Churn is the enemy of subscription-based businesses; it measures the rate at which your hard-won customers cancel their subscription to your service. Left unchecked, what seems like a relatively low customer churn rate month-on-month can quickly escalate into a crippling annual churn rate that your business can't sustain.
Fortunately, small improvements in your customer churn rate can have a huge impact on MRR and revenue growth over time. To help you improve your customer churn rate, I asked a ton of founders, CEOs and Customer Success Managers to share their best churn-busting strategies, and answer this question:
"What is your top tip for companies looking to reduce their customer churn rate?"
Read on for awesome customer success insights from the likes of Lincoln Murphy (Sixteen Ventures), Suzanne Gedney (Chargify), and Caitlin Daily (Promoter.io).
Churn is a symptom of a deeper, underlying disease; that disease is a failure to ensure your customers achieve their Desired Outcome.Customers failing to achieve their Desired Outcome happens either because you're neglecting to Orchestrate, Operationalize, Instrument, and Intervene properly once they become a customer… or because you’re acquiring customers without Success Potential in the first place.Focus on churn, churn will always be a problem; focus on ensuring your customers achieve their Desired Outcome, and churn will not be an issue.."Lincoln Murphy, Sixteen Ventures
Determine why your customers are leaving and develop content that addresses those pain points—then deliver it in an automated way.
Don't just stick to surface reasons, though—"It's too expensive" might be why your customer claims they didn't sign up after their trial period, but there are so many underlying explanations that can fall under that. Dig deeper to find out the true cause of them leaving: you might find that the cost of your product itself wasn't the real problem but that your customer just didn't find enough value for what they were paying.
What were their expectations and how did you fall short? Get on the phone, send out cancellation surveys via email, and just spend time getting to know what your customers really need from you—then give it to them before it's too late. Work their answers into your onboarding content, create customized campaigns for different stages of the lifecycle, and keep customers engaged by anticipating their needs before they're even aware they have any.
Tia Fomenoff, Director of Product Marketing, Thinkific
The fundamental reason customers stop using a paid service is because they aren't getting enough value from it relative to the total cost. Plain and simple.
I say 'total cost' because the customer spends more than just the monthly fee for your service, they pay in terms of team training, integration, keeping up with the product, adapting your product to their own slightly unique needs etc.
Therefore, the most important thing you can do as a company is to continually provide more value to your customer, so the equation is clearly more value provided than the total cost the customer is paying.
Customer success is critical in helping customers get more value from your product – through onboarding experiences, check-in calls, solving small pains through automation or product improvements suggested to the rest of the team. And the best way to make sure you understand how your customers feel and what they are struggling with is to listen to them and solicit their direct feedback, and then use that feedback to improve your core service."Caleb Elston, Co-founder & CEO, Delighted
After building value, my top tip for reducing churn is to reduce friction for your customer. Two common ways friction leads to churn:
- Encouraging a re-evaluation of your product at the wrong time (like when something breaks, or you're asking the user to do more than they expected).
- Making subscription renewals difficult with ineffective outreach, login pages or simply payment issues that go unnoticed.To solve your billing problems, it's important to make sure your automated systems scale well: knowing when to work behind the scenes, and when to notify the customer."Ken Johnson, Partner, Customer Success, Churn Buster
Identify at risk accounts and proactively reach out to them before they have a chance to churn. Analyze data to determine red flag metrics, such as customers who have decreased activity, are paying overage fees (and could save money by upgrading), or are past due and not responding to dunning communications.
Your customer success team should reach out to those at risk accounts to re-engage with them before they churn. And you don’t have to wait until accounts are at risk of churning to connect! Combine proactively managing at risk accounts with scheduled outreach when things are going well for your customer. Doing both gives you the opportunity to learn your customers’ pain points, while also establishing trust and long-term relationships to effectively reduce churn and increase revenue."
Suzanne Gedney, Director of Customer Success, Chargify
Know What your Customers are (Really) Thinking.
Without a simple method for identifying your unhappy customers, reducing churn can be a daunting task. Unfortunately, a lot of customer feedback methods are long and complex. The result is that companies hear the thoughts of only a few users, and rarely the ones at risk of churn.
Using a simple and direct survey system such as Net Promoter allows you a more direct line to your customers’ feelings. Those who may be considering leaving can be quickly identified, and their problems (which often only require a little training to correct) can be solved.
Not only do you prevent churn, but actively improve your product and customer satisfaction. When communication happens the right way it’s win-win all around."Ondrej Sedlacek, CEO & Co-founder, SatisMeter
It's tough to prevent churn without understanding and measuring success. To do this at scale, you'll need to get a handle on all of your customer data. Think product usage, support tickets, NPS scores, and so on. Utilize these metrics to paint a complete picture of your accounts, correlate engagement with value, and quantify what success means to your customers. Then, you can use your insights to proactively engage with at-risk accounts before they decide to leave."Craig Soules, CEO/Co-founder, Natero
It may seem a bit self-promotional, but honestly, the best way to reduce or even eliminate customer churn is by continually measuring customer loyalty with NPS (Net Promoter Score). At Promoter.io, we utilize our own tool for this exact purpose. In fact, if you're actively using NPS and haven't seen a meaningful reduction in churn or an increase in revenue, you're doing something wrong (and you should talk to me … ASAP).With that in mind, identifying your at-risk customers (detractors … and even passives to some degree) is only half the battle. In order to effectively prevent churn, you need to close the loop with these customers by listening and responding to their needs and concerns in short order. Statistically speaking, 40-50% of your detractors will leave you within 90 days, so time is of the essence.Reducing churn by addressing your customers needs is the easy part. Finding out what those needs are in a timely and consistent fashion is where most companies fumble. This is why NPS is an essential must-have tool for EVERY company in existence.Caitlin Daily, Head of Customer Support, Promoter.io
When figuring out how to reduce churn, you want to start by choosing the right objective. "Reduced churn" is proof you've achieved your goal, but it's not the goal itself. How often have we dealt with companies where it's impossible to cancel? I'm sure they're reducing their number on churn, but they're awful companies. We can do better.Pick an objective like "make our product so valuable that customers never want to leave." Then, come up with measurable key results that demonstrate you've met your objective. One of those results may be reduced churn, but you should also leave room for measurements that indicate that you're improving your product and driving customers towards the parts of your app that help them be successful.One way to get started is to identify your most active users and learn how they use your product. If you can find behaviors that correlate to customer success, you can then find ways to point users to parts of the app which they may not be using and which may be highly valuable to them.In the end, it's all about making your product better so your customers can be successful. When you do that well, reducing churn will be the natural result."Ben McCormack, Customer Support, FullStory
The single biggest usage drop-off point is after the first session: 40-60% of new users will use your product once, and never return (source). Therefore, my top tip for reducing customer churn is to generate value for the customer – as early as possible. This means two things:
- You need to understand what your customers want to achieve from using your SaaS product (what Lincoln Murphy calls their ‘Desired Outcome’);
- And you also need to identify the smaller steps they’ll need to take to move towards that End Goal (their success milestones).
With that in mind, you can shape an onboarding process that delivers demonstrable, tangible value, right from first use. If you can help your new customer achieve something during that first session, you’re more likely to keep them coming back for more."Emily Smith, Growth Specialist, Cobloom
My top tip for customer success teams looking to reduce their churn rate comes in three parts:
- 1st, you must determine and fully understand how the product is designed to deliver value to the customer
- 2nd, you must personally work with each customer (account that you take ownership of) and understand how THEY define value - what is valuable to them (what are their needs), irregardless of the product in question
- 3rd, and most importantly, your CSMs must personally help each customer actually get that value. Oftentimes, this exclusive service is reserved for a top tier or segment of the customer population.The CSM will often find that each customer has a unique way of utilizing the product - in other words, what the customer actually finds valuable may not always align with the value proposition that the product team had in mind when designing the software. Thus, it's the CSM's responsibility to understand how the product is actually being used in the real world, and be able to cater their own expert services to deliver more value than the customer might anticipate in any given situation.This is the key to customer success - being able to connect business needs with product design and usability, thus delivering value to the customer AND providing insight to internal product team (which should then ideally continue to improve the product for all customers)."Srajan Bhagat, Customer Success Manager, Recruiterbox
My top tip for companies looking to reduce churn rate is simple: When analyzing customer feedback, context is king.I like to break up customer feedback into two classes: implicit and explicit. Implicit feedback is when you infer your users' thoughts and intentions through metrics (e.g. tracking conversion rates on a homepage signup form). Explicit feedback is when you ask them to answer a question or have a discussion (e.g. asking customers the standard Net Promoter Score question).Ryan Angilly, CEO, Ramen, Chart URL, PluckIn both classes, it is critical that the context of who is answering is taken into account when analyzing the feedback. In the implicit example, you want to break out your conversion rates by source. You may find that organic traffic converts at 10% while certain marketing campaigns convert at 1%. This is great feedback on the quality of your messaging (and may give some great insights into how to change that messaging based on the phrases driving you traffic). In the explicit example, an NPS score of 8 can mean two very different things if one comes from a relatively new user (yay!) while another comes from someone who previously rated you a 10 (womp!).Whenever you're working on customer success, it's important to collect lots of feedback from your customers, but it's just as important to ensure that the source of the feedback factors into the final analysis. This ensures you're responding to the right feedback the right way, and ensuring your existing customers are being heard."
Focus on adoption. Without adoption, retention can be very challenging (if not impossible) to achieve. There are many facets to ensuring adoption, but the lowest hanging fruit for most SaaS companies is leveraging their event (or usage) data. The purpose of tracking usage data is several fold:Keri Keeling, VP of Customer Success and Operations, Bluenose• Leading indication of churn for customers/end users that are not adopting• Identification of accounts to focus your CSM team on• Identification of customers showing buying signs for upsell• Features that are not being leveraged adequately (may require customer training or product improvement)
Begin by tracking these event types:• Users log in activity• Feature usage• Form factors (the method a user engages with your application)
Just these three categories of data can then be used to uncover the frequency in which the events happen which opens the doors to many different types of Customer Success activities that will compliment your customer retention efforts."
You can't improve what you can't measure, so be as meticulous as possible with your churn calculations.
The biggest mistake I see is confusing monthly customer churn and annual customer churn. A lot of SaaS companies will talk about having "5% Customer Churn", but that statement means nothing without a time period attached to it.
To put this into context, 5% annual customer churn is a great benchmark to aim for; but 5% monthly churn is the equivalent of losing half of your customerbase (54% to be precise) by the year-end.Ryan Law, CMO/Co-founder, Cobloom
Improving Customer Churn
Even small improvements in your customer churn rate can have a huge impact on your revenue growth.
Thanks to the expert tips and guidance outlined here, you'll be able to tackle your SaaS company's customer churn rate more effectively: identifying at-risk customers; understanding what they want from your SaaS product; engaging customers with timely support; and measuring and analysing your churn data correctly.