There are three primary elements of the SaaS business model. Firms must acquire customers, retain customers, and upsell or resell to those customers. The second of those components, customer retention, is the most important.
Customer churn is the result of poor customer retention. It’s the name given to when subscribers or clients abandon your company. That can be either at the end of a subscription or any point along the way. Keeping customer churn to a minimum is a must for any SaaS business. We’re going to give you 17 hints and tips to help you reduce churn.
It’s common sense that no business wants to lose customers. For SaaS companies, though, it’s even more critical. They rely on having ongoing revenue from clients to make a profit. Where retail firms get the bulk of their money at the point of sale, SaaS businesses get paid over a more extended period.
The longer a customer stays with a business, then, the more valuable they are to that business. That makes reducing churn a vital process for any successful SaaS firm. It’s also a key metric for any business to track. Keeping customers on board is what maintains your monthly revenue. It’s cheaper to retain any one customer, too, than it is to gain any one new one.
Your bottom line will look a lot healthier if you can reduce churn. Keeping customers happy and paying their dues is how to get long-term growth you can sustain. The following are 17 different ways to look at the issue of reducing churn. Mix and match whichever of the hints and tips best suit your firm. Get it right, and you could both reduce churn and grow your profit margin.
The first thing to keep in mind is that reducing customer churn can’t be a passive process. Customers who may be at risk of churning won’t often warn you ahead of time. You need to be proactive and reach out to customers even before you know they need you.
Such proactive outreach shows customers you care about them. It tells them that you’re invested in them getting the most out of your service. The best kind of outreach should also relate directly to the customer’s use of that service. You may, for instance, contact customers who aren’t using a specific service feature. A quick reminder about that feature and its benefits can help customers get more satisfaction from your product.
You’re proud of your business and its products, and rightly so. That doesn’t mean that everything about your operation is perfect. No company has a 100% success rate in getting everything right the first time. There will always be weaknesses in your products or services. Those issues could be driving up your churn rate.
The first step to solving those problems is finding them. You need to ID your weaknesses. Your current customers are your best source for finding the answers you need. Try to get as much feedback from them as you can. Ask them directly what they think you can do to improve your service.
Reducing churn goes hand-in-hand with improving customer satisfaction. A tried and tested way of boosting customer satisfaction is by giving them more for their money. Think about different ways that you can add value to the service you provide to clients.
Added value elements don’t have to be things that cost you much money. You don’t need to be running promotions or providing service features for free. What you could do, though, is to offer free tutorials on how to use your service. You may even go one step further and provide guides or resources about the wider industry your product exists within.
So far, we’ve talked about general, all-purpose ways to reduce churn. Sometimes the best way to handle customer retention is to take a more targeted approach. Segmenting your customer base into groups is a super way to target them more effectively.
An individual who’s been with your firm for years is a different animal to someone who signed up a week ago. You need to treat them differently if you’re going to keep them happy and on board. If you segment your customers, you can better communicate with different groups.
Once you have segmented your customers, you can plan how to contact different groups. In the same way as they’re invaluable to customer acquisition, automated emails are also superb for aiding customer retention.
Most good email clients let you set up ‘trigger emails’. These are messages that go out automatically to customers in particular circumstances. They might, for instance, get sent to someone who hasn’t logged in for a few days. Such emails are terrific for nudging customers back to your service or showing them how to get the most out of it.
Customers at risk of churning are a crucial segment of your base on which to focus. If you can proactively solve the issues they have with your service, you may be able to keep them on board. That’s an intelligent and effective way to reduce churn.
They are a few things to watch out for to predict who may be at risk of churning. Look for those customers whose use of your product is gradually diminishing. If you want to take things further, you may also wish to consider customer churn prediction.
If you have lots of customers at risk of churning, you may not be able to reach out to all of them. In that case, you should focus on those customers who are most valuable to your firm. That’s at least according to Sunil Gupta, a professor at Harvard Business School:
“What’s missing from traditional methods is that they focus only on a customer’s likelihood to churn, but not on the overall profitability of that customer… we contend the goal should be maximizing profits, rather than only reducing churn.”
Onboarding can be crucial to customer retention. If you help your customers get up to speed with your product and its benefits, they will get more out of using it. That will make them happier and less likely to churn.
Your onboarding process is also vital if you offer a free trial. Having got a lead as far as agreeing to that trial, you want to convert that lead into a real customer. It’s much easier to do so if you help them to get the most out of their time using the product for free.
Customers will view your service positively if you reward them for sticking with you. Setting usage milestones and incentivising clients to reach them is a smart way to reduce churn.
Incentives you choose to offer should reflect your product and your customers. Think about what’s most likely to persuade clients to extend their subscriptions. Options can include discounted rates, extra features, and other bonuses.
Customer churn is often a result of customer frustration. Service users sometimes become aggravated by confusion over how to use a product. They may equally get annoyed by poor customer support or assistance.
You need to know what it is that’s getting under the skin of your customers. The best way to find out is by asking. Try to ask for direct customer feedback as often as you can. Then, make sure you do use the feedback to tweak and tailor your product or service.
We’ve already talked about the value of automated emails. They’re real time savers when it comes to reaching out to large numbers of customers. It’s worthwhile, though, to balance the time-efficiency of automation with the benefits of personalisation.
Adding a personal touch to your messages will make each customer feel valued. They want to think that you’re talking directly to them. Try to include their name in the email salutation. Also, look to send messages from named – rather than ‘no-reply’ – accounts.
Promoting your products and site to new customers is vital. You shouldn’t focus all your marketing efforts on new leads and prospects, though. You may find it surprising how lucrative it is to upsell new packages and add-ons to existing clients.
Upselling added-value elements like eBooks or guides is also helpful for customer retention. Even though you’re selling them not giving them away, such added extras can still boost customer satisfaction.
People like to feel as if they belong. It’s a vital part of what makes some customers so fiercely loyal to certain brands. Just ask a fervent Apple fan what they think of that company’s latest release if you need any proof of that.
An excellent way to foster a feeling of belonging is by building a community amongst your customers. Add a blog to your website and actively encourage participation and interaction. Get customers talking and sharing insights. That’s sure to make them think of your firm as a crucial part of their business life.
In business, you never want to be standing still. You should always be striving to improve your products and services. Stay on the lookout for ways to add value to what you offer to your customers. When you do intro new services or features, make sure you tell customers about it.
Send customers a quick message telling them how the excellent service you offer has got even better. You may also wish to share news of how your product is helping customers. Email case studies detailing how beneficial your product is being in practice are a good idea. They will help to convince customers further that they’re with the right company.
Competitor research is essential to many aspects of your business. You need to know as much as you can about what your rivals are offering their customers. If their products or prices are superior to yours, your customers may start looking their way.
It’s also useful to know how your rivals’ products work. If you can get to grips with their features and offerings, you’ll know if there’s anything you should emulate. Equally, it’s also useful to get a better understanding of the weaknesses of your rival’s products. Doing so makes it easier to exemplify your competitive advantages to customers.
Offering longer contracts is a simple yet effective way to reduce churn. By tying a customer to a longer deal, you are literally guaranteeing they won’t churn for a longer period. You need to be careful about when you lengthen contracts, however.
Extending your customers’ commitments works best when customers are already happy. Happy customers are more likely to want to sign up with you long-term. If levels of customer satisfaction aren’t what they might be, our other ways to reduce churn may suit you better.
You’re always going to get some customer churn. It’s unavoidable, even if you cherry-pick all of our tips that best suit your firm. When churn does occur, what’s crucial is to learn as much about what caused it as possible.
Try to reach out to departing customers and ask why they’re leaving. Not everyone will reply. Those who do, however, can give you some vital insights. By learning what caused customers to churn, you can make changes to ensure that no others go for the same reasons. It’s a classic example of the adage that it’s essential to learn from your mistakes.
If you can reduce churn, you’re a long way toward making your business more profitable. Excellent customer retention and a low churn rate are what separate the best SaaS firms from the rest. There’s no one way to reduce churn, but there are lots of different avenues you can explore.
By combining some of our 17 suggestions for reducing churn, you can do wonders for your bottom line. Whether by being more proactive, rewarding loyalty, or building a customer community, you can keep customers happy and your margins wide.