Six strategies to reduce churn, with real-life examples from SaaS companies that have successfully done it. In this guide, we’re going to go over six strategies that reduce churn and how to use them to grow your business while also reducing churn while also growing your business.
Create a magnetic onboarding process
Most customers aren’t satisfied with the way businesses onboard them
- Create a process that actively pulls customers back into your product so they don’t forget about you
- Have the right tools in place
- User data
- Clearbit
- Product tour
- Communications
- Intercom
- Support ReadMe
- Analytics
- Mixpanel
- Encharge
User churn vs. revenue churn
User churn is the number of customers you’re losing in a given timeframe (typically per month or year).
- Revenue churn refers to the amount of revenue you are losing due to downgrades or cancellations.
- If you look at just user churn, you’re ignoring how much revenue you’re losing with churned users.
Goodbye churn, hello MRR
Three steps to get started
- Sign up for a Baremetrics account ASAP
- If you don’t have an onboarding process in place, start writing out a series of emails of the steps customers should take when they first sign up for your product
- Create a feedback loop so you can start to learn more about what your customers want from your product
Build customer loyalty
Customer loyalty isn’t just limited to huge international brands that sell physical products. Smaller brands (including SaaS companies) have die-hard customers that are loyal to them.
- One of the biggest differences between a brand loyalist and someone who just likes your product is that brand loyalty is tied to your brand, not just your products.
Celebrate your customers
Identify the customers you want to celebrate
- Send out a survey
- Feature customers in your content
- Look for your highest value customers – customers who have been with you for a long time
- Tweet out your customer successes
- Highlighting a customer of the week or month in an email newsletter
What is churn?
Churn can most basically be defined as resources lost in a given period of time
- Typically it’s referring to users or revenue lost and is usually represented with either a percentage or dollar amount
- The plain-english formula for calculating churn is: [Lost Resource / # of resources at beginning of a given interval]
Signs that you have a churn problem
Your churn is outpacing new customers
- You are losing more customers than you are acquiring
- LTV is shrinking
- The longer your customers stay with you, the higher the lifetime value of your average customer should be
- If your churn rate is above 10%, it is usually a sign something in your process isn’t working
- More downgrades than upgrades
Find out why customers are cancelling
Ask
- Asking customers why they’re cancelling is one of the easiest ways to get valuable insights that can save your business
- Customize the cancellation reasons in your survey based on your product
- The best time to establish a strong relationship with your customers is during the onboarding/free trial process
- Build a relationship with them before they cancel
- If you can develop even the smallest personal relationship with a customer, they will be more inclined to share with you why they’re canceling when they cancel
The biggest challenge with reducing your churn is figuring out where to start
Figure out where the 11% is coming from
- Look at your churn by customer segments or cohorts
- Segment your customers based on their plan level, location, coupon vs. full price, or any other category
- Create segments for your different plan levels
- Use a plan filter and select one of your plans, then hit Save
- Next, look at cancellation reason for your highest churning plans using our Cancellation Insights
- You can also use Augmentation to bring in data from external sources like marketing automation software or your CRM
All your SaaS data in one place
Import data from Mixpanel, Intercom, and other data sources into Baremetrics and keep an eye out for inactivity.
- Set up notifications to push users back into your app when they reach a certain period of inactivity (e.g. Hootsuite).
- Create triggers that ask customers to complete a certain activity.
Be honest and transparent
Transparency builds trust in a world where 55% of customers now trust companies less than they used to
- Airfocus shares their product roadmap so customers can see what features are on the horizon
- A lot of times, people will sign up for your product not only because of your current offer, but because of what you have planned for the future
- Honesty can also improve customer loyalty
Listen and act on customer feedback
Being intentional about getting feedback and putting it to use can help you retain customers and reduce churn.
- Create a process for gathering customer feedback and feature request gathering
- Use a tool like Clubhouse to mark feature requests as “Feature” and follow up with customers afterwards
SaaS and subscription companies lose 9% of their MRR due to failed payments
Automate the process with a dunning tool like Recover
- Set up in-app reminders and paywalls that’ll pop up for customers whose payments didn’t go through or are up for renewal
- You can also setup an automated email sequence to send to customers until you’ve collected payment
- Send your first email for failed payments the day it happens, and then five subsequent emails afterwards
- The first email has the highest recovery rate, but the follow-up emails have helped us recover tens of thousands in MRR
6 Churn Reduction Strategies that Can Save Your Business
Your goal shouldn’t be to get your churn to zero percent.
- You should be able to get it to a level that makes it possible for you to grow your business long term
- These strategies will depend on the size of your business.
