The key to success for SaaS companies is predictable revenue from loyal customers.
For SaaS businesses to remain profitable over an extended period, customers need to renew their subscription plans regularly, so it’s essential to reduce user churn.
But what do we mean by user churn?
User churn is the number of customers who stop using your product and end their business relationship with you. Why churn happens is individual to every company, and reasons can vary from pricing to user experience.
Now, you might think that the most straightforward solution to that problem is to simply acquire more customers.
But did you know that almost 70% of companies see year-over-year revenue growth of up to 40% from their existing customers? Besides, acquiring new users is far more expensive.
So, the real answer to churn lies in making current customers happy, so they stick with your company as long as possible.
To help you on your journey in reducing churn, here are different things you can try to improve the relationship with your customers and garner more revenue.
Know Who Is at Risk
First, identify potential ‘at risk’ customers so you can convince them to stay.
Here’s what you have to understand. You can’t just wait for customers to leave and then try to win them back.
You need to engage with them to fix the root issues that trouble them while they’re still doing business with you. Because once customers leave, almost 68% of them will never return.
Keep in mind that some users will always be more likely to leave than others. In most cases, you can identify them by their behavior.
Keep a lookout for these red flags that indicate possible churn:
- Reduced product usage
- Lowered email response and open rate
- Bad reviews on social media
- Negative experience with customer service
Once you notice those, there are many ways you can reach out to customers directly and ask what’s wrong.
The two most common methods are calling the customer and sending emails. According to a recent study conducted in the UK, 41% of users want their problems discussed via email.
Following that, once you notice that some of your customers are not using your product as much as they used to, send them an email like this:
Source: Campaign Monitor
With emails like these, you’re communicating to the customer that you’re available and ready to help in any way you can. This might make them think: “Hey, this company cares. Maybe I’ll tell them what’s bothering me.”
Then you can help your customers and improve their experience before they churn.
Improve User Onboarding
If a user can’t operate your product immediately, they’ll lose interest and stop using it.
You have to know that starting to use a new product is very overwhelming for users, no matter their previous experience. They’ll have to navigate a new interface, use new tools, and possibly get used to an entirely new workflow.
SaaS companies often make the mistake of throwing a lot of information at the new user at once. In an effort to show the customer how useful their product is, they might negatively affect the user experience.
In fact, customers want a simple and straightforward onboarding process, one that will help them learn all the essential information and get to their Aha! Moment faster.
If you can’t show them how they can benefit from your product in a few simple steps, they will go to someone else.
Your only job is to ease the customers through the learning process and onboard them successfully. Or, to put it differently, you have to guide them efficiently through your product so they can realize its value and become a loyal customer.
Take notes from Sitemate, who doubled their user engagement by simplifying their onboarding utilizing tooltips and product tours.
Sitemate’s customers were used to managing data on paper, so it was essential to show them how Sitemate’s product could improve their processes.
The onboarding elements such as product tours and tooltips helped customers create new habits. The result was an increase in engagement from 30% to 60%.
Additionally, the company managed to showcase its value in under three minutes!
To summarise, Sitemate helped their users learn how to use their product and drive them to value at the same time with a simple onboarding process.
You should do the same for your product, and your customers will be less likely to churn.
Educate the Customer
We’ve established that your user onboarding should be simple and provide only the essential information. But what if your customers want to learn more?
When users are educated about different aspects of your product, they’ll be more comfortable with using it frequently. In turn, you can expect them to become loyal in the long term.
So what should you do?
First, keep educational content about your product always available. This additional information could be in the form of videos, free training, product demos, or knowledge bases.
Keep in mind that the more resources you offer, the better are your chances of reducing churn.
For example, look how comprehensive educational content from LiveAgent is.
In addition to providing webinars about how to use LiveAgent’s product, they provide an academy dedicated to topics concerning customer service. Their goal is to provide valuable resources and establish themselves as an authority on the topic of customer service.
LiveAgent’s blog also provides customers with fresh news and tips about topics their customers are interested in.
All of this content should help drive customers to LiveAgent’s website and engage them in an enjoyable way.
In the end, when you have quality educational material, you should retain even the most demanding customers.
Be Proactive and Engage With Your Customers
Engage with your customers and give them reasons to come back to your product.
Here’s a secret: only the most invested customers will become loyal customers. But how do you get them to engage? Simply put, you have to be where customers are.
Like many businesses nowadays, you can flaunt your product’s advantages and market your company through social media.
With over 4 billion users, social media is the perfect channel to reach existing and new customers. It’s also the ideal opportunity to keep your product top of mind.
Here’s how Moz does it. They get the most out of their social media presence by sending announcements about their new products and features often.
Their messaging entices current users to check out the new addition to Moz’s product suite.
But the customers are not left alone to explore the new product. Moz cleverly adds a link to their blog where the customer can read about how their new product works and how they can benefit from it in more detail.
You need to keep your customers in the loop of what you’re doing and how you’re improving.
Using social media is the next best thing to remind a wider audience about your offer and how they can benefit from using it.
Remember, being relevant and informative is the key to reducing user churn. You’re giving your customers the latest news about your product, thus keeping them engaged.
Social media posts should help you get users involved with your product, reducing churn in the long run.
Remind Users of Your Value
The way to guarantee lifetime loyalty from your customers is to integrate your product into their daily lives.
Think about why your product is different from your competitors and how it’s already helped your customers achieve their goals. Then, send them notifications to remind them of the benefits they’re currently receiving.
For example, you can send them progress emails.
When they receive emails like these, customers can see their progress with your product, making them feel more confident. You’re showing off your value, and customers see they’re achieving their goals. It’s a win-win situation.
In short, sending customers progress emails is the perfect way to reach them directly and prevent user churn.
Send Out Cancellation Surveys and Offers
Learn from customers who inevitably churn but try to win them back with a good offer.
User churn can make you face ugly truths about your company. There may be weaknesses you’re not even aware of that stunt your growth.
Nobody wants to admit their business has flaws or doesn’t deliver on its promises to customers. Still, if you’re not resolving the issues that drive your customers away, you’re damaging your company in the long run.
To know exactly where to make improvements, contact customers who are on their way out. Try to talk to them and get as much feedback as you can to identify critical issues.
This way, you can create a better product and improve the customer experience for existing customers.
The most common way SaaS companies gather feedback from churned customers is by sending cancellation surveys.
When customers fill out a cancellation survey, the company has a better idea of what it’s doing wrong. So, analyze these results and uncover more significant problems that hinder customer satisfaction.
But you shouldn’t completely give up on customers on their way out, either. In some cases, giving them a good counter-offer might convince them to stay.
In fact, recent research shows that 91% of customers are more willing to stay with companies that offer them something relevant in return.
For example, look at HelpCrunch.
Source: Smart Insights
The company asks for feedback from a churned customer, while simultaneously trying to win them back with something they might find useful.
In this case, the customer didn’t subscribe to HelpCrunch after a free trial. So, to entice them to give HelpCrunch’s product one more chance, they offer to extend the customer’s free trial and add a discount.
What should you do?
First, listen to your churned customers to identify your weaknesses. Then, give customers an enticing offer to convince them to stay a little longer. That way, you can improve your product according to their feedback and reduce churn.
Ask For Feedback Often
Cancellation surveys can tell you how a particular churned customer feels, but you need to monitor the level of happiness of your entire customer base, not just those who leave.
But there’s good news! Customers love to give feedback; all you have to do is ask for it. If you do, you’ll make 89% of your customers really happy.
Sharing their experience with a product is very important to customers, and it can help you identify problems early enough to prevent churn.
For instance, you can detect what frustrates your customers by conducting NPS surveys.
NPS stands for Net Promoter Score, and it’s a way to measure how customers perceive your company. It consists of a single question, and scores range from -100 to +100 (the higher your score, the better).
This initial question enables you to segment the users with a higher score (9-10) from those with a lower score (6-0). If you notice many customers give you low scores, you can take this opportunity to contact them and ask why they’re not happy.
As Ondrej Sedlacek (co-founder of SatisMeter) puts it, the NPS is all about listening to customers and increasing their satisfaction.
You can’t provide effective solutions if you don’t know where the problems are. Doing it means being proactive about creating a product your users want to engage with.
Remember, asking for feedback helps you address the most pressing issues your customers have and increases customers’ levels of satisfaction.
Create a Community Around Your Customers
Customers are more loyal to companies that make them feel like they belong.
Nowadays, using a product is not all there is to a customer’s experience. Instead, a product is simply a device to access an exclusive community of like-minded people.
When customers feel like they are a part of a group, they will be more open to engaging with others and sharing insights.
This, in turn, can improve customer loyalty. Or, to put it differently, when you create a community around your product, customers are more likely to perceive you as a crucial part of their lives.
And by that logic, they are less likely to churn.
Now, what can you do to create a community?
The key lies in regular communication. We’ve already mentioned that social media is a good way to market your product, but it’s also an excellent way to keep up the communication with your customers.
For example, Slack regularly communicates with its followers on Twitter.
This type of communication makes people feel like they’re connected to the brand. This encourages them to reach out to the company, thus creating a community. But Slack isn’t afraid to get informal and more personal.
Communication like this makes the company appear more approachable. So, customers are more loyal to companies that talk to them as people instead of just being customers. Almost two-thirds of customers say that interactions with the company drive their loyalty.
So, if you want to reduce your churn significantly, create a community around your product by having good communication with your customers.
Assign Customer Success Managers to Your Most Valuable Customers
It goes without saying that great customer service is indispensable for reducing churn.
But there’s something you should also be aware of when it comes to user churn. Not all customers will be equally valuable to your company. With that in mind, you have to be prudent about who you focus on.
Think about it: which user will impact your revenue more when they churn? One with a $50 monthly subscription plan or one with a $10 000 monthly subscription plan? It makes sense to pay more attention to your high-value customers.
While chatbots and general customer service agents can handle the majority of your customers, a dedicated customer success manager can help you retain your most valuable users.
First of all, customer success managers are the main point of contact for your important customers. They know everything about a particular user and provide personalized assistance in solving their problems.
This is vital because one of the main points of frustration for users is getting in touch with an agent, only to discover that they aren’t knowledgeable enough to help them.
Actually, 75% of customers expect the agent to know their purchase history and other essential information. When you have a dedicated customer success manager, you can handle this issue better.
To sum up, when customers have someone dedicated to their success to give them tips and support throughout their customer journey, a more personal relationship forms between the customer and the company. So, the chances of them unexpectedly leaving decrease.
If you want to keep your high-value customers, hiring a dedicated customer success manager should be your top priority.
There is no straightforward way to reduce churn. But every small action counts.
The main takeaway from this article is that communication with your customers is key to knowing their main problems. Only companies that reach out to their users and work on improving their customer experience will find success.
In the end, your battle with user churn never stops but implementing effective methods to fight it will help you stand out from the competition.