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How to Successfully Manage Churn in Your SaaS Business

It’s no big secret that acquiring new customers costs a business significantly more than retaining existing ones. However, the frustrating reality is that despite your best efforts, customer churn is going to happen. 

Thankfully, there are ways to stem the tide and minimize customer loss. We will cover every aspect of how you can successfully manage churn in your business, leaving no stone unturned. 

What is customer churn?

Customer churn occurs when users of your products or services bid you farewell for new pastures. It’s particularly significant to SaaS companies, which tend to operate on subscription-based models. A lost customer may not mean a single sale but a year’s revenue. In other words, you don’t simply lose the MRR (monthly recurring revenue) of the customer but their whole CLTV (customer lifetime value). As such, customer churn is a metric you need to track vigilantly. 

You must also pay attention to other areas to contextualize your churn rate. By analyzing data from your sales lead management software, scrutinizing customer feedback, and examining support ticket trends, you can better understand how well you’re taking care of your customers.

If your churn rate steadily increases, it’s time to take action. To begin with, you need to learn how to recognize the warning signs that a customer is about to churn. 

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What are early signs of customer churn? 

When you become familiar with these red flags, you can prevent customer churn before it happens. 

Decreased product usage or engagement

Many businesses, quite rightly, place a lot of emphasis on tracking sales and marketing analytics but fail to monitor important data about their existing customers. Decreased product usage or engagement can signal alarm bells that a customer is on their way out of the door. 

Tools like Google Analytics, Amplitude, and Mixpanel, among others, can help you track metrics like user behavior and feature adoption. If you see a suddenly inactive user, there’s a good chance they’re dissatisfied with the service or product, and it’s time to reach out. 

You can set automated triggers to kick things into action when, for example, a customer hasn’t logged in for a month or significantly reduced engagement. Integrating your app tool with your CRM system will immediately notify the right team members.  

Negative feedback or sentiment

A more obvious sign of impending customer churn is poor feedback and negative sentiment. This doesn’t mean sitting back and waiting for a customer to tell you directly if they’re unhappy; you need to be proactive. 

Keep an eye on customer reviews, monitor your social media mentions, and analyze all customer feedback for common trends. Has a price rise triggered a negative reaction? Are there frequent complaints about any of your features?

Handling bad feedback and negative sentiment can be tricky, but dealing with it quickly and looking for solutions can make the difference between retaining a customer and losing them. 

Missed or late payments

Aside from the extra time and resources it takes to chase late or missed payments, these financial indicators also raise concerns that your relationship with a customer is coming to an end. 

Whether their failure to pay is due to financial woes or discontent with the service you’re providing, the fact that they’re not paying can speak volumes. 

Whatever the reason, handling the situation thoughtfully and taking a flexible approach to billing is your best path forward.

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Increased interest or engagement with competitors

If your clients are starting to flirt with your competitors, get ready to fight for your relationship—metaphorically speaking, of course. You can monitor the situation using a few different tactics. 

Use social media listening tools to keep abreast of any updates from your competitors and monitor likes and comments to detect any uptick in engagement. You can also use competitor analysis tools, like SEMrush, to assess other areas of your competitor’s online presence, such as website traffic and customer reviews. 

If you want to be more direct, you can send your customers surveys which ask about their interactions with competing businesses. 

Strategies for managing churn

We’ve already touched a little on the strategies you can use to mitigate customer churn, but it’s time to get into the thick of it. 

Invest in a dedicated customer success team 

If you don’t have a customer success team, establishing one can add some serious firepower to your churn-battling arsenal. A customer service team is predominantly reactional, on hand to answer problems and queries as they come in, but a customer success team exists to secure a client’s long-term satisfaction.

Their goal is to build strong relationships with customers. As such, you’re looking to hire an empathetic, proactive team with gold-standard communication skills. Extensive training is a must, as they’ll need inside-out knowledge of your products. 

Among the KPIs that will indicate the success of your customer success team are churn rate, customer satisfaction, renewal rates, and upselling and cross-selling statistics.

Provide a smooth and personalized onboarding experience

Set the right tone with customers from the beginning by providing an easy and tailored onboarding experience. This is your opportunity to make an outstanding first impression and you’ll need to employ the right technology. 

Process orchestration tools can automate much of the administrative side of onboarding, speeding up the procedure and coordinating different departments and processes in one place. 

Your email campaign at this stage can also have a big impact, particularly if you’re offering a free trial initially. You can convert more customers with simple onboarding emails by including personalized content and resources, such as tutorials, to show how important each individual customer is and begin sowing the seeds of long-lasting loyalty. 

Offer flexible pricing and subscription options

A one-size-fits-all price can be restrictive, and a diverse audience makes flexible pricing a no-brainer. Before you create your pricing plan, you need to understand what your customer’s requirements are. 

Offer different levels of packages, with varying features for a range of budgets, or consider fully customizable plans. When it comes to setting your prices, keep sales psychology firmly in mind. 

Tactics such as odd-even pricing, perceptual pricing, and value-based pricing can all influence the way your customers perceive your product and your brand, so pick your pricing wisely

Implement loyalty programs, discounts, or incentives

A tried and tested approach to minimizing customer churn is to introduce a loyalty program. For example, a tiered subscription structure which offers bigger benefits for longer commitments, with a monthly subscription being the most basic and an annual option boasting the most exclusive perks.

Outside of loyalty programs, you can offer discounts and incentives that reward customers for using your products. Renewal incentives, for example, could involve a bonus or discount for renewing their subscription early. 

Bundle offers are another great idea, giving customers a discount for combining multiple services or features. Altogether, these tactics serve to make staying with your business more attractive than straying to a competitor.

Collect and analyze customer feedback to identify pain points

To really grasp the most pressing issues that may cause your customers to jump ship, you need to take advantage of cutting-edge new technologies that can make sense of large swathes of customer data. 

Sentiment analysis tools, for instance, use natural language processing (NLP) algorithms to monitor your customer communications channels – social media, reviews, emails, support tickets, etc. – to classify sentiment as positive, neutral, or negative. This gives you a clear view of the general emotional tenor of your customer interactions. 

The specifics will then come in the form of the feedback itself, which you should collect continuously and across multiple channels to illuminate pain points. However, it is not sufficient to collect this feedback; you need to act on it and communicate with customers to let them know that their voices have been heard.

Provide timely and helpful solutions to customer issues

The quality of customer service you offer plays a huge role in increasing or decreasing customer churn. Long wait times, fragmented communication channels, and poor responses are all guaranteed to have a detrimental effect. Once again, there are many technology solutions out there that can help you in this endeavor. 

AI-powered chatbots can answer many queries instantly and at any time, so customers don’t have to wait for a reply to a pressing matter. Meanwhile, an intuitive call center monitoring dashboard can help you track the performance of your agents and improve wait times.

These solutions alleviate pressure on your customer service team and show you where you can make improvements. The result? Happier, supported customers and lower churn rates. 

Conduct exit interviews to grasp customer churn causes

In the eventuality that customer churn has happened, there is still an opportunity for you to learn what you could have done better. Conducting exit interviews opens up the floor to get honest and open feedback about clients’ motivation for leaving.

There may be an opportunity to do this in person, but a common format is sending the leaving customer a carefully designed survey. You’ll need to strike a careful balance here; too long, and they may not bother to complete it. Too short, and you won’t get the valuable information you need. 

Choose your questions carefully. Include open-ended questions to get their real thoughts, and use this knowledge to make the necessary changes. 

Create targeted campaigns to win back lost customers

When you do lose customers, it doesn’t mean they are gone forever. Craft a plan that you can implement when the time comes to win them back. Rather than a generic blast, the goal here is to make them highly targeted. 

This can be achieved by analyzing historical data that indicates what may have caused dissatisfaction and their reasons for leaving. You can then devise a targeted email campaign that addresses pain points, shares the improvements you have made, and provides valuable content.

As you may be aware, you can generate leads using content and re-engage former customers with content. Customized content, such as success stories of similar clients, can be a persuasive way to convince customers to return.

Read more: How to Implement Win Back Emails for Customer Retention

Upsell existing customers to annual plans

It’s understandable that some customers want the flexibility of a monthly subscription or prefer a shorter commitment, but upgrading to an annual plan should be as beneficial for them as it is for you. 

An annual plan should deliver substantial cost savings and offer attractive bonus features. If your plan isn’t selling as well as it should, consider whether you’re offering enough of an incentive.

Ideally, customers should save the equivalent of a few months when they upgrade. Upselling existing customers to annual plans may not always be easy, but the more people you have on an annual plan, the lower your churn rate is likely to be.

Use Dunning emails to prevent involuntary churn

Not all customer churn is a choice. Where there are issues with renewal payments, sometimes customers unwittingly let their subscriptions expire. The reason for not paying could be for several innocuous reasons, commonly that they have new payment information. 

This is where dunning emails will be useful. They notify customers that there has been an issue with taking payment, which can often prompt them to rectify the situation right away. 

Time is of the essence with Dunning emails, so it’s advisable to automate them so any missed payments are swiftly but politely flagged with the customer. This can go a long way to preventing involuntary churn and maintaining continuous customer service.

Continuously improve your product or service

Even if you’re offering a best-in-class service or product, always look for ways to keep improving, because you can be sure your competitors will be. Stay up to date with the latest technological developments and be discerning when choosing what solutions are right for your business. 

Act on customer feedback and market trends to keep innovating your offerings. Also, think about the customer experience you are providing. 

Hyper-personalized content, behavior-based email marketing, and dynamic personalization technologies are all ways to provide the tailored service that customers will come to expect as standard. 

Conclusion

Managing customer churn is a complex task, but it must be prioritized. Customer retention is vital to the success and sustained growth of a business. The money you invest in attracting new customers will be wasted if you cannot retain them. 

The value of loyal customers cannot be overstated. Adopt the strategies in this article to reduce your churn rate and maintain a long-term customer base to help your business thrive. 

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