Whether you’re a Software-as-a-Service (SaaS) firm or an another kind of subscription service provider, protecting your existing client base is vital. An indication of how well you are protecting this base is your churn rate, which is the percentage of clients who cancel their subscription in a given period of time.
There are many factors that can raise your churn rate and threaten your subscriber volumes and revenues. These include but are not limited to a lack of user activation, users not getting ongoing value and your product being eclipsed in a fast-changing market.
Being in the service delivery business means that there is always an inherent risk of being abandoned by users before you recover acquisition costs, let alone development and overhead costs. With no initial outlay on a license fee and companies often taking over 12 months in a customer’s lifecycle just to break even, it’s essential SaaS companies become masters of making their service hard to give up so that they can reduce churn and increase customer lifetime value.
To help, here are four tips for minimizing your churn.
1. Get Users Engaged Quickly
When a customer is newly subscribed, they have the most enthusiasm they’ll ever have for your solution. With your first interaction, remind your users about the reasons they purchased your software, specifically reiterating the value your product provides. Then, prompt them to get started using your service right away. If your client needs training or complementary add-ons, determine the best way to make your solution “sticky” as soon as possible.
2. Make Customers Successful
As many of the most successful SaaS vendors have proven, user acceptance will make or break your subscription. Having context-sensitive help available, multiple channels to reach customer support and engaging “how-to” tutorials are a great way to bring users up to speed. If you keep tabs on user login stats, proactively follow up with less active customers to see if there might be issues keeping them from getting started with your solution. Whatever it requires, make sure users have the support and information readily available to be successful using your service.
3. Encourage Customer Feedback
Empower your customers to be an integral part of your development roadmap so they have even more reasons to stay with your solution. You can have votes on what features would be most valuable to add, have open dialogs about your users’ processes or propose user-specific functionality, which might be an “accelerator” or add-on solution. Don’t create your product roadmap in a vacuum!
4. Analyze Where Unsubscribes are Trending
You can’t address churn if you don’t know why it’s happening. Track customer usage patterns and correlate with those who unsubscribe. If you notice your customers are dropping off between 30-45 days after subscribing, there may be an issue with your users getting activated properly. Should it be 6-8 months down the road, there may be a usability issue or your customers could be missing valuable features in your solution, suggesting more communication is needed. For clients that do cancel, a follow up to determine their motivations for terminating their subscription is important. If possible, archive, don’t delete their accounts in case you can resurrect their subscription.
Getting your customer churn under control takes dedication to quality, continuous improvement, customer service and usability. Investing in understanding your customer and being a true partner in their ongoing use and investment in your solution will make a big difference to your subscription revenues and your revenue growth. Take every opportunity to get feedback on the direction your product will take. A customer who feels like they are not getting sufficient value from your solution can easily bounce to a competitive solution so don’t neglect ongoing customer communication. Show your customers the value of your business and that you value their business.