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How to Reduce Customer Churn: 9 Proven Strategies for SaaS Companies

How to Reduce Customer Churn: 9 Proven Strategies for SaaS Companies

Anirban Banerjee
Anirban Banerjee
October 25, 2022
5 min read

A wise man once said, “in the end, the whole of life becomes an act of letting go.” 

Goodbyes hurt the most, but they are an integral part of our lives. We have to keep moving forward.

the act of letting go.

Your SaaS business is not spared from this fundamental principle of life. Customers leave for various reasons.

Don’t let them bring you down. 

Some reasons are beyond your control. 

That said, some of the reasons that customers leave are within the control of the business that they are ditching. Businesses might want to make adjustments to retain customers who leave for reasons within their control so as to maintain profitability and pursue revenue growth. We’re talking about developing a retention strategy - or at least a handful of retention moves. But before we start working on our customer retention strategy, let’s understand the what and why.

What is the churn rate, and why is it so important?

Churn rate is the percentage at which a business is losing customers in a given period of time. It is calculated by the following formula:

Churn rate formula = (lost customers ÷ total customers at the start of time period) x 100

For example, let’s say that your Saas business was catering to 500 customers at the beginning of the month. And after the month ended, your business lost 50 customers.

So using the churn rate formula we have,

(50 ÷ 500) x 100 = 10%

Your monthly churn rate is 10%. That is, your Saas business is monthly losing out on customers at a 10% rate.

The churn rate delivers a sort of double whammy to your business. First, when the customer churns, your customer lifetime value decreases. Second, to find a new user, you have to put in additional resources.

A high churn rate is clearly bad for businesses. Got it. 

As a result, you need to build a strong strategy to optimize customer value, improve the customer experience and consequently reduce your churn rates.

9 proven strategies that will reduce your churn rate

Learn to let go

Like a toxic partner, a customer who is emotionally unavailable and isn’t letting you grow needs to go. You need to accept that in the long run. That relationship is neither sustainable nor healthy.

Ahhh, that feels good.

If you don’t believe us, hear it from the expert Sunil Gupta, the Edward W. Carter Professor of Business Administration at Harvard Business School.

"If I offer an incentive to customers most likely to churn, they may not leave the company, but will it be profitable for me? The traditional method is focused on reducing churn, but we contend the goal should be maximizing profits, rather than only reducing churn,"

The traditional approach to retention strategy ranks customers based on the likelihood of churn and then offers incentives to customers who are most likely to churn.

Gupta suggests internalizing the fact that not every customer is as valuable to your business.

Case studies show that rather than spending your time and efforts on the most likely-to-churn customers to reduce the overall churn rate, you focus on the most profitable customers on the brink of churning instead.

Be the first to talk

When you take the first step toward your customers, they are likely to feel important. Let them know that you care.

 Well, maybe not so angrily...

You don’t need to begin bombarding them with emails and make a nuisance of yourself. Instead, try to understand and enable their experience with your product.

For example, if someone has just bought your product, they might take some time to figure out the entire extent of the convenience it delivers. A smooth, well-thought-out onboarding process could guide the new customer through your product. This onboarding process might include tutorials, guides, and product tours delivered by email or in the product kit. 

Tips: 

  • At-a-click tutorials work best
  • Avoid cumbersome product guides
  • Make product guides searchable by keyword
  • Always include FAQs

For example, if you download a software but do not get to use it immediately, you are very likely to receive an invitation to a “basics webinar” with their customer success manager.

If the customer has already been using the product for a while, then maybe it is time to tell them about the new features after asking them what their pain points are. Chances are that your product team developed these features as a response to market demands. Find a way to underscore how these features can help them resolve their pain points or achieve their goals. 

Make them an offer they cannot refuse.

Not the Don Corleone type. We’re talking about letting the customer know you care by offering pricing incentives. 

Special deals, promo codes, discounts, and loyalty programs are small expenditures compared to the profits you gain by retaining an existing customer. 

Who doesn’t like discounts!

To reduce customer churn rate, you can target customers who seem to be procrastinating on renewing subscriptions. If you send them a discount for the next renewal cycle, they are more likely to stay.

Many customers also cancel their subscriptions when the product isn’t what they were looking for. In that case, a discount can make them stay a little longer, giving your product team the time that they need to build that feature into the product.

This brings us to our third strategy.

Ask for feedback

A discount can make the customer stay a little longer, but how would you know that the customer is not happy with the product in the first place?

Joey got that right!

Dissatisfaction is often the top cause of customer churning. If they are getting frustrated trying to use your product, or they cannot understand how to use, or they cannot see the value your product is adding to their business, why would they keep paying for it?

You need regular feedback to ensure a happy customer base.

Customer feedback and NPS surveys improve their faith in your product and give you vital information to take back to your product development team. Even small measures like product rating requests allow you to zero in on at-risk customers so that you can make the necessary retention measures.

Moreover, when you ask for feedback, the at-risk customer might feel inclined to give you some time to pull up your socks because you are committed to improving your product and services.

Don’t let bygones be bygones

Customers lost represent data points to prevent similar events and reduce the churn rate. You know the saying: Learn from your mistakes. 

Put those lost customers under a microscope and study them

Happy customers, as well as churned customers, can produce key insights to optimize your product and increase customer satisfaction.

The idea is to analyze this metric accurately and form the right questions, such as:

  • At what point does customer churn happen? Do they walk away right after buying the product? Or midway through their subscription? After the holidays? Does churn happen if customers go a specific number of days without using the product or service?
  • Are customers leaving for specific reasons, like dissatisfaction with customer support?

When you really understand the when, why, and how of customer churn, you are in a better position to reduce attrition and predict churn before it happens. This will also help you re-engage lost customers with incentives or updates like “we have fixed our XYZ that represented an obstacle to you enjoying our solution in the past.”

Provide excellent customer service

Picture this: Your customer wants to create an analytics sales report. Your software helps them create the report. The steps are pretty simple, but for some reason, your new customer is stuck and cannot create the report using your software.

They call customer support and have been waiting for a long time to get connected to no avail. When someone finally picks up, they show lacking empathy (or parrot back a done-to-death script) and hang up, telling your customer that someone will get back to them. Is your blood pressure rising just reading this? Imagine what it's doing to your customer, whose job is probably going to be at risk if he cannot deliver this report on time. 

Here’s your clue ;)

A frustrated customer is a churned customer.

Ugh, another hurtful good-bye. :’(

The right assistance is needed when the customer is stuck. Your support staff should be able to give quick fixes for the bugs and answer their questions. This means that your customer support team needs sufficient product training, which might be an additional cost, but look at it this way: a poor customer experience can and will eat up your profits to a greater degree. 

You can also assign customer success managers that make sure all your most valuable customers are taken care of. These managers can offer additional tips to make the most of your product. 

Till death do us apart

The best way to increase customer lifetime value and customer loyalty is by offering long-term contracts. Try to persuade your customer with the help of incentives to subscribe to long-term contracts. That way, the customer will have enough time to implement the product and see the benefits of using it.

This might call for volume pricing discounts (like how a one-year Netflix subscription is cheaper than a monthly subscription), but it will prove worth it if you can improve customer retention. 

Keep up with market trends!

There is always the threat of a competitor lurking in the market. A SaaS product has to be continuously upgraded and updated if it is to keep up with new benchmarks in the market. This is the only way that new users will be attracted to your product, and existing customers will remain loyal.

To increase retention rate, you need to upgrade your technologies with the market and create new features keeping in mind the future growth/changes in the industry.

Market research, customer feedback, and usage analytics can help in automation and designing features that make the customers stick to your brand. Big companies like Apple have innovation labs - also known as incubator programs - focused on finding new technology and pursuing innovation. If you have the budget for an innovation lab or an innovation team, or an innovation chappie, go for it. Otherwise, simply look around you and ensure you stay relevant. 

Together, we can achieve much more 

Customer communities are integral to a brand image. This is a forum where customers can interact with fellow users to solve problems and discuss the product.

With the help of social media, it is easy to create and maintain a customer community. Having a whole ecosystem around the brand reduces the likelihood of customer churn when something goes wrong.

Nothing can go wrong with Wingman by your side

Skip, skip, skip!

Wingman helps you improve your customer retention strategy in the following ways:

  1. It transcribes and records your sales calls so that you understand your customer’s expectations and frustrations.
  2. You can go back to call records and draw meaningful insights to understand why a customer churned. Maybe you overpromised in the objection-handling stage, and now they feel shortchanged? 
  3. Wingman stays with your reps in real-time, prompting them on what to say next.
  4. When the phone calls aren’t going right, and the customers aren’t satisfied, it alerts you so that you can step in with guidance and sales coaching.
  5. Wingman seamlessly integrates with CRM software, video conferencing applications, messaging apps like Slack, and other business tools, to provide a holistic view of the sales process. All that data can go a long way in helping you build your retention strategy. 

Wingman helps you boost your sales and reduce the customer churn rate with the right metrics and insights. Don’t believe us? Give Wingman a try - book a demo here!

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