Ways to prevent SaaS churn

churn

We get it. Churn sucks. Worse than that, avoidable churn really sucks. In the words of Andrew Marks

An important component of preventing churn is the need to always be aware of how your customer defines success. It will change over time, so ensuring that you're in sync regularly is important. 

- Andrew Marks

The short version: your customer’s definition for success is your product’s definition of success. Therefore, your best defense against churn is arming your users and customers with the tools they need to succeed.

1. What exactly is Churn?

churn Rate

Illustration by Priyanshi Bareja, Raivix

Simply put, churn is when a certain number of users cancel their recurring plan with a SaaS. Churn is one of your most critical product metrics. It is an excellent indicator of your product’s overall health. An average churn rate is 3-7%, but less than 3% is the goal.

2. The best practices for preventing churn

ONBOARDING

Okay, how do you provide the most value in the shortest time? Great user onboarding! This is one of the core pillars of great user onboarding, ensuring that the onboarding process perpetually provides value to the user in one way or another. If they have to hunt for value in the product, they would rather spend their energy hunting for a product that meets their needs. 

The average app loses 77% of users after three days. Within 30 days, 90% leave. Within three months, 95% are gone. 

REDUCING FRICTION AT EVERY POINT

Before moving forward, not all user experience friction is created equal. Some friction is desirable if it helps make immediate action easier and more trustworthy. The term for this positive friction is called the IKEA effect, and it helps users develop a deeper understanding of action by purposefully making them jump through some helpful hoops.

Now, onto the unhelpful friction. The typical culprits of harmful user friction are 

  • Cluttered UI 
  • Overwhelming the users with more information they need or were looking for
  • Unclear design navigation

PRICING

Ah yes, that delicate balancing act of pricing just enough to make sure there’s profit and not too little to prevent razor thin margins. 

Retaining a customer is 5 times less expensive than acquiring one. There are no hard and fast rules for pricing, it comes down to how much you are willing to spend to prevent losing a user. Market research is critical for mastering this step. It might not seem like much but just reducing churn by just 5 percent can increase profitability by 75 percent

PRODUCT MARKET FIT

This is where churn is the most avoidable, not having a good product market fit. Focusing on the correct market segment can dramatically reduce churn. When your users are more aligned with your product’s ability to help them, good things start to happen. 

Understanding your target audience/user 

  • After talking to satisfied and frustrated users, your UX is more attuned to their behaviors and habits. 

You measure what matters 

  • Churn isn’t the only metric to look at with product market fit. Looking at your NPS scores and how they’ve fluctuated over time will help paint a clearer picture of your product market fit. 

Your CAC is lower than the lifetime value of your customer

  • It would help if you spent less on acquiring customers than their “lifetime” commitment to your product. 

Your customers are selling your product for you

TALKING TO THOSE THAT LEFT

fraser doctor crane

If you are trying to figure out why customers are leaving, talk to those that are leaving. Reach out to them via email, call or exit survey, carrier pigeon if you have to. Understanding what was their breaking point is critical in designing an experience that would have retained them. 

Questions should follow a general pattern of 

  1. What specifically caused you to cancel? 
  2. Was there anything that worked for you/you liked? 
  3. Was there anything that you didn’t like? 
  4. Do you have any suggestions? 
  5. Do you think you would reconsider our product in the future? 
  6. What tool did you decide on to fit your needs and how is that experience so far?

This also has the potential to help provide more context for your market fit, user onboarding, price points, customer services, finding potential bugs and so on. 

CUSTOMER SERVICE

Customer service; the front lines of human interaction within SaaS. A great customer service team can rescue a faltering product experience. 

We all know the hallmarks of great customer service.

  • Warm
  • Friendly 
  • Helpful 

This trifecta is critical to any customer service team, whether software or soft serve. 

In the case of Status Brew, a key part of reducing their churn by 20% was integrating more chat features to talk to frustrated users. The easier access to the customer service team prevented them from growing user frustration in their customer base. 

ENGINEERING

If your product is buggy, all the previous factors won’t matter much. 

Sometimes this issue can be solved by design, having to reduce or cut some animated items that are slowing loading times. More often than not, this software and hardware issue needs to be investigated and invested in. 

Sometimes it’s the wi-fi, and sometimes it’s the code, but every second a website takes to load, the conversion rate drops by over 4%. 

3. Conclusion

(Not) breaking news: retaining users isn’t easy. Having an onboarding experience that guides users to value quickly takes several iterations. Pricing is a delicate tightrope. Talking to customers, both those that stayed and those that left, takes time. It is not easy but the payoff is so high. You already know the value of reducing churn even slightly can greatly impact revenue. The great part is every single one of these suggestions is interlinked. Supporting one strategy helps others succeed. And it does more than reduce churn. It also reverberates throughout the rest of your critical product metrics, especially NPS. Users who enjoy all aspects of a product experience, from the first few clicks of onboarding to talking with customer service to resolving a misunderstanding, speak of a product more fondly. This becomes one of your most valuable marketing assets. Preventing churn means inviting success. 

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