Although it sounds like a tough challenge, reducing your SAAS customer churn isn’t overly complex. There are three core ingredients of a SAAS business model:
- Customer acquisition
- Customer retention
- Upsell/resell to existing customers
Customer churn is typically caused by an inability to retain customers. In other words, it’s when your clients abandon you and go elsewhere. This might be a loss of subscribers or members, but it’s really important to stop the flow of customers leaving your SAAS business.
Why is it Important to Reduce Churn?
You don’t need us to tell you that losing customers is bad for business. But in the world of SAAS business, customer loss is even more damaging. This is because SAAS businesses rely on recurring revenue from clients for their sole business model. Ultimately, the more time a customer stays with a SAAS business, the more valuable they become.
For SAAS businesses, customer retention is arguably the most crucial metric to track. It’s also a lot easier (and cheaper) to focus on customer retention than acquisition. An insightful study identified the following three leading causes of churn:
- Poor onboarding
- Weak relationship building
- Poor customer service
Helpfully, these are all areas that you’re in full control over, but they require you to be proactive. So, let’s take a look at some of the ways that you can effectively retain your clients.
9 Strategies to Reduce Churn and Retain Customers
1. Be Proactive
When things are going well, it’s all too easy to rest on your laurels and let your SAAS business run on autopilot. But in reality, if a customer is about to go elsewhere, they probably won’t warn you in advance. As such, you need to be proactive in your communications with your clients, checking in and ensuring they have everything they need. Most importantly, proactively reaching out and interacting with your customers shows that you value them and want to improve your service offer.
There are lots of ways to interact with your current client base, but engaging with those that aren’t using the full spectrum of your services is a good way to offer added value. They might not have realized the scope of what they signed up for, and informing them of how to improve their experience will show them that you’re keen to keep them for the long run.
2. Review your Processes
Is something happening within your SAAS business to cause your customers to churn? While it might not be a huge issue, reviewing your internal processes and identifying potential weaknesses is an important step when looking to enhance your customer retention.
You might, for instance, not be doing enough to answer customer queries in a timely manner. Or, the onboarding process may not be as smooth as it could be, motivating customers to look elsewhere for a better solution.
While it can be difficult to pick holes in your service offer, being honest and reflecting on the root causes of your churn rate will provide you with the basis for your potential solution.
3. Look for Opportunities to Add Value
If you can make your customers happier, they’re much more likely to stay with you in the long run. One of the best ways of adding value to your current service offering is to give your clients more for their money. This doesn’t mean that you need to start offering discounts or freebies. Rather, look for ways to build value into your existing products and services. Perhaps you can offer free tutorials on how to use certain aspects of your product.
Alternatively, you can create content that will improve the overall user experience, be it YouTube videos or podcasts. With this in mind, you could even broaden your FAQs and improve your troubleshooting. These are small things that your clients will appreciate.
4. Target Customers at Risk of Churning
Although you can’t easily predict when a customer is likely to churn, there are some signals that will help you identify those most at risk. As a starting point, look for customers who are slowly decreasing the amount they are using your product or service.
You could also utilize a customer churn prediction model that will help you identify patterns that may lead to your customers leaving you. While not foolproof, such a model is an excellent way to identify the most at-risk clients.
If you can invest time and energy into preventing the most at-risk customers from churning, you will see an improvement in your bottom line as a result.
5. Make Sure your Onboarding is on Point
As mentioned, insufficient onboarding is one of the three main causes of customer churn. Therefore, you need to make sure your onboarding is on point and enable your customers to get the very best out of your product from the start.
If they get started with your product while only using limited features, they won’t see the full benefits of your service. This is particularly important for SAAS businesses that offer free trials to their clients.
You need to do everything you can to ensure your potential clients benefit from the free trial period. Everything from your customer service to product explanations needs to be on point, so your customers see the true value of signing up for a paid plan.
6. Reward Loyalty
While many of us are hesitant to give things away for free, rewarding customer loyalty is an essential aspect of reducing the churn rate. An effective mechanism to employ is usage milestones, which you can incentivize your clients to reach.
It’s entirely up to you how you reward loyalty, but you might offer reduced subscription rates, improved customer service (24/7 contact, for instance), or access to bonuses or additional features.
Building a loyalty program into your product design will show your customers that it’s worth sticking with you. Make sure you hone in on your loyalty program in your marketing, as it’s not necessarily obvious to your clients from the outset, particularly when they’re new users.
7. Utilize Feedback
In most cases, customer churn is a direct result of frustration or unhappiness with your product or service. This manifests itself when your customers are confused over how to use your product or if your customer support is lacking.
The best way to find out what is causing issues for your customers is to ask them directly. While you don’t want to overburden your clients with feedback forms, checking in at regular intervals will give you a lay of the land.
It will also bring issues to your attention that you didn’t know existed and will help you nip them in the bud before they lead to customer churn.
8. Add a Personal Touch to your Communications
When customers feel valued and respected, they’re more likely to stay with you. If they receive multiple faceless emails from no-reply accounts in response to their queries, they will become frustrated. When you get in touch with your customers, make sure you show a human element to your interactions. Use real people to respond to queries, and direct your responses to the named recipient.
Given that so much of our business is conducted from behind screens in the present day don’t lose sight of the importance of the personal touch. Your customers will certainly appreciate the additional effort.
9. Research your Competitors
While the above tips have focused on your own products and services, this one is about finding out what your competitors are up to. After all, if a customer leaves you, they’re probably going to one of your competitors.
Therefore make sure you carry out detailed competitor analysis and find out exactly what other companies are offering. How does their service differ from yours? Are their prices better? What does customer support look like?
The more you can find out about your competitor’s products, the more you can improve your own service offer. Of course, you don’t need to replicate your competitor’s offer, but you do need to be aware of what they’re up to.
Final Thoughts
Customer churn rate and retention go hand in hand. If you’re not paying enough attention to keeping your customers happy, there’s a good chance that they will leave you and take their business elsewhere. The nine strategies introduced above will help you reduce churn in your SAAS business and keep your customers motivated. If you’re not proactive and don’t take steps to keep them, your customers are likely to seek solutions from your competitors.