Customer churn rate is one of the most important SaaS metrics for your company to track.
It measures the rate at which existing customers cancel their subscription to your service over a particular time period. High customer churn rate is bad for your company, as it leads to fewer customers and therefore lower revenue.
Many underestimate the numbers as they struggle to calculate churn rate correctly, but once you've worked out your customer churn rate, you have a benchmark from which to make improvements and retain more customers.
Today I'm looking at seven ways to improve your customer churn rate.
1) Improve Your Onboarding
"40-60% of users who sign up for a free trial of your software or SaaS application will use it once and never come back."
While customers on a free trial don't contribute to your churn rate (as they aren't a source of revenue for your company), it's clear that hooking the user right from their initial interaction with your software can have a major impact on your customer churn rate.
Your onboarding process should get them to the 'aha!' moment - the point where they see and experience the real benefits of your service - as quickly as possible.
By providing a demonstrable 'win' for the user early on, you will help them understand how it can benefit them in the longer term. This will make them more likely to return to your service for a second time.
2) Look For the Red Flags
Analysing your users' activity will identify clear behavioural differences between users that leave, and users that continue using your product. This will help you uncover the red flags that point towards customers who are more likely to churn.
SaaS start-up Groove analysed their users' first 30 days and discovered that length of first session and frequency of logins were their most significant 'red flag metrics'. Total number of logins also proved to be an important metric.
Identifying your red flag metrics, just as Groove did, will help you understand how your users are engaging with your product, and enable you to work out where the major drop-off points are. Things to look out for include:
- Infrequent log-ins (they're not using your software)
- Taking much longer than the average user to complete simple tasks (they're having difficulty using your software)
- Visit times much shorter than the average user (they're not using your software to its full potential)
Once you know what to look out for, you'll have a good way to segment users who you've identified as 'at risk' of churning. You can then specifically target this list with follow-up contact to remind them of the benefits of your service that attracted them to sign up in the first place.
3) Increase Engagement
If a user is engaging with your product - that is, logging in and actively using it - on a regular basis, they are much less likely to churn. A good way to 'hook' users is to provide them with a way to get value on a daily or weekly basis - perhaps a regular activity report or a checklist of actions to complete for X benefit.
By encouraging the user to engage with you at set regular intervals, you will begin to integrate your service into their daily or weekly workflow. If using your software becomes a habit for the user, and they come to depend on your service as a tool or source of information that they can't imagine doing without, then that user is much more likely to renew their subscription to your service.
4) Educate Your Users
You need to make sure that your users are equipped with the knowledge to make best use of your software. To reap the most benefit from your service, they will need to know how to use it to its full potential.
Therefore it is vital that you continue to educate your users about your service after the initial onboarding process, even if they've been using your service for months. This could take the form of emails about new features, or regular blog posts or case studies of how other users are benefitting from your service.
“If a client doesn’t know about 70% of the functionality of your service, then they’re unlikely to be using it to its full potential and therefore aren’t getting the ultimate value out of it. And won’t renew when push comes to shove, or budgets get tight.” – Mike Templeman
5) Continue to Add Value
A great way to keep your users coming back for more is to improve the experience they receive.
Whether that is by improving the functionality and/or user experience of your service, adding new functionality, or rewarding them for their engagement, adding value will help position you ahead of your competitors. A happy customer is much less likely to leave than an unhappy one.
Another way to add value is by educating your user (see #4, above). An educated user is a one that understands your product and its benefits. You should try to ensure that all of your users understand the full value you are offering with your service. By teaching them more about your service, you maximise the amount of value they get from it.
6) Continue to Market to Them After They Make a Purchase
No doubt you went through a lengthy marketing and sales process converting your website visitor into a paying customer. Why should this process stop once they've signed up and passed over their payment details?
You want to keep your service at the forefront of their mind, and keep reminding them of why they signed up in the first place. By continually reminding your users of the benefits that attracted them to your service, and the value it provides, you are reducing the likelihood of them churning at their next renewal date.
This will be particularly important when you have identified users who are at risk of churning (see #2 above). You can then take steps to re-engage those users with your service.
Of course, even with your best efforts, some of your users will churn. But these will provide you with the best insights of all: concrete information about why they left, and what specifically triggered them to cancel their subscription to your service.
On cancellation, you should automatically trigger an exit survey to find out why the user is cancelling, and if there's anything that might get them to stay. In reality, it will be extremely difficult to convince that user to change their mind - they're already set on cancelling their subscription to your service. But the information they provide will be invaluable to you in the long term.
Common themes in exit survey responses will enable you to make sure that your service is aligned with the user's expectations, and help you to improve or alter your service accordingly.
Now you understand how to retain more of your existing customers, learn how to attract new ones by downloading our free eGuide below.