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8 Tactics To Reduce SaaS Customer Churn Rate
So, you're losing a bunch of customers fast - like over 10% in no time. You're probably wondering where even to start.
Even if you're really good at getting new customers, you'll eventually hit a roadblock if they keep leaving. You won't be able to grow your revenue, and you'll need to figure out what's going on and fix it fast. Plus, in the SaaS world, it costs way more to get new customers than to keep the ones you have - like four to five times more.
Based on what we've learned from research and our own experience, we're stoked to share X tactics that helped our clients go from a 10% churn rate to 3%. They work, as long as you do them right.
SaaS churn types and industry benchmarks
Customer churn is the percentage of customers you lose each month, and it's super important for your business growth. We can break it down into two main groups: customers who want to leave, and those who have to.
When customers quit because your product doesn't cut it - maybe the support is weak or the features aren't doing it for them - that's voluntary churn. On the other hand, if they're forced to cancel because, say, their payment fails, that's involuntary churn.
For SaaS companies, a healthy churn rate is anything below 5% monthly.
Reasons for SaaS customer churn
So, what makes SaaS customers churn?
Research shows that this is usually because their card gets declined (26.5%). The other reasons are bad customer service (18.5%), a high price (15.5%), the end of a free trial (15%), or struggles with setup (8.5%). These reasons fit into two camps discussed above: voluntary and involuntary churn.
Based on our experience, the quality of customer support can significantly prevent customer churn. And below, we’ll share some of the tactics that helped our clients to improve revenue by minimizing customer churn.
How to reduce churn in SaaS: 8 tactics
Note: we mainly concentrate on what can be fixed with customer support, since it’s our area of expertise. However, some of these steps will cover other departments as well.
Optimize churn feedback system
Surveys and customer interviews are the secret to keeping your SaaS customers happy and reducing churn.
Usually, customer support representatives can reach out to anyone who churned recently, arrange for them a call with the customer success manager (if available), or at least send a well-crafted survey. Next, it’s the job of the customer success team to segment feedback by annual recurring revenue, ICP, etc. You can also use tools like Askable for streamlined and optimized surveys.
Expert tip: Don't just do surveys when you're losing a lot of customers - make it a regular thing. We've found that most customers are happy to give their input, but you can even offer them something in return, like two weeks of free service or a discount on another product, to get a 100% response rate.
Here's an example message you could send to customers who've canceled:
Come up with passive value for customers with high churn risk
Deliver value to users even when they aren't actively using your product. This could include:
- Automated reports: send them automated reports every week or month. These can be summaries of what they've gotten from your product, key metrics, or progress reports on their goals.
- Personalized insights: look at how people used our product in the past and send them stuff they'll really care about, like "pro tips" or cool features they might've missed. This gets them excited about what our product can do again.
- "We miss you" campaigns: reach out to customers who've wandered off with a "we miss you" message. Let them know what they're missing out on or show them our newest and coolest features.
- Automated workflows tailored for customer needs: if your product automates tasks, highlight them. Showcase how these background processes save them time and effort, even with minimal active use.
Add incentive reminders for annual subscriptions
Annual subscriptions are a no-brainer for managing your SaaS costs. You'll save time and avoid the monthly hassle. Plus, you're in charge with one simple payment to worry about.
By switching to annual subscriptions, you'll free up time and resources for the important stuff. Your team can focus on what really matters, not just paperwork.
Want to get more users on board with annual subscriptions? Offer them a better deal or some cool extras. And here's a bonus: they'll be less likely to ditch your service after a few months.
Avoid these annoying customer support mistakes
Poor customer service is the second most common reason for customer churn. Based on our experience, here are the most annoying customer service mistakes that may encourage customers to unsubscribe:
- Issue repetition: the most annoying thing for a consumer requesting customer support is repeating the issue again! All customer service software provides activity history that mentions details on all historical conversations. Even for voice calls you not just the notes from an agent but all call transcriptions with a summary.
- Robotic responses: scripted responses lack empathy and don't address the customer's specific concerns. Train agents to actively listen and personalize their responses. Empower them to use their judgment and offer solutions tailored to the situation.
- Shifting blame: Take ownership of the problem and focus on finding a resolution for the customer. Even if an issue lies outside your control, apologize for the inconvenience and work collaboratively to find a solution.
Optimize churn feedback system
Almost every one of us has had a declined payment that resulted in subscription procrastination. Since it’s the most common reason why customers churn, it makes sense to focus on preventive measures before it actually happens.
Whether it’s an expired credit card, insufficient funds, or wrong personal data, the outcome is the same. But there are concrete steps your customer support team can take to prevent that.
- Send out emails with reminders about the upcoming payment (3 days before the invoice is due).
- Allow and motivate customers to add a backup payment method.
- Ensure customer support representatives reach out to a customer immediately once a payment fails.
Tailored and guided onboarding experience
Most businesses fall at this step since a customer is already converted. However, only if they feel welcome, they are likely to stay.
For sure, the most important part of onboarding is UX-friendly design and the automated flow, with every step described in detail.
However, in the perfect scenario, it should be the combination of automated flow and greeting from the customer support agent (or customer success manager, if available).
Make the onboarding process a guided experience. Instead of overwhelming users with a generic introduction, tailor it to their interests and goals.
It’s good to have a template at hand for this purpose. And if you add a personalized touch for each template (just one small sentence) that would be awesome!
Implement various customer education initiatives
Picture a powerful software tool. When customers grasp how it works, they tap into its full capabilities, advancing from confusion to proficiency in no time. This understanding unlocks the tool's full value for their specific needs.
The impact of customer education is clear in the numbers: customers who use training services show a 92% higher renewal rate. This dramatic increase effectively doubles their chances of staying with you.
When thinking of a format, we recommend educational videos but adapted to current global trends of short-format videos. A series of bitesize videos that cover each feature is the best option.
Ensure a strategic plan for adding product features
First of all, customer support representatives should have a specific action plan for sharing feedback with product teams. Stopping at the “Thanks for your feedback, we appreciate that” will result only in more annoyance. Most feedback should lead to action.
For this, it’s important to ensure smooth cooperation between customer support representatives and the development team. It’s important that is ticket is taken into account, brought to team review, and then transformed into a specific action (if relevant).
But the tactic doesn’t end here. The implementation of new features won’t give you a guarantee for reduced churn. So, here’s a strategic approach to saving sources:
- Define your top customers that paid the most.
- Learn who they are in detail, conduct interviews, and analyze their behavior and preferences to understand what would be most beneficial to them.
- Define avatar-specific features, something these customers lack.
- Consider adding customized features just for them, if it’s possible.
Consider adding premium support for the lifetime value of a customer is how much money they will bring in over the course of their relationship with the company.
Bottom line: everything starts with understanding
Losing customers is a huge deal for any SaaS company that wants to grow. So, you need to figure out not only why customers leave, but what keeps your best customers coming back. Focus on making your loyal customers happy. Give everyone a great experience. This will set you up for long-term success.
Outsourcing customer service can also help you keep things positive and consistent for all your customers. This means fewer will leave, and you'll do better in the long run.
Want to learn how outsourcing can help you reach your customer service goals? Book a quick call to get a personalized plan and quote.
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