Every SaaS (software-as-a-service) business has some churn. But if the churn rate in your business is too high, and your customer acquisition efforts aren’t keeping pace, you could end up running your business into the ground.
Related: The Science Behind Customer Churn
Because no two SaaS businesses are exactly alike, you will need to take a tailored approach to reducing churn within your business. The following tips and case studies will hopefully provide inspiration for what to do.
1. Find out why your customers are leaving.
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If you can identify the exact reasons why your customers are leaving, the next steps will be easier. Alex Turnbull, founder and CEO of Groove, shared on the Kissmetrics blog how this seemingly simple step enabled his company to reduce churn by 71 percent.
Although the company's techs had recognized that the company app had too many features and bugs that needed to be fixed, and that its onboarding process required some simplifying, they couldn’t immediately identify what was leading to so much churn.
What they discovered was that those who spent 35 seconds in their first session and logged in at a frequency of 0.3 times per day were the ones who quit. Not surprisingly, those who spent more time in their first session and logged in more often stayed longer.
Groove decided to send targeted emails to customers who spent less than two minutes in their initial session, and to those whose usage of the app was declining. Both of these campaigns were immensely successful.
So, what is the difference between the users who are staying, and those who aren’t? Have a look at your metrics to identify differences in their behavior.
2. Optimize your targeting.
Are you certain that you’re appealing to the right kind of prospects with your marketing?
In a SaaS business, making money isn’t just about getting people in the door. Even if you’re onboarding new customers at a rapid rate, if you aren’t retaining them over the long haul, it could be that your offer isn’t the right fit for the people you’re targeting.
Who is your ideal customer? Whom is your software for? Why do those people need it?
Without clear and specific answers to each of these questions, there’s a good chance you will be floundering in your business. Even if you think you have the answers, you may want to dig deeper.
Fundamentally, if there’s a misalignment between your service and the people using it, you’ll need to rethink your marketing strategy.
Also note that: If your churn rate is particularly high, it may be that your app’s core features are leaving something to be desired, and attracting the wrong customer might not be your only problem.
Related: 3 Ways to Monitor Customer Churn
3. Examine your foundation.
This goes hand in hand with the last point on optimizing your targeting.
It’s also important to take an honest, detached view of your SaaS offering and identify issues associated with it. This can be a difficult thing to gain perspective on as a business owner, because it’s your baby. You gave birth to the business and the idea.
Nevertheless, try to see things from your customer’s perspective. If you were a user of your app, what wouldn’t you like about it?
Is the software difficult to use? Does it have bugs that need to be ironed out? Is the interface unattractive and difficult to understand? Is your app actually helping your customers save time on important tasks they must complete, or is it adding unnecessary steps to their workflow?
The number one thing that will reduce churn is happy customers. When you have happy customers, their lifetime value will increase, and you can use testimonials and social proof to promote your platform and improve your onboarding.
Take some time to figure out whether or not your product is actually worthwhile and something people want.
4. Increase the frequency of communication.
Clément Delangue, chief marketing officer of Mention, shared on the Kissmetrics blog how his company was able to reduce churn by 22 percent in a single month.
Part of its action plan was to put a greater emphasis on support by reducing response time. The company decided to handle queries in batches every four hours, and held “support meet product” meetings to improve the product and its support tools. These steps enabled the company to halve the amount of time spent on customer support.
Additionally, although Mention's staff had a marketing process that converted free trial users, communication stopped with them after users upgraded and became paying subscribers. Mention decided to create additional emails and in-app messages to keep users engaged and to encourage their use of additional features.
Finally, it also organized a webinar to showcase how to use the app’s features, and what real users were using it for.
What this case study demonstrates is that sometimes it isn’t enough to just convert free trial users into paying ones. By communicating more regularly with new customers, you can offer better support and helpful tips on how to best take advantage of your SaaS app.
5. Improve your onboarding process.
Every SaaS business needs to onboard new customers. If your process is clunky and complex, you might be seeing some drop-off in the early part of the customer life cycle.
Earlier, you read about Groove, and you might have noticed how Turnbull identified the company's onboarding process as one of its potential issues. But for some SaaS businesses, this represents a much larger obstacle. Common onboarding issues include:
- A lack of explanation. Your prospects don’t understand how to use your product.
- A lack of clearly identified benefits. Your prospects don’t understand the value of the product.
- Misunderstanding. Your prospects are getting a false impression of what the product does or how it works.
Magoosh, an education app, was able to increase its conversions by 17 percent by A/B testing its welcome message.
In order to gain a holistic picture of where your onboarding process is falling short, you will need to analyze your metrics. But more often than not, improving your onboarding process simply means making it simpler and faster for your visitors.
Once again: When you’re looking to build online asset and reduce churn, you have to remember that no two businesses are exactly the same. It will be necessary for you to identify where the weaknesses are in your business, and then establish a strategy to tackle them.
Churn is also a critical factor in a SaaS valuation. If you think you might be interested in selling your business at some point, you will need to get your business on a growth trajectory by reducing churn and increasing profits.