SaaS Churn: How to Keep Your Rates Low

Are your churn rates uncomfortably high? And how high is too high anyway? Average churn varies widely across multiple factors ‌such as market, company age and size, and even time of year, so it’s difficult to pinpoint an acceptable level. It’s certain, though, that the lower the churn rate, the better for your business. 

For reasons we’ll discuss, retaining loyal customers is crucial to your success, and the key to fostering this loyalty is forming and nurturing a long-term relationship. 

So read on to discover why churn rates matter, how to build a lasting relationship with your subscribers, and consequently keep your churn low.

Why is low churn so important?

As a SaaS company you’ll understandably be focused on acquiring new customers. But the retention of customers is equally vital to the success of any subscription-based business. This is because the cost to your business of acquiring a new customer can take time to recover, and is sometimes more than the value of the annual contract. In fact, on average, the cost of acquiring a new customer is about 11 months’ of revenue. So losing customers early can often result in an overall loss. 

Not only that, when a customer cancels their subscription early, you don’t just lose current revenue, you lose future revenue, the potential to upsell, and the acquisition of new customers through referrals from an existing loyal customer. 

Clearly, it’s important for the success of your business, that you retain as many of your existing customers as you can. But how exactly do you go about that?

Practical steps to reduce churn

Set Realistic Expectations

The process of forming a long-term relationship with your customer should start even before the customer clicks the ‘Buy’ button. A surefire way of getting off to a bad start would be to over-promise on your product, then under-deliver. 

To prevent this, be clear and honest about the benefits of your product from the outset. Make sure, as much as possible, that the customer understands what it can and can’t do before they commit to buying. Online learning and information about your product can help customers buy the right one for their needs. 

Provide a high-quality product

An essential and obvious requirement for the success of your business is the quality of your software. Ensure that it provides the right mix of features to satisfy user needs, has good usability, and delivers value for money. When necessary, provide seamless updates to maintain the software’s relevance and competitiveness, and continue collecting user feedback to inform its future development.

Deliver first-class customer support

A good relationship with your customers is essential if you want them to remain loyal. In fact it’s so important that in a recent study, 7 out of 10 consumers said they’ve stopped dealing with a brand after an unsatisfactory customer experience. 

Customer support services are key to maintaining this relationship. So make sure your customers know they can rely on your support services to receive fast and effective help when needed.

  • Provide a variety of ways your customer can reach you, such as email, live chat, phone, or a ticket system.
  • Be proactive and prevent problems as much as possible by sending updates, news and tips to keep them engaged and informed.
  • Ensure your support team is well trained, with all the necessary information and tools to provide the best possible support.
  • Listen to your customers’ needs and concerns, and show them that it’s important to you that they have a good experience with your product. Be prepared to go the extra mile.
  • Offer self-service options, such as videos and written information with answers to common questions, and a comprehensive FAQ page.
  • Monitor customer support metrics, such as response times, resolution times and customer satisfaction scores. Use this information to identify areas where you can improve the customer experience. 

Offer upsells with advanced features

Upsells can take the form of add-ons or a higher tier subscription. For instance, a business selling an email marketing tool could provide enhanced segmentation features as an add-on, or a project management tool could offer integrated time-tracking. A higher-tier subscription for either business could provide more features, functionalities, storage, or priority support.  

An upsell can be a win-win for both you and your customers. A relevant and helpful upsell not only improves customer satisfaction, it can also differentiate your business from your competitors and provide extra revenue. However, to maintain customer trust and loyalty, the upsell should always be helpful and relevant.

Provide a personalized customer experience

A personalized experience can make your customer feel valued and understood. Here are a few examples of how you could go about this:

  • Use customer data such as past purchase history to suggest products or services relevant to the customer’s interests.
  • Offer customization options that allow customers to tailor the product or service to their needs. For instance, a website builder could offer stylistic options, such as layout, colors and fonts to reflect the company’s brand. 
  • You can provide personalized assistance in real-time by using chatbots or AI-powered tools. 
  • Provide personalized onboarding, where dedicated support helps the user set up the product in a way that is tailored to their needs.

Provide comprehensive onboarding

Customer onboarding usually involves a series of steps that guide the user through the product’s key features. It might include video tutorials, interactive tours and in-app messaging explaining how to use different features. It might also involve setting up the account, configuring settings, and integrating the software with other tools the customer may be using.

The goal of onboarding is to provide users with a clear understanding of how to use the product so they can quickly get the most from it. Substandard onboarding can have a significantly negative impact on customer retention. When customers don’t see a product’s value or understand how to use it, they’re likely to abandon it. At the very least, a poor understanding of the product will lead to decreased engagement, increased demand for customer support, and negative online reviews.

Conversely, good onboarding can ensure that your customer quickly understands the potential benefits of your product, and starts to use it effectively without relying on input from customer support. 

Offer free online education and courses

In-depth education for your users can help them understand the full potential of your product, so they can make the most of its features. Well-informed consumers are less likely to run into problems with the product, needing less support and reducing customer support costs.

Free online education courses can also help differentiate your business from the competition by providing additional value not offered elsewhere. Educational content can be provided through tutorials, videos, webinars, blog posts, or e-books. The content should be focused on helping users achieve their goals with the product, and be easy to access and understand.

Build a community for your subscribers

An online community allows your customers to share tips, experiences and best practices. Communities have the effect of increasing customer engagement with a product and building a sense of loyalty to the brand. A thriving community can increase brand awareness, prompting word-of-mouth referrals and attracting new customers.

A community also provides a direct line of communication between customers and your business, providing a valuable source of feedback. This feedback can be used to improve your product and service, and inform its future development. 

Consumers often turn to communities to find information from other users. Experienced users may be able to provide unique and valuable insights into the best use of a product, through the knowledge they’ve built up by using it for a long time. So a busy community where customers share knowledge and help each other solve problems reduces the demand for customer support, also reducing its costs.

Offer rewards for loyalty

Loyalty rewards can improve customer satisfaction and retention, and foster positive word of mouth. Examples of the sorts of rewards you could offer are:

  • Discounts and promo codes offering a certain percentage off the customer’s next purchase
  • Referral bonuses, such as a monetary reward to a customer who refers their friends and colleagues to your business
  • Exclusive content or features made available to customers who’ve subscribed to your business for a certain period of time
  • Early access to new features for long-standing customers
  • Loyalty programs where customers can earn rewards in the form of points, badges or other types of reward

Measure engagement

Most SaaS products will have some kind of usage analytics built in. These analytics can provide insights into how often a customer uses the product, which features they use the most, and how long they spend within the product. By tracking these metrics over time, businesses can get a sense of a customer’s engagement level.

Some SaaS businesses may use behavioral tracking to monitor engagement. This could involve tracking how a customer navigates through the product or what actions they take within the product. By tracking these behaviors, businesses can get a sense of a customer’s level of engagement.

This information can be used to improve the product, personalize the experience and offer relevant upsells and cross-sells. It can also identify when a customer may be losing interest, in which case you should provide timely help and information. 

Communicate regularly

It’s a good idea to send a series of onboarding emails when customers first subscribe. These might include instructions for getting started, tips for getting the most from your product, and links to resources like documentation and support.

Regular newsletters can keep customers updated on new features, product updates, and industry news. The frequency of newsletters can vary, but many businesses send them on a weekly or monthly basis.

You could send personalized emails to customers to celebrate milestones and achievements, such as hitting a certain usage level or completing a particular task within the product. These emails can help build a sense of community and encourage customers to continue using the product.

If a customer hasn’t used the product in a while, it can be helpful to send a re-engagement email to encourage them to return. This email can include information about any new features or improvements that have been made since the customer last used the product.

You could also send promotional emails to promote new products, features, or discounts.

In general, you should communicate regularly with your customer, but be mindful of the frequency and timing of emails. Aim to send emails when they are relevant and useful to the customer, but avoid bombarding them with too many.

Ask for feedback

It’s best to wait until customers have subscribed for a while before asking for feedback. They’ll need time to use your product and become familiar with it before forming an opinion. It’s also important to avoid asking for feedback too often, as this can be annoying and may result in lower response rates. A good rule of thumb is to ask for feedback every few months, or after a major product update.

You can collect customer feedback, using surveys, interviews, focus groups, and social media. The best method depends on the nature of the feedback and the target audience. Surveys can be a good way to collect quantitative data from a large group of customers, while interviews and focus groups can provide more in-depth insights from a smaller group of customers.

Respond to customer feedback

Feedback offers a valuable opportunity to improve your product and customer experience. By listening to your customers and responding to their feedback, you can build stronger relationships and create a better product.

Listen to your customers’ concerns, questions and suggestions, and clarify any misunderstandings. And always thank the customer for taking the time to provide feedback, even if it’s negative. Let them know that their feedback is valuable and that you appreciate their input.

Next, take time to analyze customer feedback and identify any patterns or common themes. Prioritize the feedback based on how you think each issue impacts your product and your customers. Then consider how you can address the issues raised, dealing with the most critical issues first, and subsequently working your way down the list.

When you’ve implemented any necessary changes, follow up with the customer to let them know that you’ve taken note of their feedback, and have taken action to improve your product.

Conduct exit surveys

Conducting an exit survey for canceled customers helps you understand why customers are leaving. It’s another opportunity to garner valuable customer insights you can use to improve the product and your customer’s experience. 

The most common way to conduct an exit survey for a SaaS business is to send an email or use in-app messaging to customers who have canceled their subscription. The survey should be short and focused on gathering feedback about your customer’s experience.

Provide easy cancellation

Easy cancellation is a sign of ethical and fair business practices. It demonstrates that you’re not trying to trap customers into a subscription they no longer want, and respect their decision to cancel. This leaves a positive impression on your customer, and may lead to positive word-of-mouth marketing.

Conversely, if you make it difficult for customers to cancel, this can damage your reputation and make it harder to gain the trust and loyalty of current and future customers.

Building trust is key

In the highly competitive SaaS market, providing a top-notch customer experience is the key to building long-lasting trust and loyalty. By focusing on delivering the best possible customer experience, you’ll not only reduce churn, but also attract new customers through positive word-of-mouth marketing.

So, prioritize your customers at all times, provide high-quality products, exceptional customer support, and a personalized experience. On top of that, check in regularly with your customers, gather and respond to feedback, and continuously improve your approach to keep them happy for the long haul.