Customer churn costs businesses billions of dollars in lost revenue each year — and the stakes are arguably even higher for Software-as-a-Service (SaaS) companies that heavily rely on recurring revenue to keep their operations afloat.
While every customer success team works hard to reduce churn, it’s hard not to wonder if you can be doing more. Here are a few approaches to fighting attrition and keeping customers happy.
Target every type of churn
Businesses usually equate churn with the number of customers they lose, but that view can sometimes be too broad to be really meaningful. Customers drop services for all kinds of reasons: price, customer experience, billing issues, service delivery, etc.
Without digging deep into your user data across the entire customer journey, how can you know the specific circumstances that led to the churned customer’s decision? More importantly, how can you prevent it from happening in the future if you don’t have that context?
When reducing churn, look at it from every possible angle:
- Voluntary churn: Also known as active churn, this refers to instances where customers deliberately cancel services. According to HubSpot, some of the most common causes of churn include poor customer engagement, bad user experience, ineffective customer service and substandard platform performance.
- Involuntary churn: Sometimes called passive churn, involuntary churn happens when a subscription or service is canceled without the customer’s consent. Involuntary churn typically results from payment issues, like a declined card.
- Revenue churn: The number of churned customers alone won’t always tell you the full story. For instance, losing high-value or loyal customers impacts your long-term outlook much more than seeing users drop off after their free trial ends. Measuring the amount of revenue that churn represents can help shine a light on customer experience issues affecting different types of users and service packages.
Revamp your onboarding process
Customer retention starts on day one of the customer journey. Every aspect of the user experience can either help keep customers in the fold or drive them away. That includes onboarding.
The onboarding process is a chance to educate new users, demonstrate the value of your product or service and get them hooked right from the start. If that’s not happening, you may find yourself fighting a losing battle with customer attrition.
A close look at your product adoption and usage metrics will point you in the direction of any onboarding issues. For instance, low adoption rates on key features should tip you off that new users don’t fully understand or appreciate what your service can do for them.
Take advantage of every opportunity to improve onboarding — adding on-demand guided tours, customized user experiences and data-driven engagement strategies — to get people excited about your services.
Measure the right metrics
Calculating churn rates tells you how many customers leave at a given time, but you need a lot more context to make decisions that will keep existing customers around long term.
Here are a few key metrics to give more meaning to your churn rates:
- Monthly active users (MAU): Be sure to look at fluctuations in MAU as they relate to the entire customer journey. For instance, once the initial wave of new user cancelations ends, do churn rates level off? They should. If not, that’s a huge red flag.
- Customer life-time value (CLV): Businesses can stomach a certain amount of churn as long as the customers who stick around offset those losses. CLV gives you a good sense of the financial impact of churn.
- Average subscription length: It can take months for SaaS companies to turn a profit on new customers. Are people churning before they cross that threshold? Calculating the average subscription length will help give you those answers.
You should also keep an eye out for tell-tale signs of churn risk. Those include customer support activity, direct customer feedback, user activity fluctuations and much more.
Bring churn metrics and customer success insights together
With all that being said hard data isn’t the end-all and be-all of customer insights. Your customer success team may have a closer view of how individual customers feel about your product, your service and your brand.
The key is to balance those two sides (metrics and subjective input) to capture a complete view of the customer experience. Customer success managers’ first-hand interactions will tell you a lot about how your customers feel.
When you pair that with solid data, you have all the insights you need to push customer satisfaction and retention to new heights.