Churn. It's the nemesis of subscription businesses, and SaaS companies are no exception. SaaS startups have it especially tough because they need to find a way to do churn management while they're still in their growth phase – and that's not always easy. In addition, SaaS companies take revenue from existing customers over a longer timeframe in the form of subscriptions, making revenue vulnerable to customer churn.
And keep in mind that if a recession materializes, it will be harder to get new customers. So as insurance, you'll want to focus on ways to reduce churn to generate more revenue from existing customers using customer retention strategies.
In this post, we'll share our tips to reduce customer churn, keep your customers happy, and, by the inverse, increasing customer retention and increasing customer lifetime value. So read on to learn how to make your SaaS startup thrive!
As any business owner knows, churn is the enemy. The customer churn rate is the percentage of customers who cancel their subscription or stop using your product or service over a given period. Here is the formula for calculating customer churn rate across any timeframe (monthly, weekly, quarterly, annually):
Courtesy Hubspot
Not only does churn cost you money in lost revenue, but it also takes a toll on your team in terms of time and resources. There are two types of churn: customer churn and revenue churn.
Customer churn or customer attrition is when a customer cancels their subscription or stops using your product or service. Revenue churn is when a customer downgrades their subscription or usage level. Both types of churn harm your business, but they can be mitigated with a strong retention strategy. By understanding the different types of churn and their impact on your business, you can develop a plan to reduce churn and increase customer loyalty.
There are a variety of churn factors that can contribute to customer churn. You'll need to collect data and analyze it systematically to identify which ones are causing customer churn. Once you've identified the churn factors, you can take steps to address them.
For example, your customer success team can work on onboarding and education initiatives if customers are churning because they're not using your product. If you find that customers are churning because they're not happy with your customer service, your customer success team can work on improving your support process. By addressing the root causes of churn, you can help reduce churn customers and improve your business.
The customer is always right, or so the saying goes. But what happens when the customer is wrong? A solid customer success strategy can be the key to maintaining a base of loyal customers - even when they're in the wrong. Customer retention strategy focuses on customer satisfaction and engagement to keep them coming back, even when they've made a mistake.
You can show them that their business is valued by addressing customer concerns and complaints promptly and satisfactorily. Additionally, customer retention strategy involves following up with customers after purchase to ensure they're happy with their purchase and experience. By taking these extra steps, you can turn a one-time customer into a lifelong fan.
As any business owner knows, customer feedback is essential for improving products and keeping existing customers happy. After all, what customer doesn't like to feel like their opinion is being heard? But how can you make sure that customer feedback is helping to improve your product? Here are a few tips:
1/ Prioritize proactive customer service by making it easy for new customers to give feedback so you can quickly identify at-risk customers during the onboarding process. Have a dedicated link on your website or include a QR code prominent while onboarding that links to a customer satisfaction feedback mechanism.
It can be more complex, like a form, or something simple like a Net Promoter Score that asks paying customers to rank their experience from 1-10 with one or two fields for further comments. Make it clear that you value customer feedback and that it will be used to improve the product.
2/ Follow up with customers who provide feedback to provide proactive customer service. Thank them for their input, and let them know how you're using it to improve the product. This will show them that their feedback is appreciated and valued and will encourage them to provide more in the future.
3/ Use customer feedback to help guide your product development process. Use it to identify areas where your product could be improved and to assess customer needs and wants. By incorporating customer feedback into your product development process, you can be sure that you're always working to improve your product and customer engagement.
It's no secret that customer retention extends beyond the immediate loss of revenue. Retaining customers means getting more customers via referrals and having a larger pool of customers to offer revenue expansion plans. Customers keep the lights on and the wheels turning, and they're the ones that help to propel a company forward.
That's why offering incentives and rewards for customers who stick around is so important. B2B customer loyalty is essential for any business, and offering perks can help to solidify those relationships. A B2B customer loyalty program can help reduce churned customers and increase customer retention.
Whether it's a discount on future purchases, early access to new products, or free product upgrades, showing appreciation can go a long way. So if you want to keep your loyal customers happy, offer them some incentive to stick around.
So, what's the bottom line? First, to keep your business afloat, you need to understand customer churn and how and how to reduce churn. You also need to identify which factors are causing customers to churn and take steps to address them. Finally, implementing a retention strategy that focuses on customer satisfaction and engagement is essential for keeping customers around for the long haul.
And finally, don't forget to use customer feedback to improve your product and keep customers coming back for more. Oh, and one last thing – offer incentives and rewards for customers who stick around longer than average. It may seem like a lot of work, but it's worth it in the end. Thanks for sticking with us!
Now that we've covered all of this ground, do you have any questions about loyalty programs or retention strategies? Talk to us about how we can implement a loyalty program specifically tailored to your products. We think it will make all the difference when it comes time to retain those valuable customers and increase customer lifetime value and your overall company valuation.
