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How To Reduce Customer Churn in Your SaaS Company

by Anne Carton Tweet - in Business Branding - [wtr-time]

SaaS Company

Last updated on October 14th, 2021

Customer churn, also known as Customer Attrition, is one of the important factors that can make or break your brand success. Over time, customer satisfaction has become a great concern for both small and large brands. In this blog, we’ll be sharing factors affecting the customer retention and how to reduce customer churn rate in your SaaS company.

A SaaS business model revolves around three primary elements: customer acquisition, customer retention, and upselling. Of course, all three aspects of your SaaS business need specific and mapped strategies. However, retention is where most SaaS companies get stuck.

Irrespective of the scale of your company, a customer churn rate as low as 4% can cause you a high degree of financial loss. That’s why putting in efforts to improve customer retention is so important.

Here, we bring you sure-shot ways to help your SaaS company reduce customer churn but first, it’s important to understand the distinction between two types of churn: voluntary and involuntary. We’ll help you address both.

Types of Customer Churn

Your customers can either end their subscriptions by choice or involuntarily, but both are considered customer churn.

Voluntary customer churn occurs when a customer consciously chooses to end their subscription with your company. Someone may choose to cancel their subscription because your software is no longer relevant to them.

Your services didn’t live up to their expectations, they’ve moved to a competitor product at a lower price point, etc. Regardless of the reason, your customer has decided to stop doing business with you.

Involuntary customer churn occurs when a customer ends their subscription by accident (they may not even know it ended!).

On the plus side, your customer wasn’t dissatisfied or hoping to discontinue their service. However, involuntary churn still means you’ve lost a customer and revenue.

Failed payments are the root cause of involuntary churn. Failed payments can happen as a result of an expired credit card, incorrect billing information, a card reported lost or stolen, a transaction flagged or blocked by the bank, or insufficient funds. And, Failed payments make up 50% of overall customer churn.

6 Proven Ways To Reduce Your SaaS Customer Churn

Whether you’re experiencing an increase in voluntary or involuntary churn — or maybe both — there are proven ways you can help reduce customer turnover while boosting customer satisfaction and revenue. Here’s how:

01. Collect Feedback To Know The Why

One of the central reasons for customer churn in SaaS models is the lack of customer satisfaction. In a survey by PWC, 32% of respondents commented they will stop taking services from a brand they love just after one bad experience.

You cannot eliminate all your business weaknesses at once. However, you can take customer feedback about what is troubling them the most and contribute to the increasing churn. Focus on feedback collection and ask direct questions about how you can improve.

Algolia, a search and discovery solution, has built a brilliant cancellation flow. When customers choose to delete their account, it necessarily requires them to put in their feedback. The Delete tab is disabled until then.

Leveraging your most loyal customers can be another way to collect powerful feedback. Asking these VIP customers what they love most about your business and what they think you can improve through a survey will help you target and form other long-lasting, high-value relationships with subscribers.

Not to mention, these VIP customers will likely feel honored that you care enough to know about their experience with your subscription — especially when you offer an incentive for filling out the survey (which you should!).

02. Offer Trust – Building and Value – Adding Elements

Reducing churn is not a passive process. Hence, you need to react proactively. To get subscribers invested in your services ahead of time, improve customer satisfaction by offering them more value for their money.

Include trust-building and added-value elements in your services that make them want to continue your services and improve customer relationships at the same time.

And, you don’t necessarily need to burn your money and offer promotions. You can offer free tutorials, provide guides or resources, or send personalized video emails.

Gusto, a human resource management software, offered deferrals during the crisis of COVID-19. It added new payment options during COVID-19 serving convenience to its users. It reflects a sense of empathy and is a positive move towards strengthening customer relations.

Such methods also bring new customers to your company. 77% of customers prefer a company to a friend if they’ve had a great experience.

What value you can add to your subscription will vary depending on your industry, but don’t be afraid to think outside the box and use the feedback collected by VIP subscribers to improve your offerings and increase value.

03. Address Failed Payments With Human-to-Human Communication

Did you know billing failure occurs on 10–12% of credit card transactions?

Unfortunately, billing issues are all too common… and are bound to happen in your business. But the last thing you want is to lose a happy customer by accident.

That’s why it’s important to reach out to every customer that experiences a failed payment so you can continue their subscription.

The process used to communicate with subscribers and collect failed payments are called “dunning.”

Many dunning efforts are rather unsuccessful because businesses resort to automation and bots. But collecting failed payments requires empathy and tact bots will always lack. They’re not human.

If you’re running a small start-up, you may be able to handle emailing each customer individually with a failed payment.

For bigger, more complex companies, you’ll want to invest in a team or third-party solution to effectively address failed payments with human-to-human communication.

Here Are A Few Quick Tips For You or Your Team When It Comes To Winning Back Failed Payments:

  • Think of your customer first and be empathetic toward their billing issues… Billing complications can be frustrating and depending on the cause, embarrassing.
  • Don’t place blame on the customer. This wasn’t intentional! Explain what’s happening politely and kindly, then clearly lay out the next steps.
  • Know when to stop. If you have messaged a customer several times to collect a failed payment with no response, don’t nag. Count this one as a loss. It won’t look good for your company to interrogate customers for payment.

04. Adopt Personalized Strategies After Segmentation

Don’t you adopt different approaches for the customers in the various stages of the sales funnel? Adopt the same approach once they’ve turned into your customers.

You don’t acquire all customers at the same time. A user who has been with you for years needs a different treatment than someone who joined your service plan two weeks ago. Therefore, segment your customers into groups to target them more effectively.

After segmentation, plan personalized strategies for each group. You can set up automated emails for particular circumstances. According to statistics, personalized emails account for higher engagement.

If you offer different software or features that reflect specific interests or needs, segment accordingly.

If someone is just getting started with your services, provide more information and education than you would with a long-time subscriber.

Once someone has become a long-time subscriber, offer incentives and rewards, such as giveaways. For example, you can check out custom all over print shirts guide to make your own merch and give it as a reward to your customers that bought items or services for a certain amount of money..

Such personalized strategies result in better communication and hence, a reduced customer churn rate.

05. Reach Out To At-Risk Customers

Voluntary churn typically doesn’t happen out of anywhere. It’s a decision that takes time. That’s good for you as a business owner because it means you have time to sway a customer’s decision the other way and convince them to stay.

Key indicators of potential churn include reduced service usage or completely stopping usage. That’s why it’s important to monitor these metrics.

If it looks like a subscriber is missing out on a key feature of your subscription, send out an email and show them how to maximize their service.

If someone has stopped usage completely, don’t be afraid to reach out via email too. Ask them why! Ask them if they need help using any of the features you offer.

06. Improve Customer Service

96% of customers say customer service is a key factor in brand loyalty.

Getting in touch with your customer service team should be extremely easy — whether it’s through email, chatbox, or telephone.

You want to be available to resolve any customer questions and concerns immediately as they arise. By making yourself and your team available, you’re effectively building trust and loyalty to your brand.

Nothing seems more suspicious than a company you can’t get a hold of when you have a problem.

Being available is only the first step toward providing good customer service. Customer communication should also be fast, efficient, polite, and helpful.

Even just one bad experience with a rude or unhelpful customer service representative can kill a brand reputation.

According to research, you can prevent 67% of churn if customer complaints and problems are resolved right the first time.

Conclusion

Customer churn is inevitable. Every SaaS company experiences it. The goal is to not let customer churn get out of hand and to implement as many effective customer retention tactics as possible. Apply these strategies, monitor the results, implement changes, and prevent users from turning away from your SaaS company.

Remember, it is an ongoing process. If you can’t implement consistent efforts, you have the option of seeking support from customer retention and failed payment recovery services.

Gravy Solutions, a payment recovery business, is designed to recover lost revenue from failed payments and reduce customer churn for SaaS models.

Anne Carton is a small business consultant, designer and an enthusiast blogger working with Designhill, one of the fastest-growing custom design marketplace. She has authored several blogs, articles and editorials on various topics related to interactive content, concerning design, social media strategies, growth hack strategies, digital marketing and e-commerce.

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