SaaS Marketing Guide

How to Reduce SaaS Customer Churn in 17 Ways

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You work hard to attract new customers to your SaaS company, so the last thing you want is to lose them when subscription renewal time rolls around—or at any other point for that matter.

The stark reality for any business is that retaining clients is just as challenging, if not more so, than acquiring them in the first place. Reducing the dreaded customer churn should be high on the list of priorities for any SaaS company.

We know the three primary elements of the SaaS business model: acquire customers, retain those customers, and upsell or resell to them. And retention is the most crucial component in ensuring a successful long-term business strategy.

So how do you reduce SaaS customer churn and safeguard the future of your company? We’ve got 17 tips to help your company do just this.

Causes of Customer Churn

First let’s look at the main reasons for churn or customer attrition in business.

Price/Cost

Money talks. If your competitors are undercutting you, their lower price may turn some clients’ heads. Should you lower your rates to match? Not necessarily. There’s no reason to sell your company or your product short. You just need to show them why it’s worth spending more with you.

Product/Market Fit

In a world of sales targets and global outreach, it’s easy to be dazzled by customer acquisition rates. The more new customers, the better, right? Well, that’s not entirely true.

If your sales team is too focused on hitting targets and securing new clients no matter what, it is easy to neglect to secure the right kinds of customers. Those who may have been wowed by a salesperson with the gift of gab will soon realize if the product they’ve bought isn’t quite right for them and start looking at alternatives pretty quickly.

User Experience (UX)

Ease of use is paramount for any product, from cheese graters to web hosting platforms. If yours is difficult or frustrating to use, you’ll soon discover that the limits of human patience are shorter than you might’ve thought.

Customers will accept a learning curve with any new product or technology, but if there’s an alternative to yours that’s simpler to use, you shouldn’t expect them to hang around for long. Make sure the user experience of your product is as smooth as it can be, and provide guidance and support to your customers if they need it.

Customer Interaction

So you’ve made a sale and acquired a new client—that’s excellent, but what is your aftercare like? The customer journey doesn’t stop once money has changed hands.

Customers want to feel valued, and their opinions of you and your company may change depending on their interactions with your account managers and client services teams. It’s also important to consider how your website looks and how your brand comes across on its social media channels. This can all go a long way toward preventing churn.

What’s the Average Churn Rate in SaaS Marketing?

It is difficult to land on an exact percentage for the average churn rate in SaaS marketing because there is a lot of variation across different businesses and industries. Very broadly speaking, it is roughly 5%.

SaaS companies should aim to keep their churn rates between 3% and 8% to ensure long-term viability. You should generally be very happy if it is at 3% or less. But again, we’re painting in broad strokes because, in addition to the variation across sectors, the data is a little inconsistent too.

Some SaaS companies report their churn rates in terms of revenue, while others use customer numbers. Some go by monthly figures, and others annual ones. This means that the average has a wider spread across industries.

Ultimately though, you want your individual churn rate to be as low as you can get it.

Why is Churn Reduction Necessary?

It’s common sense that no business wants to lose customers. For SaaS companies, though, it’s even more critical. They rely on having ongoing revenue from clients to make a profit. Where retail firms get the bulk of their money at the point of sale, SaaS businesses get paid over a more extended period.

Effective Churn Reduction Strategies for SaaS Businesses

Your bottom line will look much healthier if you can reduce churn. Keeping customers happy is the key to sustainable long-term growth.

With that in mind, let’s look at 17 ways to reduce churn. Mix and match whichever of the hints and tips best suit your firm. Get it right, and you could reduce churn and grow your profit margin.

01. Reach Out Proactively

The first thing to keep in mind is that reducing customer churn can’t be a passive process. Customers who may be at risk of churning won’t often warn you beforehand. You need to be proactive and reach out to them.

Such proactive outreach shows customers you care about them. It tells them you’re invested in them getting the most out of your service.

The best kind of outreach should also relate directly to the customer’s use of that service. You may, for instance, contact customers who aren’t using a specific service feature. A quick reminder about that feature and its benefits can help them get more satisfaction from your product.

02. ID Service Weaknesses

You’re proud of your business and its products, and rightly so. That doesn’t mean that everything about your operation is perfect. No company has a 100% success rate in getting everything right the first time. There will always be weaknesses in your products or services. Those issues could be driving up your churn rate.

A data visualization showing the leading causes of churn.

The first step to solving those problems is finding them. You need to ID your weaknesses. Your current customers are your best source for finding the answers you need. Try to get as much feedback from them as you can. Ask them directly what they think you can do to improve your service.

03. Offer Added-Value Elements

Reducing churn goes hand-in-hand with improving customer satisfaction. A tried and tested way of boosting customer satisfaction is giving them more for their money. Think about different ways to add value to the service you provide clients.

Added value elements don’t have to be things that cost you much money. You don’t need to be running promotions or providing service features for free. What you could do, though, is to offer free tutorials on how to use your service. You may even go one step further and provide guides or resources about the wider industry your product exists within.

04. Segment Customers Effectively

So far, we’ve talked about general, all-purpose ways to reduce churn. Sometimes the best way to handle customer retention is to take a more targeted approach. Segmenting your customer base into groups is an excellent way to target them more effectively.

An individual who’s been with your firm for years is not the same as someone who signed up a week ago. You need to treat them differently if you’re going to keep them happy and on board. If you segment your customers, you can better communicate with different groups.

05. Use Intelligent Automated Emails

Once you have segmented your customers, you can plan how to contact different groups. In the same way that they’re invaluable to customer acquisition, automated emails are also superb for aiding customer retention.

Most good email clients let you set up ‘trigger emails’. These are messages that go out automatically to customers in particular circumstances. They might, for instance, get sent to someone who hasn’t logged in for a few days. Such emails are terrific for nudging customers back to your service or showing them how to get the most out of it.

06. Target Customers at Risk of Churning

Customers at risk of churning are a crucial segment of your base on which to focus. If you can proactively solve their issues with your service, you may be able to keep them on board. That’s an intelligent and effective way to reduce churn.

There are a few things to watch out for to predict who may be at risk of churning. Look for those customers whose use of your product is gradually diminishing. If you want to take things further, you may also wish to consider SaaS customer churn prediction.

07. Focus Most on Your Most Valuable Customers

If you have lots of customers at risk of churning, you may not be able to reach out to all of them. In that case, you should adopt a churn management approach and focus on the customers most valuable to your firm. That’s at least according to Sunil Gupta, a professor at Harvard Business School:

“What’s missing from traditional methods is that they focus only on a customer’s likelihood to churn, but not on the overall profitability of that customer… we contend the goal should be maximizing profits, rather than only reducing churn.”

08. Get New Customers Up to Speed

Onboarding can be crucial to customer retention. If you help your customers get up to speed with your product and its benefits, they will get more out of using it. That will make them happier and less likely to churn.

Your onboarding process is also vital if you offer a free trial. Having got a lead as far as agreeing to that trial, you then want to convert them into a real customer. It’s much easier to do this if you help them get the most out of their time using the product for free.

09. Reward Loyal Customers

Customers will view your service positively if you reward them for sticking with you. Setting usage milestones and incentivizing clients to reach them is an intelligent way to reduce churn.

The incentives you choose to offer should reflect your product and your customers. Think about what’s most likely to persuade clients to extend their subscriptions. Options can include discounted rates, extra features, and other bonuses.

10. Use Feedback to Inform Your Service

Customer churn is often the result of customer frustration. Service users sometimes become aggravated by confusion over how to use a product. They may equally get annoyed by poor customer support or assistance.

The steps involved in gathering and actioning customer feedback. — Image Source

When managing churn you need to know what it is that’s getting under the skin of your customers. The best way to find out is by asking. Try to ask for direct customer feedback as often as you can. Then, make sure you use the feedback to tweak and tailor your product or service.

11. Retain the Personal Touch

We’ve already talked about the value of automated emails. They’re real time savers when it comes to reaching out to large numbers of customers. It’s worthwhile, though, to balance the time efficiency of automation with the benefits of personalization.

Adding a personal touch to your messages will make each customer feel valued. They want to think that you’re talking directly to them. Try to include their name in the email salutation. Also, look to send messages from named – rather than ‘no-reply’ – accounts.

12. Upsell With Impunity

Promoting your products and site to new customers is vital. However, you shouldn’t focus all your marketing efforts on new leads and prospects. You may find it surprising how lucrative it is to upsell new packages and add-ons to existing clients.

A graph showing how upselling accelerates SaaS profitability. — Image Source

Upselling added-value elements like eBooks or guides is also helpful for customer retention. Even though you’re selling them, not giving them away, such added extras can still boost customer satisfaction.

13. Create a Customer Community

People like to feel as if they belong. It’s a vital part of what makes some customers so fiercely loyal to certain brands. Just ask a fervent Apple fan what they think of that company’s latest release if you need any proof of that.

Building a community amongst your customers is an excellent way to foster a feeling of belonging. Add a blog to your website and actively encourage participation and interaction. Get customers talking and sharing insights. That’s sure to make them think of your firm as a crucial part of their business life.

14. Keep Adding Value & Tell Users About It

In business, you never want to stand still. You should always strive to improve your products and services. Stay on the lookout for ways to add value to what you offer to your customers. When you do introduce new services or features, make sure you tell customers about them.

Send customers a quick message telling them how the excellent service you offer has got even better. You may also wish to share news of how your product is helping customers. Email case studies detailing how beneficial your product is in practice are a good idea. They will help to convince customers further that they’re with the right company.

15. Know Your Rivals Inside Out

Competitor research is essential to many aspects of your business. You need to know as much as possible about what your rivals offer their customers. Your customers may start looking their way if their products or prices are superior to yours.

A comparison table listing features against rival businesses. — Image Source

It’s also helpful to know how your rivals’ products work. If you can get to grips with their features and offerings, you’ll know if there’s anything you should emulate. Equally, it will give you a better understanding of the weaknesses of your rival’s products. Doing so makes it easier to demonstrate your competitive advantages to customers.

16. Lengthen Subscriptions & Commitments

Offering longer contracts is a simple yet effective way to reduce churn. By tying a customer to a longer deal, you are guaranteeing they won’t churn for a longer period. You need to be careful about when you lengthen contracts, however.

Extending your customers’ commitments works best when customers are already happy. Happy customers are more likely to want to sign up with you long-term. If levels of customer satisfaction aren’t what they might be, our other ways to reduce churn may suit you better.

17. Learn From Your Mistakes

You’re always going to get some customer churn. It’s unavoidable, even if you cherry-pick all of our tips that best suit your firm. When churn does occur, what’s crucial is to learn as much about what caused it as possible.

Try to reach out to departing customers and ask why they’re leaving. Not everyone will reply. Those who do, however, can give you some vital insights. By learning what caused customers to churn, you can make changes to ensure that no others go for the same reasons. It’s essential to learn from your mistakes.

Combat Customer Churn & Reap The Rewards

If you can reduce SaaS customer churn, it will go a long way toward making your business more profitable. Excellent customer retention and a low churn rate are what separate the best SaaS firms from the rest. There’s no one way to reduce churn, but you can explore many different avenues.

By combining some of our 17 suggestions for churn prevention, you can do wonders for your bottom line. Whether by being more proactive, rewarding loyalty, or building a customer community, you can keep customers happy and your margins wide.