7 Effective Ways for How to Reduce Churn for SaaS Customers

Last updated on May 9th, 2024 at 09:00 pm

Thinking that high churn in SaaS companies is just a phase could be a major business mistake.

Get this, studies show that even a small 5% reduction in churn can significantly boost profits. (Source)

This highlights the importance of effective churn management strategies—strategies that will make your customers rethink leaving and will make them stay longer.

Today, we’re getting into how we can use a unique approach to tackling customer churn, the impact of high churn on SaaS businesses, the churn rate formula, and more.

With these strategies, you’re not only gonna reduce churn—you’re gonna prevent it from happening.

So, let’s dive into it.

First, how do you even calculate churn?

How do you calculate customer churn?

To figure out your customer churn rate, you’ll need to do a bit of math.

Don’t worry; it’s pretty simple.

Here’s the formula for customer churn rate:

This calculation will give you the percentage of customers who said “bye-bye” in a given period.

Example: Say you had 100 customers at the start of September, and by the end of the month, only 80 remained.

To calculate your churn rate for this period (September), you’d plug in these numbers:

Customer Churn Rate = ( 100 – 80 ) / 100

Customer Churn Rate = 0.2 or 20%

This means that in September, your customer churn rate was 20%.

Easy-peasy!

Why is this number so important?

Well, it helps you understand if you’re doing a great job keeping your existing customers happy or if you might need to step up your game.

Plus, it’s crucial for planning how to grow your business and keep things moving in the right direction.

So, keep a close eye on that customer churn rate.

Now, let’s say your customer churn rate shows you need to step it up a notch.

Here’s what you need to do to reduce your SaaS customer churn.

7 Strategies for How to Reduce Churn SaaS Customers

Ok, your goal is to reduce customer churn in your SaaS business’s existing customers to fully achieve growth.

Now, it’s time that we lay down the strategies that you must implement for you to start seeing growth in your SaaS business.

But, we’re going to put these strategies within a framework—the customer value journey (CVJ) framework.

But why the CVJ?

The CVJ strategically guides SaaS customers from awareness to becoming brand advocates, ensuring every interaction adds value and fosters loyalty.

This framework is designed to gear any digital marketing strategy to achieve growth—even in SaaS.

By meticulously addressing each stage, CVJ helps in creating a seamless experience that reduces churn and achieves customer satisfaction by making existing customers feel valued and understood, encouraging long-term engagement.

Simultaneously, this can positively impact customer retention.

Basically, with the CVJ, customers are nourished with value at every stage of their customer journey so as not to give any chance for customer churn.

When existing customers are given value every step of the way, spotting factors that contribute to churn and resolving them early comes naturally.

Using the CVJ helps you do this in eight succeeding stages:

1. Awareness
2. Engagement
3. Subscribe
4. Convert
5. Excite
6. Ascend
7. Advocate
8. Promote

But since we’re trying to tackle customer churn, we will only be highlighting some of the stages in the CVJ in line with the strategies that we’re focusing on in this blog.

The strategies we have here observe the sequence of the eight different stages in the CVJ.

For best results, double down on these strategies depending on which stage of the CVJ your customer is currently in.

1. Implement Effective Onboarding Processes

Your relationship with a customer begins the moment they sign up for your service.

A rocky start often leads to a quick exit.

Crafting an onboarding process that is both intuitive and personalized is your best bet to start the relationship on the right foot.

Just as how Cloudshare frames it, customer onboarding and retention are closely linked.

A strong onboarding process demonstrates a company’s commitment to customer success, leading to increased customer satisfaction, loyalty and reduced churn.

To realize this, you need to inject personalization into the onboarding process.

Why?

Because every customer is unique, and their onboarding experience should reflect that.

The onboarding process should also be streamlined for ease.

Complexity can be a significant roadblock in onboarding.

Simplify the process by creating task-oriented checklists and employing in-app tutorials that guide users through essential features, reducing the time between sign-up and value realization.

Here are some straightforward tips to help you nail personalized customer onboarding and make the whole process smoother and quicker for your customers:

• Know Your Customers Inside Out: Before anything else, figure out who your customers are. What do they like? What do they need? This info is gold when you’re looking to personalize your onboarding experience.
• Segment Your Customers: Not everyone is the same, right? Group your customers based on their needs or behaviors. This way, you can tailor the onboarding process to fit each group perfectly.
• Create a Personalized Roadmap: Once you know who you’re dealing with, lay out a clear path for them. A roadmap that speaks directly to their goals will make them feel right at home.
• Keep Communication Clear and Personal: Talk to your customers like you’re having a one-on-one chat. Make sure they know you’re there to help every step of the way.
• Streamline the Process: Cut out any fluff in your onboarding process. The goal is to get your customers from point A (sign-up) to point B (finding value in your product) as smoothly as possible.
• Use Data Wisely: Got data on how your customers use your product? Great! Use it to tweak the onboarding experience so it’s even more relevant to their needs.
• Regular Check-ins Are Key: Don’t just set it and forget it. Check-in with your customers to see how they’re doing and if the onboarding process is hitting the mark.
• Feedback Loop: Always, always ask for feedback. It’s the breakfast of champions. Use it to constantly improve the onboarding experience.

Remember, the aim is to make your customers feel like you’ve rolled out the red carpet just for them.

2. Enhance Customer Engagement

An engaged customer is a loyal customer.

Regular, value-driven engagement not only reduces churn but also opens opportunities for customer feedback and product improvement.

Remember: Communication is key.

Maintain an open line of communication with your customers.

Regular updates, new feature notifications, and personalized messages amplify the value of your SaaS and nurture the customer relationship.

Plus, make sure that in every engagement, they gain more value.

Avoid the fluff—updates, and communication should always relate to delivering more value to the customer.

How can new features make their lives easier? How can updates save them time or money?

Answering these questions in your engagement strategies will solidify your customer’s commitment to your product.

Here are three solid tips to get your customers engaged:

1. Chat It Up: Seriously, live chat is a winner. It’s like having a convo with your friend. Customers can just pop in, ask a question, and bam – they get help right away. It makes them feel heard and supported instantly.
2. Feedback Is Gold: Make it super easy for your customers to tell you what they think. Put up a simple feedback form or even just an email address where they can drop their thoughts. This way, you know exactly what’s working and what’s not. Plus, acting on this feedback shows them you really care.
3. Keep ‘Em In The Loop: Send out regular updates or newsletters that are easy to read and straight to the point. Tell them about new features, tips, or how you’ve fixed something they weren’t too happy about. It’s a great way to remind them that you’re always working to make things better for them.

Stick to these, and you’ll see your customer engagement start to climb.

It’s all about keeping the lines open and showing your customers some love.

3. Provide Exceptional Customer Support

Proactive customer service can address issues before they become reasons for customers to depart.

It’s all about making customers feel like partners, not just users. It’s all about customer success.

One way to do that is to anticipate when they need support.

Using data analytics, anticipate when customers might need support and reach out before they have to ask.

Whether it’s offering an in-depth tutorial or troubleshooting common problems, proactive customer service can heroically save at-risk customers and boost customer retention.

Also, act on customer feedback.

Create feedback loops that turn customer issues into product enhancements.

Engage with customers to understand their pain points, and then act on that insight to improve your SaaS, personalized to their needs.

Alright, let’s discuss how you can be a superhero for your SaaS customers, swooping in with help before they even know they need it.

Here’s a step-by-step guide:

1. Know Your Customers Like Your Best Buds: First up, you gotta really understand who your customers are. What makes them tick? What gets them stuck? Dive into their behaviors, preferences, and feedback. This isn’t about being nosy; it’s about knowing them well enough so you can predict when they might need a hand.
2. Map Out the Journey: Sketch out the typical customer journey. Where do folks usually hit a snag? Maybe there’s a tricky feature or a common question that pops up. These are the hotspots where you’ll want to focus your preemptive support efforts for improved customer success.
3. Feedback: The Secret Sauce: Now, feedback isn’t just nice words or the occasional grumble. It’s gold. Set up easy ways for customers to give you their thoughts – think surveys, quick polls, or a simple “How are we doing?” message. Then, actually use what they tell you to deliver customer success better. It shows you’re listening and adapting, which customers love.
4. Get Proactive with Support: Based on what you know about your customers and their feedback, start reaching out before the SOS signal goes up. This could be through automated emails offering help with common issues, pop-up chat support on tricky pages, or even personalized tips based on their usage patterns.
5. Personalize Solutions: There’s no faster way to customer success than personalization. Use the feedback and data you’ve collected to offer solutions that feel tailor-made. If you notice a particular customer struggling with a feature, send them a quick tutorial. Or if a bunch of people mention something’s missing, consider how you can add that feature or service.
6. Keep the Loop Going: This isn’t a one-and-done deal. Keep asking for feedback, keep tweaking your support, and keep looking for signs that someone might need help. The more you do this, the better you’ll get at anticipating needs and nailing that personalized support.

This isn’t about bombarding your customers with messages or becoming a mind reader.

It’s about being an attentive champion of customer satisfaction, using what you learn to offer timely, relevant support, and making every customer feel like you’ve got their back.

4. Optimize Pricing and Billing

Sometimes, the right offer at the right time can salvage a customer relationship.

Cuppa (a collaborative email workspace for agencies) has proven this to be true.

For them, optimizing your pricing strategies is crucial to customer churn because how you price your products/services significantly impacts customer retention and loyalty.

By optimizing your pricing strategies and handling involuntary churn effectively, you open more doors to retain customers.

In addition to optimizing your pricing strategies, you can also personalize cancellation for your customers.

A seamless, user-centric cancellation process may not win back every departing customer, but it can leave a positive last impression and, in some cases, prevent the cancellation.

Dunning campaigns also work.

Involuntary churn can be managed through effective dunning campaigns that remind customers of payment failures, offer flexible payment terms, and generally make it as easy as possible for customers to resolve payment issues.

So how can you handle tailored cancellations and manage involuntary churns like a boss?

Try these tips:

• Know Your Exit Points: First up, you gotta figure out where and why your customers are hitting the road. A bit of detective work (think surveys or a quick chat) can help you understand what’s making them wanna say goodbye.
• Offer Alternatives, Not Goodbyes: When someone’s about to cancel, why not offer them something else instead? Maybe a cheaper plan or a feature they didn’t know about. It’s like saying, “Hey, before you go, check this out!”
• Pause, Don’t Cancel: Sometimes folks just need a break. Offer an option to pause their subscription instead of canceling it outright. It’s like putting their favorite show on hold, not deleting it forever.
• Smooth Out Those Bumps: Involuntary churn happens when there’s a hiccup with payments and stuff. Make sure your billing process is as smooth as peanut butter. And if a payment fails, send a friendly nudge, not a cold “pay up” message.
• Retarget with Care: Got customers who’ve left? Bring them back with some clever retargeting. Show them what’s new or what they’re missing out on. But keep it cool – no one likes being bombarded.
• Keep the Conversation Going: Even after someone decides to leave, keep the door open. A simple “We’d love to have you back” message can make them think twice about leaving for good.

By offering tailored solutions and smoothing out any involuntary issues, you’re showing them you care.

And that goes a long way in keeping those churn rates down.

5. Foster a Sense of Community

Your SaaS users are more than just customers; they’re part of a community.

Build that community, and you’ll build customer loyalty.

Cultivating a sense of community can really help keep your customers around for the long haul.

Here are five tips to make that happen:

• Start a User Forum: Get a space where your users can chat, share tips, and help each other out. It’s like having a digital hangout spot for everyone who loves your product.
• Host Regular Webinars: Share updates, teach new tricks, or just have a Q&A session. It’s a great way to keep in touch and show your users you’re there for them.
• Create a Customer Success Team: Have a go-to crew that helps customers get the most out of your product. Think of them as guides in this journey with your SaaS, guides whose only target is to increase customer satisfaction and customer loyalty.
• Celebrate Customer Stories: Share success stories from your users. It not only makes them feel like rockstars but also shows potential customers what they can achieve with your tool.
• Encourage Peer-to-Peer Help: Set up a reward system for users who help others. It could be something simple like badges or shoutouts. This way, everyone feels good about lending a hand.

By making your customers feel like they’re part of something bigger, you’re not just selling them a product; you’re inviting them into a community.

And that’s a powerful way to keep them around.

6. Encourage Long-Term Commitment

The longer a customer subscribes, the more valuable they become.

Finding ways to encourage annual commitments or offering multi-year deals can significantly bolster your retention metrics.

That’s why you need to make your value clear to your customers.

You need to demonstrate the compounding value of your SaaS over an extended period.

To do that, offer additional incentives or discounts for long-term commitments, highlighting the win-win it presents for you and your customer.

And you need to be consistent, too. It’s essential.

Hold up your end of the bargain by consistently delivering value throughout the contract.

Regular check-ins and status updates can reassure customers that their long-term commitment is worthwhile and that you care.

Here’s how you can show them the ever-growing value of your product:

• Set Clear Expectations Early: Right out of the gate, let your customers know what they can expect. This means being upfront about how your product solves their problems and improves over time.
• Deliver the “A-Ha” Moment Quickly: Help your customers see the immediate value of your product. Guide them to that moment where they realize, “Wow, this is exactly what I needed!”
• Consistently Highlight Your Value Proposition: Keep reminding your users about the unique benefits your SaaS offers. Whether it’s through regular updates, emails, or in-app messages, make sure they remember why they chose you.
• Offer Personalized Tips: Everyone loves feeling special. Send your customers tailored tips on how they can get more out of your product. It shows you’re paying attention to their needs.
• Encourage Feedback and Act on It: Ask your customers what they think and really listen to their answers. Making changes based on their feedback not only improves your product but also shows you value their input.

By focusing on these strategies, you help your loyal customers commit more easily with you, ultimately increasing each of their customer lifetime value.

Make sure they understand not just the immediate benefits but also the long-term gains of sticking with your product.

Now, we just went over the strategies, but why do we take churn so seriously?

7. Monitor and Analyze Customer Behavior

It’s not enough to spot churn after it happens; the key is to predict and prevent it.

To do this, keep an eye on your customer data.

By constantly monitoring customer behavior, you can identify and address red flags before they result in churn.

Here is a simple guide to keep an eye on your customer behavior and jump on those early signs like a pro.

Here we go:

1. Choose Your Tool: First off, pick a tool that doesn’t make your head spin. There are lots out there, but you want one that feels right for what you need, without breaking the bank.
2. Focus on Key Metrics: Don’t try to watch everything at once. Just focus on the big stuff – how often people log in, which features they use a lot, and where they might get stuck.
3. Set Goals: What are you aiming for? Maybe you want more folks using a certain part of your product, or you want fewer people to leave. Having clear goals is like having a treasure map; it points you to where you need to go to generate customer loyalty more effectively.
4. Look for Patterns: Keep an eye out for trends in your customer data regarding how your customers use your product. See a spot where many users quit? Or a feature they love? That’s your cue on what to do next.
5. Act Smart: Found something interesting? Cool, but take a moment to plan your move. Maybe highlight a feature better or send out tips to help users get more from your product. Acting fast is good, but acting smart is even better.
6. Talk to Your Customers: Sometimes, just asking your users what they think can give you the best insights. A quick survey or message can do wonders. It’s like asking for directions instead of wandering around lost.

Remember, it’s all about making their experience fantastic, so they keep coming back for more.

Start with this simple formula down here.

If you want to map out your own customer value journey, download the worksheet right here.

How High Customer Churn Impacts a SaaS Business

Imagine you’re throwing a super cool party (your business), and you’ve got guests coming in (new customers) – but at the same time, folks are slipping out the back door when you’re not looking (that’s churn).

Not exactly what you want, right?

High customer churn is like having a leaky bucket; no matter how much water you pour in, if you don’t patch up the holes, you’re never going to keep it full.

So, in what ways does high customer churn slow down your SaaS business?

Let’s break it down:

1. Hits Your Revenue Hard

When customers churn, they take their wallets with them.

This means you’re losing not just their current subscription fees, but all the future ones they would have paid if they’d stuck around.

It’s like planning your budget, thinking you’ll eat the whole pizza, but half of it walks out the door.

Ouch!

2. Screws Up Your Growth Plans

Growth isn’t just about adding new customers; it’s about keeping the ones you already have.

If your churn rate’s high, it feels like you’re trying to fill up that leaky bucket we talked about.

You’re running hard but staying in the same spot because while new folks come in, old pals are also leaving.

This makes it super tricky to hit those growth targets.

3. Increases Customer Acquisition Costs (CAC)

Here’s the kicker: getting new customers costs way more than keeping existing ones.

So, if customers churn left and right, you have to spend more dough to bring new ones in just to maintain your numbers.

It’s like paying for a new party invite every time someone leaves – it adds up fast!

If customers churn continually, it’s not going to be sustainable for your SaaS business in the long run.

4. Damages Your Brand Reputation

People talk, and in today’s world, they talk online for everyone to see.

If customers churn or continue to leave one after the other, there’s a chance customer success is not being met and they’re not happy, and unhappy customers can spread the word far and wide.

This can make it tougher to attract new customers because nobody wants to join a party when everyone else is leaving.

5. Limits Your Investment in Innovation

With all the resources (time, money, energy) you’re pouring into plugging the leaks (reducing churn) and replacing lost customers (increasing acquisition), there’s less left over to make your product or service better.

Innovation takes a backseat because you’re too busy bailing water instead of steering the ship towards exciting new destinations.

High customer churn doesn’t just sting; it can seriously hamper your SaaS business’s ability to thrive and grow.

It’s like being stuck in quicksand – the more you struggle without addressing the root cause, the deeper you sink.

So, it’s super important to keep an eye on those churn rates and do everything you can to keep your customers happy and onboard.

To do that, you need to know the status of your customer churn.

Start with this simple formula down here.

Case Study – StatusBrew

So, in this case study we’re going to run through how the company, StatusBrew, recognized the importance of not just acquiring customers but retaining them for long-term success.

They implemented a two-stage approach: understanding why customers leave and encouraging them to stay.

To tackle churn, Statusbrew created a Customer Success Team separate from the Customer Support Team.

The team’s goal was to identify and convert unhappy customers into satisfied ones.

They integrated Intercom’s live chat into their web application, allowing real-time communication with customers.

This proactive approach helped identify and address potential issues before customers reach out for solutions.

Statusbrew also redesigned its cancellation page to include a short feedback form with the top 10 cancellation reasons.

This mandatory step provided valuable insights into why customers were leaving.

Additionally, they set up a priority Slack channel to receive immediate notifications when a subscription was canceled.

This allowed the team to quickly identify and address the cause of cancellation.

The company also triggered conversations via Intercom about the reason for the cancellation.

The Customer Success Team studied the user’s account usage statistics and pushed personalized messages to engage them in a conversation.

This approach aimed to convert cancellations into re-subscriptions.

Finally, Statusbrew used CRM software to track subscriptions and cancellations and sent personalized follow-up emails to churned users.

This allowed them to either win back lost customers or learn from their feedback.

By implementing these strategies, Statusbrew reduced its churn rate by 20% at the end of the last quarter.

The case study emphasizes the importance of understanding customer behavior, proactively addressing issues, and continuously improving the customer experience to reduce churn in SaaS businesses.

FAQs

Key Takeaways

So there you have it, a deep dive into how to reduce churn in SaaS and why it’s crucial for your business’s success.

By implementing effective onboarding processes, enhancing customer engagement, and providing exceptional support, you can make a significant dent in your churn rates and become a better champion of customer success as a SaaS brand.

Remember, it’s all about making your customers feel valued and ensuring they see the ongoing benefits of your service.

So go ahead, give these strategies a shot, and watch your customer retention soar.

And hey, if you’re hungry for more insights on digital marketing, business, and keeping a positive mindset, check out our other blogs.

There’s a whole treasure trove of value waiting for you!