Enticing new users and customers onto your platform can be a daunting task, but the battle is far from won when these new customers walk through your door. Keeping them satisfied with what you offer is essential to your long-term success at market, as is helping them get started. Carefully accounting for customer churn at every stage of the customer journey can help you do this.
What is SaaS customer churn?
Customer churn is the rate at which customers stop doing business with your company. In the SaaS sector, this generally manifests as customers canceling their subscriptions to your business’s services. Naturally, this can be a concerning trend if too many customers are leaving at once and your company is losing too much revenue to its competitors. This is precisely why you should monitor your churn rate as soon as you possibly can.
To track customer churn effectively as a SaaS company, you will likely need to establish a definition for the term that matches your business model as closely as possible. Not all SaaS companies are alike, and differences in the way you charge your customers as well as the normal use cases for your offering will dictate what can be appropriately defined as churn within your organization. An example of these differences would be accounting for pricing tiers and weighing churn at pricier tiers more heavily than churn at lower tiers.
What is onboarding churn?
The distinction we identified above between churn at different pricing levels of your product or platform is not the only one worth considering. Lines can be drawn up between customers churning at different points in time, such as during specific seasons of the year or in different phases of the customer journey. The latter of these two scenarios is where onboarding churn makes its appearance.
Onboarding churn accounts for all of the customers who stop doing business with your company within the first few months (say two or three) of signing up or making their first purchase. Causes for this phenomenon abound and can range from design deficiencies to poor pricing strategies. Onboarding churn can also take two separate, measurable forms in the field: churn by decreased activity and churn by decreased payments.
Regardless of the exact form it takes, this type of churn can help you to identify weaknesses in your business’s onboarding strategy and patch up holes in the parts of your product that matter most to new arrivals. To do this, it helps to have a more detailed understanding of some of the most common culprits in causing exaggerated churn at the earliest stages of the customer journey.
What are the top two reasons SaaS customers churn?
Two of the top reasons for high customer churn at any stage of their journey with your organization are actually deceptively similar to each other: low value and invisible value. These two concepts are surprisingly different and can have a profound effect on your company’s performance:
There’s a lot to be said for maximizing the actual value that your business offers its customers at every stage of their experience using your products and services. Without sufficient value, there is little reason for people to remain on board or commit to a subscription fee. When coupled with high effort on the part of the customer as a prerequisite for regular use of what your brand offers, relatively low derived value for that same customer can spell disaster and lead to them leaving.
This cause can be especially devastating without proper insight as you might not be able to determine what is driving your customers away in time. Invisible value is any benefit you offer customers that they may not notice or are simply not aware of. Making the many benefits of your product known to your customers with great clarity and consistency can make a big difference in this area.
How can you prevent customers from churning in SaaS?
There are plenty of effective churn management strategies to choose from, and some techniques can prove to be more effective for your business than others. Here are some key tips to put into practice within your organization to get better retention results:
Communication is always essential in business—both within your organization and with those you serve. SaaS customer churn is often exacerbated by a lack of communication, especially at key points in the customer journey. For instance, providing consistent progress updates and markers as new customers make their way through the onboarding process is enough to bring about more positive results. Also offering live support when necessary is a great way to ensure your customers feel comfortable continuing to work with your business.
Identify and eliminate bottlenecks
Any snags in the customer journey will need to be addressed to keep clientele from walking away from your company. Drafting a solid quality inspection framework and implementing service gap analysis techniques consistently can help to curb these issues quickly.
Choose the right business partners
For companies looking to expand into new markets and startups trying to achieve product-market fit, prime business partners are paramount. VeryCreatives is there to lend a helping hand. Contact our team to learn how we can help your SaaS business succeed.