if yours is better.
- A client gets acquired and the new owner uses a competing service and wants to consolidate into what they already use.
It’s probably worth a call to these clients to see if you can salvage the account.
