The health of any SaaS company is directly tied to its churn rate – the percentage of customers who cancel a product or service after a certain period of time. When your software isn’t providing enough value, customers take their business elsewhere. It’s as simple as that.
But the problem is that when churn rate is high, your business is at risk. The good news in all of this is that 85% of customers churn because of poor service that could have been entirely prevented.
That means that with a little manoeuvring, high churn rates can be mostly avoided.
Master Successful Onboarding
Successful on-boarding is all about communicating your value early on. SaaS companies have a short window of time to show their customers how to get the most out of their product.
In-app messaging is a great tool for SaaS startups to communicate value to their customers, specifically by pointing out your most valuable features. In-app messaging can be used to deliver messages at strategic times like “Did you know about this feature?”
It is important for SaaS companies to closely monitor how onboarding is going. If customers aren’t using certain features, whether because they don’t know about them or they don’t understand how to use them, these customers need to be targeted.
Nearly 70% of customer churn could be avoided if businesses solved customer problems during the very first interaction.
Another important part of onboarding is using it to gain feedback, especially from customers who didn’t end up becoming paid users or who went on to cancel their subscription shortly thereafter.
Lastly, SaaS companies also have to remember that communicating their value doesn’t end with onboarding. It is a continual process, as you will see below.
Attract the Right Prospects At Signup
When it comes to conversions, making the signup process as seamless as possible is typically a given. The problem is that it can often lead to a mix of prospects, many of whom aren’t necessarily that interested in your product and are therefore more likely to cancel down the line.
Even increasing the level of commitment slightly during the signup process can serve as a great prevention method.
Instead of merely asking that customers use any email address and password to sign up, make it mandatory to include a business email, name and number. This can go a long way to ensure that you are attracting qualified prospects from the get-go.
Keep Engagement Levels High For Your SaaS Customers
Keeping engagement levels high provides the strongest foundation for keeping your churn rate low over time. Engagement means that your SaaS customers are finding value from your product. As you saw above, this is a continuous process for SaaS companies.
Start by sending out bi-annual surveys. Talk to your customer support team and get their feedback.
Zach from Zendesk helped his company create a Customer Account Management Team that would reach out to customers regularly, whether through email or phone. The program allowed Zendesk to identify potential problems before they occurred while also creating a strong relationship between the customer and the company.
The account managers also kept customers in the loop regarding new features so that customers were benefiting from their software.
More referrals and low churn rates. Adding integration can also allow SaaS customers to derive more value from your product.
Lastly, consider sending customers a summary email that tells them how your business has benefited them, along with solid numbers to back up your claims. This serves as a direct reminder of how much the customer is benefiting from your service.
Monitor Lack Of Usage
An interesting survey of over 1 million Saas customers found that every cancellation had one thing in common before subscriptions were officially cancelled:
A period of non-use.
A lack of usage is one of the leading predictors of future cancellations, so users must be monitored closely.
Applications like Intercom or Totango allow companies to keep a tight hold on this data. Ultimately, every Saas company should be looking for the same thing: any decline in usage.
The next step is to be proactive and reach out customers directly, whether in the form of an automated email or even a phone call.
Keep in mind that SaaS startups also have to account for a decline in usage that is not voluntary – i.e. cancellations that happen because credit cards expire. As such, it’s important to have systems in place to detect cards that are about to expire. You can also incentive customers to add a secondary card to their account.
Continually Improve Your Software’s Most Important Features
Just about every SaaS company will eventually find that customers will not use your product in ways that you anticipated. You will come to learn that some features you didn’t think were important are much more important than you anticipated.
Once again it’s important to get feedback from your customers so that you can continue to refine and improve your software’s most important features.
The Bottom Line
Keeping churn rates as low as possible is critical to the success of any SaaS startup. Above all, customer interaction is key.