On this episode of Ground Up, Kieran Flanagan talks about the early days of freemium at HubSpot, instilling a growth discipline that expanded well beyond the marketing team, managing cross-functional teams, and more.
Ground Up Podcast | Oct 21
Elise Dopson on July 23, 2019 (last modified on July 25, 2019) • 20 minute read
Your churn rate is the percentage of customers that cancel or fail to renew their plans during any given month, quarter, or year.
And if customer or revenue churn is too high in your SaaS business, it’ll eventually catch up to you and hinder your overall growth.
We wanted to find out how you can reduce your churn rate––and more importantly, retain your SaaS users for years to come. So, we asked 29 experts to share their best tip.
*Editor’s note: Unsure on whether your churn rate is an issue? Head over here to grab our Stripe (MRR & Churn) dashboard to find your overall churn rate, along with financials that show where your business is heading:
Before we discuss churn-stopping tactics, Weav.com‘s JR Farr thinks “it’s important to understand churn is a symptom of something bigger.”
“The faster you can understand why your customers are leaving, the sooner you can get to fixing it. Stop trying to fix the sink when the well is broken.”
But when you’re finding the well to fix, be aware that the problem might be something small. You might only save 2% of your users from unsubscribing–yet that can have significant long-term value, as demonstrated by ProfitWell:
Incentives are often saved for survey respondents.
But as Marty Rogers explains: “We’ve managed to more than halve our churn rate at Lead Peep simply by offering our customers an incentive to stay that is hard for them to turn down.”
“When they try to cancel their accounts, we offer them the option of upgrading to the next package up for free OR taking a 20% discount on their current package. It has worked amazingly well for us,” Rogers says.
This is a great tactic for the 68% of companies who offer free trials to convert users into long-term, paying customers:
…and the 20% who offer a free version of their product:
For Shufti Pro, Damien Martin says: “The most important thing is providing the customer with the best possible service. The quality of the service is reflected in customer satisfaction levels.”
“Another important thing is to be responsive to complaints and queries. Providing instant chat support helps resolve the clients’ issues more efficiently. It is also useful to build relationships with clients and thoroughly understand what they require, thereby providing them with valuable services and better user experience.”
Martin explains: “We have found from our experience that evaluating and assessing the reasons customers leave, and then making efforts to resolve them helps in reducing overall churn rates.”
Text Request‘s Kenneth Burke also notes that their “customer success reps have been crucial to reducing our churn. They’ll reach out as soon as a new customer signs up, a couple of weeks in, a couple of months in, and so on.”
“Their goal is to help customers have the best experience possible, which includes learning more about how they can use our product, and even if they can save money on it. They’ve done an impressive job of creating great experiences that make people want to keep working with us.”
Have you built a support team to handle any queries that come your way?
“Something we’ve implemented more recently is an all-company strategy for talking to customers, handling support tickets, and responding to issues,” writes Corey Haines of Baremetrics.
“Instead of one person or one set of team members trying to handle all support and bottle-necking the process, everyone is encouraged to do support and the end result is a much more efficient way of handling issues and keeping customers happy.”
As a result of this all-hands-on-deck approach, Haines says: “We’re all much more in tune with what’s needed and where to focus. Tickets get resolved faster, more bugs get squashed, and customers feel heard and appreciated.”
Not only is this a great way to stop you from losing money through churn, but you can keep more people using your product:
Encouraging your entire team to provide user support could help reach your request times–something Chris Martin says is “the most effective method FlexMR have used to reduce customer churn rate.”
“Since extending the opening hours of our help desk team, we have targeted the team with a two business day resolution time. By investing more heavily in this aspect of the business and improving communication with customers, we have been able to positively impact monthly revenue retention by providing additional value to clients,” Martin writes.
This monthly revenue retention is important–especially when the majority of SaaS businesses lose 2-3% of their MRR:
“We start the renewal process and the relationship-building as soon as the deal is closed,” writes SparkPost‘s Tracy Sestili.
“We have dedicated account managers for Enterprise accounts who reach out regularly and also hold quarterly business reviews. We also have a nurture program for non-Enterprise accounts to provide thought leadership and best practices (including hosted events).”
V. Michael Santoro of Vaetas, LLC also adds that they “reach out to our users and offer to interview them for our Vlog. They get to share information in a video interview about their business. They give business tips to our viewers and usually include a testimonial when they explain how they’re using our SaaS platform to grow their business.”
“As early as possible, we work to establish an authentic relationship with every new potential customer and work to maintain throughout the customer lifecycle,” says Lydia Sugarman of Venntive.
“It took a long time for CRM to be adopted by companies because it was sold into IT departments as a replacement for sales. Some companies still make the mistake that technology can replace the human connection.”
Sugarmann says their CRM “helps us work more efficiently. It helps us prevent tasks and people from falling through the cracks. It helps remind us to reach out. But, at the end of each day, it’s all about how we manage the real-life relationships that help us retain accounts for years.”
*Editor’s note: Monitor (and improve) the relationships you build with your customers using our HubSpot CRM dashboard. You’ll be able to see how many leads are in your pipeline, and compare your month-on-month activity.
Jói Sigurdsson of CrankWheel agrees on the importance of relationship building, and thinks you should “show [your users] they’re doing business with humans, not a faceless web service.”
“Engage with your customers soon after they join, in a human way, not just using the typical automated onboarding sequence, and start building a real relationship that lets them know there’s a human on the other side.”
“For example, send them a quick email from the CEO or an account manager that’s plain text, not written in marketing speak, and ideally that includes some questions about their business based on a real bit of research into what it is they do.”
Sigurdsson continues: “Ask them how you can improve, whether they have feedback for you, whether they’d like a T-shirt or coffee mug, or what’s the next trade show they’re going to where you might meet in person – the specifics will depend on the expected lifetime value of the deal and your industry.”
This could help you surpass the $101 – $5,000 average annual revenue that SaaS companies get from each user:
“If you do this, as we do, you’ll find that your customers are more likely to reach out if there is a problem and give you a chance to correct it, they are more likely to evangelize your product or service within their own company, and bring you into the next company they move to in their career,” Sigurdsson writes.
That step-by-step guidance could help users get to grips with your product–especially when 77% of SaaS companies don’t require their users to purchase additional onboarding services:
Ryan Chan also credits their churn-prevention tactics to “an incredible Customer Success team at UpKeep that has helped us reduce our churn rate by really supporting the needs of our customers.”
“With communication channels like self-service tutorials, phone support, training webinars, one-on-one training, onsite training with a dedicated Customer Success Manager, we want to be as connected as possible with our customers.”
Chan summarizes: “By connecting with our customers through multiple platforms, we have reduced our churn rate and equipped users with the tools to achieve results for their maintenance teams by using UpKeep.”
Eric Keating says Appcues has a surprising way to reduce churn: “When people think churn, they automatically think about reactive tactics, eg. how do I save these customers?”
“For Appcues, it’s all about the new user onboarding experience. We found that if we are able to shorten their time to value, and help new customers find success early on, they’ll be far more likely to stick around.”
It’s not just Keating seeing results from this, though: “Based on a survey of thousands of B2B and B2C SaaS businesses, Profitwell found that users who had a positive perception of their onboarding experience retained at 5%+ higher rates after 21 days, and that trend carried through well past 60 day mark.”
Keating shares four of his best tips to improve your onboarding flow:
Keating summarizes: “SaaS solutions are a dime a dozen. If your users don’t find value with your product quickly and efficiently, there’s a very good chance that they’ll abandon your product in favor of another. But if you can shorten their time to value, and help them find success early on, they’ll be far more likely to stick around.”
Kate Jones also adds: “As with many software tools, with Synergist, you get out of it what you put in. If a company adopts the system and doesn’t use it then they don’t see nearly as much benefit as a client who jumps in with both feet. So for us, reducing churn is all about gaining “sticky” customers.”
That’s why their approach to reducing churn “is all about gaining “sticky” customers.”
Jones adds: “The only way to achieve this is to provide the right service from the start. We’re transparent about the software pre-sale, understanding the business’s needs and being honest when there isn’t a fit.”
“During onboarding, we walk customers through every stage at their own pace. We involve as many stakeholders as are required, but we also encourage a designated “super user.” If someone is actively championing the software internally, we see far more engagement,” Jones writes.
Referral Rock‘s Josh Ho says this approach to perfecting user onboarding has cut their churn rate in half: “We’ve always had a consultative inside sale, but in the early days we just let customers loose on the product after the sale and were reactive with our support. Our onboarding process is now a pro-active approach where we have a kick-off meeting and complete a profile on the customer.”
Ho adds that “you have to make it very clear to the customers and set the proper expectations. For example, we make it extremely clear to the customers throughout the whole process that “we help you” not “do it for you.”
“Every SaaS business wants low/no touch these days, but customers do want personalized help. It may not work for every SaaS business as its very dependent on their pricing and type of customers they are attracting,” Ho explains.
Plus, Ananta Adithya’s team at Outgrow “proactively follow up with our customers [throughout the onboarding process] to check if they have any feedback related to our product or services offered. This helps us in getting an early idea in case the client is planning to cancel and helps us in ensuring that our client’s issues are resolved to his/her satisfaction.”
Lunar‘s Rachel Rosenthal follow a similar approach: “We make sure the handoff from sales to customer success happens in a way that feels effortless to the customer. Our customer success team makes contact within 24 hours of a contract being signed.”
“We make sure to find out what the customers’ pain points are that brought them to our solution to ensure we keep that at the forefront of our onboarding process. Each onboarding is slightly customized to the customer to make sure we are meeting their needs.”
“The efforts to reduce churn continue on past onboarding, but it’s our first contact point and where we can make the most impact,” Rosenthal summarizes.
*Editor’s note: If you have a mobile app to coincide with your web version, grab our Google Analytics Mobile App Metrics dashboard to see how well your onboarding sequence performs. You’ll be able to view the overall conversion rate of your sequence, and calculate how many users are returning:
You don’t have to wait for customers to cancel their subscription until you begin your attempts to retain them.
Closer‘s Piotr Dziedzicz explains: “Collecting the data about usage of our product, we can identify the most critical factors of a healthy customer.”
“Thanks to the data, we can easily find patterns of customers at risk, those signals gives our success team an alert, so they can actively reach out to ensure the customers are getting the most of the product.”
Rescuing customers who are at risk of churn can also help your sales team, too–especially if they’re in the minority of teams who are penalized if a new user cancels within the first six months:
Andrew Allsop says the team at Wunderkind Agency “used Clearbit to enrich all of our customer data and piped this data into ChartMogul so we could segment all of our revenue analytics by demographics, geography, industry, company size and more.”
“We highlighted which segments had low churn, and then we realigned our sales and marketing strategy around these segments.”
Allsop continues: “A product is never a good fit for many different personas and industries – but there’s absolutely no problem with someone signing up and trying it out. HOWEVER, you shouldn’t actively market to people who aren’t a good fit. Find out who is a good fit, market to them only, but embrace edge cases incase you uncover something you didn’t already know.”
Maxwel Bettendorf also says Shape Integrated Software “analyze risk indicators and certain customer behaviors with internal tools and identify issues before customers are even aware there is a problem.”
Their team then “notifies them of the issue and provide steps to rectify it if necessary”–a tactic Bettendorf says “has alleviated 70% of our annual customer support requests because we are able to proactively address the most common errors/misconfigurations (that can’t necessarily be fixed with platform enhancements).”
“As a result, churn has decreased to 3.3% and we’re seeing steady improvement in customer retention,” Bettendorf says.
So, how do you spot at-risk customers?
The team at citrusHR have built a list of “churn indicators,” as Dan Madden explains: “The mix of indicators will be different for every business, but the two key signals we look at are NPS and software engagement.”
In fact, NPS is a huge metric that SaaS companies track religiously:
Madden continues: “NPS data clearly only tells you how engaged users (whether detractors, neutral or advocates) feel about you. But any detractor (6/10 score of less) is a strong churn risk, so they get a phone call from our Customer Service Team within an hour of their response to try and resolve the issue(s). It’s our experience that if negative feedback is ignored a cancellation is almost guaranteed.”
“Our software usage data adds context to those NPS responses, but it also gives great insight into churn risks across the rest of our customer-base. If a customer hasn’t logged in for a couple of weeks or isn’t using what we’d consider a key feature, they’re paying for something they’re not getting value from.”
“There’s always room for improvement, but these simple early warning indicators have helped us get ahead of customer dissatisfaction and reduce churn. The premise is simple: Stay close to customers and keep checking they’re getting value from the subscription fee they pay us,” Madden summarizes.
Once you’ve identified customers at-risk of canceling their subscription, April Rassa says Brightback deliver unique offers to retain them.
“We’ve benchmarked the reasons why customers cancel, learned which customer segments are actionable, and tested offers that retain them long-term. With Brightback, companies meet their customers at the right place, at the right time with the right offer for the right reason, and they’re reducing churn by 10 to 20%.”
Your user is at risk of churn, but they’ve ignored your offers.
Market My Market‘s Chase Williams thinks you should “remind a customer they are going to be billed in X days [and] include new value propositions or case studies about your product.”
…But what happens when a user’s payment does fail, despite the numerous warnings you’ve given?
Williams recommends sending those users “dunning and pre-dunning e-mails letting them know their credit card is about to expire or their payment failed.”
A dunning period is the time between a user’s payment failing, and canceling their account. It means failed payments don’t need to automatically result in churn.
Tools like Churnbuster can help you manage dunning periods:
LiveChat‘s Jacob Firuta says altering their dunning period was “one of the easiest fixes we’ve done that also turned out to be very effective.”
Firuta explains: “We initially had it set to 9 days, so if a payment didn’t initially go through, we would try again after 9 days. We tweaked it a bit, tried a couple of other values to see how it would affect churn.”
“As it turns out, adding an extra 3 days increased the number of successful payments by 15%. The extra 3 days didn’t really affect us since it costs next to nothing to provide a bit of extra service for those customers and we got a big return since those customers never left, we didn’t have to use additional resources to bring them back and so on.”
“The best thing about this fix is that it can be done by any subscription-based company. The dunning period options are provided by a plethora of payment providers, so it’s a case of accessing payment settings and changing one value to see big results,” Firuta writes.
A feedback-focussed business is more likely to succeed.
Lars Eidnes says this ties into their churn-reducing strategy: “The most effective thing with CatchJS was simply to email customers that left, asking what they thought about the service. This was never an automated email, but a handwritten email from the founder.”
“People are generally glad to provide feedback, which provided great insights into where to go next in order to deliver an awesome product.”
Blogcast‘s Miguel Piedrafita adds that they “found that personally reaching out to people who canceled their account or are about to do so can really help to bring them back.”
But even if you can’t convince them, Piedrafita says: “You’ll at least get detailed information about why they left and how you can improve their service so that it doesn’t happen again.”
When we asked ZenMaid for their best tip to reduce churn, Amar Ghose said: “I’m sure lots of people will say “listening to our customers” but for ZenMaid the key was SHOWING people that we were listening.”
“Even if we didn’t have the feature they wanted, being able to showcase we intended to build it rather than just say we would went a long way in lowering our churn rate.”
Ghose explains: “We do this by publicly collecting feedback and allowing users to vote on it. In the past, someone would leave because (for example) we didn’t offer on-the-way text messages but when we were able to show them that a ton of other customers wanted that too and that we’d be working on it soon, it really kept people with us long enough to develop around their needs.”
AutoVerify put this into practice, as Samantha Kohn explains: “It can be difficult to measure the ROI of SaaS products, which makes customers question whether the software is providing good value.”
“We had reached an uncomfortable churn rate and received feedback from customers that they weren’t receiving the ROI they expected. To combat this, we created an ROI calculator that provides transparency into the financial results customers were receiving from our service.”
Kohn summarizes: “The calculator formula takes into account the client’s monthly payment, web traffic, number of leads generated from our products and their monthly conversion rates to determine the return on investment, making the ROI incredibly clear.”
Monkey Blocks have a unique way to stop churn, as Will Laurenson explains: “The single most powerful thing we did was send a postcard out to every new paying customer.”
“Initially we tested this out on trial users, but we found it didn’t shift any engagement numbers or seem to influence conversion to paid. However, when we started sending out to users who made their first payment, we saw engagement with the platform and customer lifetime increase by around 50%.”
Laurenson summarises: “All we did was send out a handwritten postcard to each new signup saying thanks for signing up, welcome to the family and if they ever need any help just get in touch.”
Our poll found that payment terms were one of the metrics SaaS companies analyzed to see an impact on churn rate:
How does that fair when the vast majority of SaaS users pay on a monthly basis?
For AeroLeads, “one way which has really worked well to reduce the churn rate is to offer a discount on yearly custom pricing,” writes Pushkar Gaikwad.
“This doesn’t mean the flat 2 months off but we actually are willing to work with the customer to find their best requirement and customize the plan for them.”
However, Gaikwad has a caveat for this tactic: “Of course, this strategy may not work for every SaaS product as it needs multiple touchpoints but being in competitive vertical, we try to create a differentiator with the customization and solid support.”
John Doherty said the team at Credo reduced churn by raising their prices: “It sounds crazy, but when I dug into the churn data by payment level I found that our churn rates for our lowest price tier were about 5x that of our next tier. So, we raised prices (without offering anything new) and our churn plummeted.”
“I have consistently found that your lowest paying customers churn the most and take up most of your support time,” Doherty writes.
A sky-high churn rate doesn’t have to haunt your business like the plague.
These tactics, shared by experts in the SaaS world, are proven to work. Simply put them into practice, monitor the results, and start preventing more users from receiving the dreaded “account canceled” notification.
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