To remain profitable, a SaaS company must attract paying customers, upsell to those customers, and increase customer LTV (Lifetime Value) through retention, with the last considered the most important,
While a SaaS developer company is vulnerable to churn, reducing it to manageable levels is not difficult. In this article, we will explore how you can improve customer retention and reduce churn through a variety of strategies, including:
- Watching out for the behavioural red flags
- Increasing retention through customer loyalty programs
- Developing tightly focused marketing campaigns that attract highly-qualified leads
- Offering flexible contracts
- Improving the onboarding process
- Publishing a roadmap
- Creating a public forum
- Staying competitive
- Taking special care of your most valued customers
Why Reducing Churn is a Good Idea
Increasing the Life Time Value (LTV) of your software as service customers is always the most profitable option. It costs money to generate leads and convert them into paying customers, so the longer you can keep them on board, the better off your SaaS company will be. Use as many of the following strategies that suit your SaaS business to reduce churn and improve profit margins.
Watch Out for Red Flags
Even with a steady stream of new subscribers, a high churn rate usually means your business is not sustainable.
The first step is to figure out WHY your customers are leaving, which can be achieved with a bit of clever sleuthing and studying user behaviour.
Determine the different types of behaviour between customers who stay and those who jump ship. This way, you can identify the risks causing your customers to leave before they unsubscribe.
One important metric to watch is the session lengths. Users who stay longer tend to become long-term customers. Customers whose sessions are short by comparison generally don’t last.
The frequency of log-ins per day is another metric that may reveal your customer’s level of loyalty to your brand. People who frequently log in often do so because they find value in using the software. By contrast, infrequent logging in could indicate the client may not be getting the benefit they expected.
Improving your retention of customers may come down to creating more effective communications with users whose sessions are brief. Maybe they are having issues using your software, or they have struggled with the setup process and gave up partway through.
Reaching out to these customers with an offer to help them with their technical issues will encourage them to hang around a little bit longer.
Likewise, communicating with users who rarely log in can turn things around when you offer to help them get more out of their investment before they consider cancelling.
Reaching out to your customers in this way will catch those clients who may have hit a roadblock and decided to quit rather than access support for help.
The critical takeaway is that certain behaviours from your users may indicate they are having issues with your SaaS software. Proactive engagement at a crucial juncture in their journey with your product could be the trigger that makes them rethink their options and keeps them on board.
This level of engagement will also display a high level of commitment from your company to its products and its customers.
Of course, there’s a lot you can learn from clients who struggle with different aspects of your SaaS offering. For example, they may alert you to UX design flaws or features you haven’t thought to implement.
Customer Loyalty Programs
A SaaS company gets most of its revenue from renewals, after-sales service, and upsells. According to a Harvard Business School Report by Bain and Company, a 5% increase in retention rate can improve profits from 25% to 95%.
You can inspire loyalty in your customer base by offering extra value through loyalty programs. Loyalty programs don’t need to be expensive or difficult to implement. You could provide additional features such as members-only content or increase limits for long-term customers.
People who may like your product are not necessarily loyal. These are the types of customers who will leave when they see a competitor release a product that can do a similar job at a reduced price.
Improving customer loyalty is about more than just creating a great product or handing out the occasional discount or gift card. You also need to build a company with ethics and values that are worthy of that loyalty.
Be open, honest, and transparent. When your customers see complete transparency, even the dirty laundry, you can significantly reduce your churn rate in a world where customers trust companies less and less.
Create More Tightly Focused Marketing
Customers who are not the right fit for your software won’t be customers long. While you may think that filling your sales funnel with a broad market segment is a good thing to do, it’s more likely to increase your workload and churn rate.
When you are spending money to generate paying customers, you want to ensure those dollars aren’t attracting a demographic with high churn potential.
If it takes $100 to attract just one paying customer, and your net profit on said customer is $25 a month, it will take 4 months to recover your marketing costs. It doesn’t take much of a churn rate to turn your SaaS project into a losing proposition.
Create a tightly focused marketing campaign that always prioritizes quality over quantity. Ensure your message only attracts your ideal customers or those most likely to benefit from your SaaS. Carefully constructed landing pages can help qualify leads so you can avoid wasting resources on low-quality prospects.
Trial runs are another great option to give your prospects a non-committal way to try out your product. A short trial run of 7 to 14 days will help qualify leads, but you should ensure the onboarding process can help them score some quick wins and increase their motivation to sign up long-term.
Offer Flexible Contracts
Everyone’s needs are different, even in something as specific as a SaaS product. Some of your leads may not need all of the features of your software and so may consider your pricing to be too expensive for their modest requirements.
It’s more profitable to keep these customers on board by offering flexible pricing options so they can choose a plan with the features they need at a budget they can afford. Opting for more features on your platform makes better economic sense than shifting to another SaaS company.
Other pricing options you could consider include cheaper tiers for longer commitments or a slightly more expensive monthly option that does not tie your customer down to a lengthy contract.
When you develop new features, you could offer these as a higher-priced option or provide them for free on a trial basis. Subscribers can then learn and use the new features and gauge whether their value is worth the bump up to the next tier.
Improve The Onboarding Process
Patrick McKenzie of Kalzumeus software tells us that almost 60% of people who sign up for free trials are tyre kickers who will use your software just once before moving on. Many will know right away if your product is not a good fit, but quite a few will fail to see the benefit of a long-term commitment.
According to Wzyowl, 90% of customers stated they were unhappy with the methods businesses used during the onboarding process, and 80% said they stopped using software because they couldn’t work out how to use it.
You can reduce this type of churn by focusing on working out the kinks that may be present in the onboarding process. Work at creating a streamlined experience that helps users quickly get up to speed with the software so they can immediately grasp the benefits of a long-term financial commitment.
Communication is critical during the onboarding process. Support must quickly respond to new subscribers or risk losing them because of a lack of confidence in the software and the company behind it.
Users faced with a new product are in the dark about what to expect. Good onboarding processes help them work through the core concepts and show them the benefits and what they can expect to gain in the long term.
You have an intimate understanding of your SaaS product, but your prospects don’t. Expecting them to understand all its features from the get-go will only increase your churn.
Don’t leave your new users on their own during the setup process. Create explainer videos to quickly get new users up to speed with the software’s main features and show them how to get more value from their subscription.
Continually testing and refining your onboarding process will deliver incremental improvements that add up to significant retention levels over time.
Publish a Roadmap
Customers will often invest in software as a service not just because of what’s on offer now but may also base their decision on what the company has planned for future releases.
You may be bursting with ideas for your dev engineer to implement, but the funds to implement them may be lacking. Offering to grandfather early adopters into a cheaper subscription plan can attract capital. However, the features that are yet to be added will have the most significant impact on their motivation for signing up and continuing their subscription.
You can then use the early capital to develop your SaaS company further, but you will need to ensure you deliver on your promises.
You can keep your subscribers appraised of the SaaS development situation by publishing a roadmap of your development plans. Many SaaS companies allow their customers to post ideas, which is a fantastic option for revealing new features that will add value your competitors may not have.
Other customer engagements possible with roadmaps include upvoting and downvoting, so you can quickly get an idea of the most desirable features and shuffle your SaaS development priorities accordingly.
Create a Public Forum
A public forum exclusive to paying members can generate loyalty and offer a place for your customers to support each other and share ideas.
Communities built around a company create some of the most loyal customers and can significantly reduce churn. These forums are often the first place your customers will go to get support, ask for feedback, or inform your SaaS dev engineer of performance bottlenecks and bugs.
You might also like to have one of your team monitoring the platform and adding to the conversation or offering an additional support channel.
Don’t underestimate the value of a loyal customer base creating an informal support channel for your product. It not only has the potential to reduce your workload, but an active community is an attractive benefit for leads and prospects considering joining your SaaS company.
A SaaS company with an engaged community rallying around it is a much more attractive option than one that doesn’t.
The market conditions that have made your SaaS Development Project a success can quickly shift and change your fortune. Plus, there’s always a dev engineer out there looking to create a competing product if the demand warrants it.
Your subscriber base’s wants, needs, and demands will also evolve according to market conditions. A constantly shifting economy means you need to keep one eye on the marketplace and be ready to take advantage of the “next big thing.”
There’s also a case to be made for maintaining relevancy and ensuring you are consistently delivering an exceptional product that caters to the needs of today’s businesses.
You should also develop a routine of keeping an eye on your competition. How well are they performing on social media? What new features are they developing, and how can you do it differently or better?
Learning what is working for your competitors can help you develop a more customer-centric service that will keep your subscribers loyal to you and stop them from considering going over to the dark side.
Take Care of Your Most Valuable Customers
Assigning a customer success manager to your most loyal, long-term customers will help you retain these valuable subscribers. A customer success manager can offer exclusive services that help them get even more value out of your SaaS product.
The customer success manager also means a faster turnaround for support requests, which can significantly increase your company’s value in their eyes and go a long way to reducing SaaS churn.
Start Reducing Your SaaS Churn Today
Don’t let customer churn stop your great idea in its tracks. We can help you reduce churn by providing stable features through best practice development. Call today to learn more.