Goodbyes are never easy, but they’re especially hard in a subscription business model. This explains why customer churn is such a long-running struggle in the SaaS world.
If you’re currently grappling with a high churn rate and looking for actionable solutions to fix the problem, we’ve got your back. This article reveals nine effective ways to reduce SaaS customer churn.
Why You Need to Reduce SaaS Customer Churn
Reducing SaaS customer churn is important because it affects your ability to grow long-term.
Your SaaS churn rate represents the rate at which your customers cancel their subscriptions within a specific time period. If your SaaS business is to grow, its churn rate needs to be significantly lower than its growth rate. In other words, you must acquire and keep more customers than you lose.
If your customers keep churning, you’ll need to spend more money to attract new ones. At best, the strategy is expensive. At worst, it’ll fail to solve the underlying issue: retaining customers and earning predictable recurring revenue.
SaaS customer churn rate can also affect your ability to attract investors. Moreover, it hurts your company’s valuation, especially during an exit.
Therefore, it’s safe to say that reducing customer churn rate should be a priority for every SaaS business.
10 Ways to Reduce SaaS Customer Churn
There are several ways to reduce SaaS customer churn. Here are nine of the most effective techniques:
1. Improve Your Onboarding Process
In an ideal world, your customer would be willing to dive into your SaaS product unprompted. They’d do the detective work of discovering what it does and the benefits it provides without needing your assistance or input.
In reality, when faced with an inscrutable user interface and zero guidance, a customer might churn.
Therefore, it’s safe to say that your SaaS product’s onboarding process can help or hinder feature adoption and, ultimately, impact your customer churn rate. It’s imperative that the onboarding flows you put in place work to help your customer achieve their goals as quickly as possible.
So what can you do to give your customers a pleasant onboarding experience? Here are a few suggestions:
- Provide Ample Educational Resources: Arm your trial users and existing customer base with all the educational materials they need to learn about your product. Think FAQs, webinars, etc.
- Use Onboarding Emails: Set up an onboarding email sequence that gets new customers up to speed with your SaaS product’s key features. Here’s a nice example.
- Utilize Progress Bars and Checklists: Use checklists and progress bars to encourage new users to reach onboarding milestones.
- Give Excellent Support: Make sure your customer support team can readily assist new customers 24/7.
Ultimately, your onboarding experience should help new customers build proficiency with your product as quickly as possible while showcasing its inherent value.
2. Add Value to Your Product Continuously
Continuous product improvement is an effective way to prevent your active users from churning.
When you make incremental or significant changes to your SaaS product, the improvements keep your customers happy and engaged, fostering customer retention.
Typically, SaaS product improvements fall into two categories:
- Inclusion of New Features: You need to include new features throughout your SaaS product’s lifecycle to keep things fresh. Adding value to your product this way comes with some risks. It’s not unheard of for a newly-included feature to face backlash. So do your research before altering your product in this way.
- Improvements to Existing Features: You can also add value to your product by tweaking its existing features. Once again, doing so isn’t without risk. For example, your improvements may alter a perfectly fine user experience for the worse.
When adding value to your SaaS product, don’t lose sight of your original goal, i.e., to keep your customers happy.
An excellent way to mitigate any blowback is to collect feedback from customers you’ve identified as power users. Take notice of any product features they are struggling with. Then use those insights to improve your product and delight the users.
3. Reward Loyal Customers
Another way to reduce customer churn is to reward your most loyal customers by implementing a customer loyalty program. According to Statista, 70% of US customers attribute a brand’s customer loyalty program as a leading driver of their brand loyalty.
The benefits this strategy provides are manifold.
First, it incentivizes your loyal customer base to resubscribe to your SaaS product (which is a fantastic benefit from a recurring revenue standpoint).
Second, it helps drive customer engagement. A loyalty program is an excellent way to make happy customers develop a deeper connection with your brand.
Third, it’s perfect for generating buzz around your product. When you reward your customers this way, they can become ambassadors who spread the good word about your products to the non-customers in their social circles.
Fourth, and finally, it reduces churn. After all, resubscriptions and increased customer engagement tend to have that effect.
For best results, don’t overcomplicate the program. Aim to give them a pleasant customer experience by rewarding their loyalty, not to confuse them. Keep things simple, and it’ll encourage them to participate.
Also, consider merging your loyalty program with a referral program, as Evernote does in the image below:
Combining the two programs will let you kill two birds with one stone, i.e., retain your active customers while acquiring new ones through referrals.
4. Monitor Customer Health Scores
It’ll be next to impossible to lower a monthly churn rate without identifying the customers at risk of churning. Your customer success team can identify these customers by monitoring the customers’ health scores.
A customer health score is a metric for identifying healthy and at-risk customers. Your customer success managers need to keep an eye on it at all times.
There are several methods for creating customer health scores. A common way is to use three criteria for scoring customers:
- Frequency: This measures the amount of time customers spend using your product as well as how frequently they return to use it.
- Breadth: When you have a customer account with multiple users, the breadth of use reveals how many of them use your product regularly.
- Depth: How many of your product’s essential features are your customers using?
Your customer success personnel can score a customer account based on the above criteria. For example, the customer account will be deemed healthy if multiple users log in frequently to use your product.
In contrast, the same team would label an account as “at-risk” if its users barely log in to use the product. This lack of engagement would be a telltale sign that the customer account in question isn’t deriving any benefit from the product.
So, what can you do when you have at-risk customer accounts?
A potential solution is to speak to your customers and collect feedback. Find out the cause behind their low adoption. Is it due to them needing additional training? Perhaps they’ve yet to set up their accounts?
Whatever the case may be, you’ll have an easier time identifying why your customers aren’t using your product when you hear it from them.
In addition, your team can look for patterns in individual customer behaviors. Doing so will help them pinpoint whether a customer’s light usage is normal or an anomaly. If it’s the latter, you might need to include more in-app guidance, adjust your product’s onboarding sequence, and so on.
5. Pay Attention to High-Value Customers
Your high-value customers are those individuals or accounts that significantly impact your bottom line. Not only do these people and accounts purchase from you the most, but they also hold considerable sway over how other customers perceive your SaaS product.
You need to pay special attention to them to prevent revenue-destroying churn.
Start by identifying these users. One of the most effective methods for doing so is to segment your customer base using the customer lifetime value KPI, as below:
The above image depicts how a company can track segmented customers’ lifetime value over the space of a year. At a glance, it’s easy to tell the customers with the highest lifetime value. These individuals and accounts are the company’s highest-value customers.
Once you identify your highest-value customers, maximize the value they receive from your product. You can do that by seeking their input before implementing new product features and providing them with timely customer support. Do all you can to maintain these profitable customer relationships.
6. Invest in Customer Success
We briefly discussed customer success personnel in relation to customer health scores. Now let’s talk about why investing in these employees is so essential for preventing churn in SaaS.
Your customer success team is at the frontline of your customer retention efforts. Among other duties, they’re responsible for responding to disgruntled customers and gleaning the reasons for churn.
Unlike customer support personnel, these team members are there with the customer throughout their customer journey. So to keep your most valuable customers happy, you need to hire these professionals.
You also want to make sure your customer success team is equipped with the right tools to understand user behavior, segment customers effectively, and automate tasks. Training your team on such platforms ensures they can identify and act on potential churn signals swiftly.
7. Target Inactive Customers
Customers may stop using your SaaS product for different reasons. Before you write off every one of them as churned customers, try and salvage those users who have yet to delete their accounts.
There’s no shortage of ways to re-engage inactive users.
You can send a re-engagement email like the one crowdfunding site Kickstarter does in the image below:
Alternatively, you can request their feedback via email to learn the reasons behind the users’ inactivity on your platform:
Whichever method you adopt, targeting and re-engaging inactive users can reduce the percentage of customers that churn.
8. Conduct Customer Churn Surveys
Finally, you must learn why customers are churning to plug the leaks. You can set up a customer churn survey to collect this feedback when the customer is in the process of closing their account.
The data you collect will be invaluable in helping you adjust your SaaS product for the better. And depending on the reasons given by the customer, you may be able to reach out to them with a solution and prevent churn.
9. Make Sure You’re Attracting Qualified Leads
Qualified leads are the potential customers most willing to venture deeper into your sales funnel because your product addresses their pain points.
If you plan to prevent future churn, your customer acquisition strategy must attract these leads. Otherwise, you’ll always have a high churn because you’ll be attracting customers who’re not benefiting from your product.
So how do you ensure that you’re attracting qualified leads?
The best place to start is to get your qualification criteria straight, i.e., decide who counts as a qualified lead.
For starters, your product’s trial users are the most qualified leads. These leads are called product-qualified leads (PQL) since they’ve tested your SaaS product firsthand. If they use your product regularly during the trial period, it’s a good indicator that the customer is deriving value from it. It solves a pain point.
When you’re certain about who qualifies as a lead, you’ll experience a higher lead conversion rate and better customer retention rate.
10. Leverage AI-Driven Customer Insights
The advancement of Artificial Intelligence (AI) has ushered in a new era of data analysis and customer insights. AI-driven tools can sift through massive amounts of customer data in real time, identifying patterns that might be invisible to the human eye. This allows SaaS companies to proactively address potential issues before they lead to churn.
Here’s what you can do:
- Deploy Predictive Analytics: Use AI-powered predictive analytics tools Amplitude and Mixpanel to analyze customer usage patterns. Such tools can forecast which customers are likely to churn based on subtle changes in their behavior, allowing you to take preemptive measures.
- Automate Feedback Collection: Implement AI chatbots or automated surveys after specific touchpoints (like a failed transaction or a customer support interaction) to gather instant feedback. Quick feedback mechanisms allow for faster resolutions.
- Personalize User Interactions: Leverage AI to tailor user experiences. For instance, if a user frequently uses a specific feature, AI can suggest related features they haven’t tried yet.
By integrating AI-driven insights into your customer management strategy, you’re not just reacting to churn but predicting and preventing it. This proactive approach can significantly enhance customer satisfaction and loyalty.
Your SaaS product’s churn rate is important because it tells you the percentage of and frequency with which your customers unsubscribe from your product. It informs the growth of your business long-term.
You can reduce churn rate in SaaS by investing in customer success personnel, setting up loyalty programs, monitoring your customer’s health scores, and attracting qualified leads. This article discusses nine effective techniques for churn prevention.
As the article reveals, there are several things you can do to reduce SaaS customer churn. Many of the ones mentioned in the article aren’t mutually exclusive.
For example, your onboarding process has to be on point regardless of whether you’re paying attention to your highest-value customers. And you’ll need to monitor your customer health score while improving your SaaS product continuously.
Regardless, when you implement the strategies revealed in the article, you’ll retain more customers and keep churn to a minimum.
Nico is the founder of Crunch Marketing, a SaaS marketing agency. He works with enterprise SaaS clients like Writer, Right Inbox, and Surfer SEO, helping them scale lead generation globally across EMEA, APAC, and other regions.