6 Effective Steps to Prevent SaaS Customer Churn

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Ask any software-as-a-service (SaaS) business owner about their number one pain point, and most of them will tell you it’s churn.

“Churn” is the number of customers or accounts that leave your business in a given period, and it’s a big headache, one that can substantially wreck your business’s growth. Here’s a peek into the mayhem:

  • The median cost for the SaaS industry to acquire $1 of revenue from new customers is $1.18.
  • A SaaS company growing at only 20% annually has a 92% chance of failing within a few years.
  • Increasing customer retention by even 5% can increase profits by 25%-95%.

But the true problem lies in how you look at churn.

It’s a deeply rooted customer relationship and lifecycle management issue that needs to be handled from the first interaction a customer has with your brand, all the way through their customer journey, even after they’ve been a long-time customer.

In this article I’m going to dive into some of the best practices for dealing with and preventing churn, so you can scale a healthy business.

1. Convert trial users into customers.

Trials give your product a chance to sell itself, and if you play your cards right, you can gain a clear edge over the competition.

This is the underlying concept of Product Qualified Leads (PQL) - leads who have realized meaningful value from your product through a freemium model.

Now the next step is to nurture these leads through the conversion process to become paying customers. Here’s how you can:

Appcues Personalization SaaS Conversion Rate

PC: Proof

(A) Run a basic “retention rate analysis” to see how long your customers stay with you before churning. Just measure how many days (or months or years) are between the day they signed up and the day they churned.

(B) Study the past actions of converted trial users and compare them to churned trial users. Are there any unique behaviors or characteristics in the conversion group that don’t exist (or are substantially higher or lower) in the churned group?

(C) Try to find a unique moment in your customer journey that’s driving conversions. That might be an “a-ha!” moment on their part, a particular email prompt or notification, or accomplishing a certain task with your product.

(D) Carry out A/B tests to see what helps users cross the finish line best.

While product trials increase conversions, they also end up lengthening your sales and marketing cycles. Make sure that your budget and processes account for this.

2. Improve your onboarding.

Customers stay with you when it’s easier to get value from your product than from someone else’s.

That’s why it’s critical to remove any friction during the onboarding process (the stage of a customer’s journey where they’ve just started using your product, and you’ve got to get them up to speed).

All the copy you use and the steps you walk users through need to:

  • Manage the expectations of each buyer persona you have
  • Overcome possible objections or barriers to using your service
  • Clearly teach how to use your product
  • Highlight your unique selling proposition (USP) - look at Medium’s About page as an example

The idea is to delight your users by setting reasonable expectations and then by offering more than what they are expecting. Hands-on guidance and automated walk-throughs are an effective way to do this.

Here are the steps involved in an influential onboarding process:

Map your customer journey.

You have to first understand what your customers are trying to accomplish through you. Then map out what steps they will need to go through to do that. For instance, a freemium service would include steps like:

  • Signing up for your product
  • The welcome email they get and what it prompts them to do
  • Setting up their account
  • Showing them how to use the product
  • Making the first transaction (purchasing or upgrading)

Walk users through setting up your product.

Create an interactive walkthrough of your platform or product to get customers acquainted with the key features and using the product in real-life scenarios.

Educate on ancillary features.

People can do a lot of great things with your product, but they don’t need to do everything all at once. As customers become more familiar with key features, begin introducing lesser used features as well.

You can do this by prompting them with helpful guides and videos, and by having a customer success manager work alongside them.

Solve customer questions.

Your customers are always going to have questions, and you need to make it easy for them to get answers. It’s better if they can answer questions themselves instead of having to contact you every time, so set up a dedicated knowledge base (like Text Request’s Queuniversity) that they can reference.

3. Provide great customer support.

Positive customer support experiences significantly contribute to customer retention. Customers understand that there are going to be questions and issues with any SaaS product, even the great ones, but there are so many products that do the same things.

Customer support has to become a defining competitive differentiator for your brand.

So jump at opportunities to help your customers. This also creates countless opportunities to get feedback on your product, sales, support, and messaging. Here are a few opportunities:

  • During live chat conversations
  • Through feedback forms on your website
  • Ask for feedback on order confirmation pages
  • Monitor feedback on review websites and social media

What’s great is that these opportunities (and what you learn from them) will help you turn average customers into advocates for your business.

PC: Berman Evans Retail

Customers who are in love with your product will engage with you more on social media, spend more with you, and will also tell their friends and colleagues to work with you, too.

Here are a few quick tips to convert casual customers into raving fans:

  • Flaunt your unique selling proposition and the value it provides
  • Constantly listen to your customers (and act on their input)
  • Delight them by overdelivering on promises
  • Invest in honest marketing campaigns
  • Create valuable loyalty programs

When you consistently offer great customer service and support, churn (and your bottom line) will almost take care of itself.

4. Increase customer engagement.

Onboarding customers is often easier than keeping them engaged with your brand. This activity churn refers to customers who are still paying you but have become inactive (e.g. they haven’t logged on in 30 days).

These customers are likely to churn as soon as they remember they’re paying for something they don’t use. So how do you keep them coming back?

You’ve got options.

Begin by sending regular engagement emails to inactive users. (You should also be sending emails to active customers, too, to keep them from becoming inactive.)

Qualified users include those who haven’t logged in on the platform for a few weeks/months or those who haven’t used key features in a certain period of time.

Here’s an example of how Grammarly uses such emails to re-engage lost users.

Depending on your product, text messages, in-app notifications, social media messages, or even phone calls can be good prompts to get people re-engaging.

These re-engagement steps apply to more than just inactive users, though. Customers who are not using your product enough can also qualify for such an engagement activity.

For instance, your analytics might reveal that any user who averages - let’s say - less than 25 minutes of activity per login session has a [90%] chance of churning. That’s definitely something you’ll want to address.

5. Listen to your customers’ actions.

Listening to both current and past customers comes with its fair share of benefits. Customers who are about to churn away normally do not usually drop off immediately. They follow a noticeable pattern of disengagement first.

Steps they take - that you can watch for - include:

  • Drastic drops in activity, or steadily decreasing activity
  • Lack of feedback or questions (they won’t talk to you)
  • Letting their credit card expire
  • Changing account administrators or contact details

As you monitor your customers’ activities and spot patterns that can predict churn, you can begin to engage them with reactivation emails, free offers or discounts, and educational content.

One sure-fire way to get and keep engagement up is by letting customers add users to their account for free (Text Request does this).

This provides a great experience for customers and encourages whole teams - not just individual users - to depend on your product. A few ways to capture this behavioral data are:

  • Recording website visits through tools like Google Analytics
  • Using heatmaps of user engagement on your pages through tools like Hotjar
  • Syncing user product engagement

At the same time, look at your churned customers to unearth critical moments in their customer journey that resulted in their churn.

6. Continually educate your users.

You’ve got a great product that adds a lot of value, but what if customers don’t realize all the value it can bring?

It’s your responsibility to continually educate your users well after purchase. So build an extensive knowledge pool of go-to resources (tutorials, guides, videos, templates, etc.) that your customers can continually refer to.

Then you need to steadily nudge those resources in front of users so they get used to engaging with your resources. This fosters a culture of self-service, which reduces the burden on your customer support team while helping customers gain more value from your product.

Per one report, that can lead to:

  • Up to 96% savings per customer service agent
  • 9% higher agent retention
  • 88% annual decrease in customer effort scores

Some of the best practices to create a reliable knowledge-base include:

  • Make it easy for users to navigate your knowledge base and find their answers
  • Have well-defined categories for base articles
  • Keep updating the knowledge base as your platform grows, adds new features, and updates existing ones

Now what?

The SaaS industry is all about creating value for users and helping them achieve their goals. True value and customer engagement stand at the pinnacle of business success and are the only fail-proof plans against churn.

As you work to reduce cancellations, keep in mind that preventing churn is an ongoing activity. It’s not a one-time project (at least not if you want results to last).

For best results, it’s crucial for all departments to work together - marketing, product development, sales, and service. Consistency is key to maximizing the customer lifetime value (CLV) and ensuring that you are always one step ahead of any doomsday churn scenario.

Related: How to Use Behavior Analysis to Create Lifetime Customers