Increasing and retaining customers is more challenging than you may think. Several factors are included, such as your economic situation, competition, product features, etc. Some of them, however, are completely separate from your business.
For example, let’s say you’re increasing your customer base by around 40%. Your users are happy with your software product, and you’re expanding your business. Everything looks great. But after a few months, something really bad happens; some customers leave. What’s worse, you don’t know why. You start asking yourself, what does that mean for my company? What can I do now? Why are my customers disappearing?
This is a classic case of one of the key metrics in the SaaS industry: customer churn. But don’t fret – businesses experience this more often than you think, and there are some very easy, useful things you can do to stop it. In light of this, this article will better explain what causes your customers to leave and, more importantly, how you can stop it from happening.
Get to know more about customer churn, including key aspects such as::
- What is churn?
- Why do SaaS customers churn?
- How to properly track and improve your SaaS Churn
- SaaS Churn reasons and tips on how to avoid them
What is Churn?
According to our latest article, SaaS Churn Rate – Calculation, Averages & Benchmarks [2022 Guide], SaaS churn is the percentage rate at that customers cancel a recurring software-as-a-service subscription within a defined period.
As SaaS companies depend on recurring revenue, churn rate is one of the key SaaS metrics and a vital way to measure company health, providing insight into historical performance, customer retention, and the overall continual growth (or decline) of your organization.
If you’re looking to know the customer churn of your SaaS company, try our Churn Calculator to get a ballpark figure regarding the annual churn rate of your company.
Now that you know what customer churn is, let’s learn the different reasons why your customers might leave your product or service.
Why do SaaS Customers Churn?
There are several reasons why your customers churn and stop paying for your subscription. Understanding these will help you implement strategies and techniques to reduce churn. Here are the most common SaaS churn reasons:
1. Unsuccessful onboarding
A user subscribes to a SaaS product because they’re looking to solve a problem, such as increasing their customer engagement, generating more leads, or others. However, if they don’t receive proper onboarding so they can value and understand the product, they’ll be more likely to leave. This is why onboarding is so crucial. Think about it. In business, too, first impressions matter.
If you’re interested in developing a successful onboarding experience, check out our FROGED customer onboarding feature.
2. Pricing not aligned with value
Developing an effective pricing strategy is a key factor in reducing customer churn and retaining customers. For example, if your product is perceived as too cheap, your customers will lose trust in your ability to fix their problems. Alternatively, if your product is too expensive, they will find another competitor with a lower price. Always align your price to the needs of your target market.
3. Not enough or too many features
Sometimes, SaaS businesses want to offer many features to fulfill every customer’s needs. Nevertheless, that can overwhelm the customers and confuse them with your product’s real purpose. On the contrary, when SaaS companies don’t offer enough features, users might switch to the competitors as they’ll offer them more complete products.
Because of this reason, it’s important to conduct a market analysis to determine how many or which features your SaaS company should offer.
4. Lack of proactive support
Proactive customer support is a strategy adapted to address customer challenges before they even occur. It improves retention rates, boosts brand reputation, and takes the pressure off your support team.
Offering a personalized, human touch can take time and effort, especially when dealing with a high volume of customers. Before you start anticipating your customers’ needs, you need to understand who they are and what issues they experience—after that, providing proactive customer support will be possible. Check out FROGED customer support features to discover more, or read our article 3 ways Product Flows lead to more Proactive Customer Support.
5. You’re attracting the wrong customer (Poor Product-Market fit)
Conducting an accurate product-marketing fit can be a key factor in attracting your desired target. Most SaaS companies start by trying to reach as many customers as possible. Rather than trying to gain all customers, it’s more important to understand which ones are likely to stay and upgrade their subscriptions.
To do so, you can start by conducting surveys and asking the new customers why they chose your product or service or other questions to understand your users. Through them, you’ll be able to conduct a customer-product fit and target the right customers for your company, ultimately reducing churn.
6. Product is buggy
Software-as-a-Service products can sometimes act weird or stop working because of technical issues. That’s why clear communication is so important!
As a SaaS company, you should always keep customers informed and updated about every issue, update, or change of your product. That way, they will understand how much you value them. In contrast, if you avoid telling them what’s happening with your product, they won’t understand what’s happening and will be more likely to churn.
How to improve your SaaS Churn
Reducing your SaaS churn rate is the key to maintaining a steady growth rate for your business. After explaining what customer churn is and why customers churn, let’s discuss ways to reduce it. Here are some tips that will help you:
Offer proactive customer support
Providing less reactive and more proactive customer support to reduce tickets and centralize customer communication will boost customer satisfaction and increase customer loyalty and retention.
Offer incentives
Users who subscribe to a monthly or annual plan make a long-term commitment to the business. Churn can occur, however, when their contracts are up for renewal, and their date is coming up. Offering incentives such as discounts, sales, special bonuses, or rewards increase customer lifetime value and gives customers another reason to stay.
Always ask for feedback
A good strategy to understand and discover what your customers think about your product or service is by asking them through surveys. Often ask your existing customers for feedback so you can learn what you can do to keep them happy and reduce churn.
Stay competitive
Making sure you’re competitive is one of the best ways to reduce churn. The most common reason customers churn is that they’re switching to a better product. To retain customers, you need a better product than the competition. Invest in product developers, well-designed marketing strategies, and good professionals.
These tips are good strategies for reducing churn and expanding your business. Are you ready to implement them?
SaaS Churn reasons and tips on how to avoid them
Churn is a reality in the SaaS industry and is one of the main reasons companies fail. However, understanding why it happens will help you implement the right strategies and techniques to fight against it.
It’s unavoidable that each business will experience a certain percentage of customers canceling their subscriptions. However, offering proactive customer support, incentives, asking for feedback, and staying competitive are techniques that will help you reduce churn and boost customer satisfaction.
Are you interested in learning more about fighting customer churn? Check our FROGED features or book a demo to discover how with FROGED, you can centralize Customer Support, Knowledge Bases, Chat tools, and Onboarding in a single platform.