Churn is nothing unusual for an SaaS company — but it is bothersome. If you can understand how to minimize it, you can grow your business. That all sounds simple enough. But as David Skok explains, the paradox is that the more your SaaS business grows, the more your unsubscribe rate can take a hit for the worse. As a result, you’re not really growing. If your churn gets out of control, you might even lose more customers each month than you’re actually gaining. This is akin to cash flow where there is more money going out than is coming in. As a result, your business dies because it costs you five times as much to acquire new customers as it does to retain existing ones.
To make things even trickier, finding a solution is difficult because all SaaS companies are different. If you’re in the digital goods niche, join me as I take a look at how you can reduce your unsubscribe rates and churn for your SaaS application.
1. Find Out Why Your Customers Are Bailing Out
If you could find out precisely why your customers are quitting, you can then take the time to tweak your methods so that less of them churn. For example, let’s say you analyze your metrics and discover that users who are churning are spending significantly more time completing a task on your application that shouldn’t take longer than a few minutes. From this, you can decipher that people are churning because they’re having a hard time getting to grips with the application. Using your data, you could then email targeted users with a message that lets them know you know they seem to be struggling, and that you’d like to offer them a helping hand. This is exactly what SaaS company Groove did. They emailed targeted users and got a 26% response rate from users, 40% of whom went on to stick it out with the company.
You need to remember why people in the digital goods niche sign up to your product in the first place, and it’s usually to speed things up, making your business more productive and efficient. If your product has the opposite effect, you’re going to see some serious churn.
Naturally, offering a helping hand to individuals can be inefficient. As such, you could put together an in-app tutorial that helps customers get to grips with your product a lot quicker. There are other ways you can improve the onboarding process — more on this in the next section.
Other reasons why a customer might bail out include bad customer support, in which case you should make providing better support your priority. More on this later.
Another reason customers might churn is that your competitors are better — or cheaper — than you. In the bloated digital goods world, this can happen. If you suspect this is the reason, again you need to make your app as user-friendly as possible and, wherever you can, offer something that ensures you and your SaaS company stands out from the crowd.
2. Improve Your OnBoarding Process
Following on from the above, you need to remember the old adage that first impressions and experiences are everything. Take a look at this stat that shows that up to 60% of new customers who sign up for a free trial of your SaaS application use it just once before giving up.
There are a few reasons why this might be:
1) They forgot they’d signed up,
2) It wasn’t right for them,
3) They didn’t “get it” the first time around.
Steve Jobs knew the importance of simplicity. “It takes a lot of hard work to make something simple, to truly understand the underlying challenges and come up with elegant solutions.” The simpler a product is, the easier it is to use.
Bing Card Creator is an excellent example of a startup SaaS that improves the new user experience by adding a visible progress indicator that helpfully lets new users track where they are up to. The application also lets its users decide if they want to move forward while sticking to the default settings, which further improves the learning process.
However you improve your own on-boarding process, make sure:
1) Your customers understand how to use your application, and
2) Your customers understand all of its benefits.
The key takeaway is that not all your customers are going to “get” your application immediately. As such, it’s a good idea to add an onboarding process that helps them to this end. This could be a product tour, for example. Make sure to keep it simple, as a product tour that’s too complicated to build could break and cause issues of its own.
3. Improve Communication With Your Customers
Once someone has signed up to your SaaS application, they’re a customer — and it’s your job to look after them. What’s the deal when your product is good but people are unsubscribing? It could be that your communication game is weak. Customer feedback is an excellent way of generating key information about your customers, including how they feel about your product, such as what they like about it and what they don’t.
Your customer support system can also help to iron out any niggling problems that might otherwise cause a customer to churn. Worse still, if you don’t iron out these problems as soon as possible, they could go viral. Use customer support to identify problems quickly, and then waste no time fixing them.
You should look to provide support across a number of channels, including emails, live chats, and blogs. It’s 2017 all right, but telephone support is sometimes necessary too. Be available for your customer, and make it easy for them to access you and get fast, useful answers to their queries. This will help with retention.
4. Leverage the Power of Emails to Nip Churning In the Bud Before It Turns Into a Cancellation
Email marketing is a useful weapon, as it’s an easy way to stay in touch with your customers. You could send out a weekly newsletter with actionable tips and advice about your SaaS applications, ask questions to cultivate feedback, and altogether build a strong relationship that’s built on trust.
Once you build a strong relationship with your customers, customer loyalty will increase and your churn rate will go down. Offering value via email demands a lot of work from you, but it helps to keep customers engaged and reminds them what a great product it is that they have here. The more value you offer and the more problems you solve on a regular basis, the more your customers will want to stay with you.
Another good reason to email customers is to prevent cancellation once the churning process has set in. Churning often begins before cancellation, and there are red flags that indicate when a customer is starting to churn. Usually, it’s disengagement that’s the biggest warning sign that should set the alarm bells ringing. For example, let’s say a whole team bought your digital product. For the first three months, they were engaging with the application, and all was fine. Then, user activity dropped off. They were no longer using it. At this point, they haven’t canceled — but the wheels have started to churn. Fortunately, all is not yet lost, and you can use email marketing to reconnect with customers who are disengaging slowly.
For example, you could send an email that begins with, “Dear (insert name), We’ve really missed you!” Your email should also include a teaser for a new product or feature that you’re about to roll out. Naturally, you need to segment your emails so that you don’t send these emails to customers who are engaging with your SaaS application.
Moreover, not all your customers will respond positively to your emails. The ones who don’t? Leave them be. Don’t spam.
5. Reassess Your Targeting Strategy
Lastly, if your churn rate is unbelievably high (5% is considered to be acceptable by many companies), you might want to consider that you’ve been targeting the wrong people. You SaaS company won’t survive if all you’re concerned about is getting customers into the door. The money is in the retained customers who hang around after 30 days.
Ask yourself who your ideal customer is. Ask who the software should be used by and why they would use it. If you’ve never been specific with these answers, now is the time to get clearer. If your service isn’t right for the people you’ve been targeting so far, you’ve got no future. Minimizing the unsubscribe and churn rates for your SaaS application, then, is a simple matter of paying more attention to your customers and giving them more of what they want. Check your data and metrics, make it easier for people to get to grips with your product, improve the frequency and value of your communication — and ultimately make sure you’re targeting the right people.
Got any tips of your own? Feel free to leave us a comment in the box below.