If you’re running a SaaS business or any other type of subscription-based company, chances are churn has caused you a few sleepless nights.
Last fall, I joined the team at Uberflip, a platform that helps people optimize their content marketing for lead generation. Part of my (and my team’s) role is to keep churn in check. So, we’ve studied our metrics, experimented with different tactics, and come up with a few things that work well. We’ll dive into what we learned and the tactics we used below, but first, a quick overview of churn.
There are hundreds of posts about how to calculate churn, so we won’t get into too much detail in this article. Simply put, you can look at churn in four ways:
- Number of customers lost
- Percentage of customers lost
- Value of monthly recurring revenue (MRR) lost
- Percentage of MRR lost
If you’d like a more detailed overview, here are a few great resources that will break it down for you:
- Churn Rate 101 — this is a good overview that gives you the basic formulas to calculate the above revenue and customer churn rates.
- SaaS Metrics 2.0 — this is a list of virtually all SaaS metrics definitions by David Skok. It includes a comprehensive breakdown of different types of churn calculations and renewal rates.
- SaaS Churn Rate: What is Acceptable — written by Lincoln Murphy, this post does a great job of helping you translate churn from monthly to annual, and it provides some useful benchmarks.
We use KISSmetrics to get a quick snapshot of our churn rate by looking at our revenue report. We keep a close eye on both customer and revenue churn, which sometimes tell very different stories (more on that below).
Decide What to Optimize
Once you know your customer and revenue churn rates, you then have to decide which one you want to optimize. Do you want to keep more customers or keep more revenue?
For example, at Uberflip we recently went through some major changes. We launched a new product, overhauled our pricing model, and shifted from exclusively targeting publishers to targeting marketers.
As you can imagine, the makeup of our customer base started to change. And (gasp!) our churn rate increased for a period of time. But, that was okay.
Why? Because the customers that were churning were no longer aligned with the direction of the company. Don’t get me wrong. We weren’t happy to see our legacy customers go, and we continued to support them to the best of our abilities. But we had to stay laser focused on retaining and growing our new customer base. It didn’t make sense to devote a lot of energy to retaining $30 / month customers when we had an influx of customers who had different needs and were coming in at a much higher average revenue per user (ARPU).
Bottom line: if your goal is to bring in and retain higher value customers, then your customer churn might be higher like ours was for a while. At the same time, your revenue churn should be relatively low (potentially even zero). This is a case where pushing away low value customers to bring in higher value customers might be okay if you’ve determined that it’s the right move.
Once you know what you will optimize, determining a strategy and choosing tactics to counteract churn become clearer.
6 Tactics to Keep Churn in Check
1. Track Actions Leading to Cancellation
Find trends in the behaviors and actions of people who already have cancelled, and then watch for those trends in your existing customer base. If you’re monitoring these metrics, you can better identify your at-risk customers and take steps to re-engage them.
For example, at Uberflip, we look at different dimensions of our customer data, including the number of times customers log in, which is indicative of how engaged they are with the platform.
We also look at their “Hub Strength,” which is a measure of how many features are used when setting up an Uberflip content Hub. Keeping an eye on the engagement level helps us zero in on customers who may be at risk of churning.
2. Segment, Segment, Segment
If you’re already tracking your “at risk” clients as mentioned above, the next step would be to segment those and create an engagement strategy for each of those segments.
Depending on the nature of your business, you might want to segment your “at-risk” list by pack type, usage, or even by vertical. Once you’ve segmented the list, figure out how to best engage them. This could be a combination of customer nurturing through email, in-app communication, or telephone (my favorite tactic) to check in and see how things are going.
With the plethora of third-party solutions that can help you segment your audience, there is no excuse not to do it, at least at a high level. If you’re going to keep churn at bay, you need to talk to each segment in terms they’ll understand and care about.
3. Don’t Send Bad Transactional Emails
Ah, transactional emails – the bane of many marketers’ (and developers’) existence. These often fall to the bottom of the priority list, and they also can be a source of contention, with marketers wanting more control while developers want to minimize the time spent on these emails.
But transactional emails can be a powerful tool to boost engagement, retain, and even upsell customers. Depending on the nature of your company, transactional emails may be the most frequent touch point with your customer, so take the opportunity to delight your customer through these interactions.
A great example of getting value from your transactional emails is Square’s recently launched customer feedback tool for sellers. The feedback tool turns digital receipts into a customer feedback tool. If well executed, this has the potential to drive a ton of value for sellers by providing insight into customer happiness and determining what it would take to keep customers coming back for more.
4. Talk to People!
Entrance and exit surveys can be incredibly valuable, providing insight into why people came to you in the first place and pinpointing what caused them to cancel.
Apps like Qualaroo and Intercom are great tools for conducting entrance surveys so you can capture why a lead converted into a customer. Knowing why somebody decided to give you their credit card number sets context for future engagement. If you know what they care about, you’ll know how to keep them interested.
On the flip side, exit surveys can provide insight into why a customer is cancelling. This can be implemented within the cancellation flow or sent a few days later, but keep in mind that the responses may be different depending on when you ask the questions.
While it might take some time to gather enough data to identify a trend (assuming your churn isn’t sky high), this can help surface the actionable steps needed to prevent more customers from cancelling.
5. Rethink Your Onboarding Process
So many SaaS companies shy away from charging outside of their SaaS model. But if your product is at a relatively higher price point or is more complex, sometimes charging an upfront implementation fee can increase the perceived value of your offering. It also has the potential to expedite the sales cycle (especially if there is a steep learning curve to set up and start using your software) and ensure that you’re providing as much value as possible for your customer.
HubSpot is a great example of this. They figured out that in order for their customers to be successful, giving them access to their platform wasn’t enough. They needed to educate them about inbound marketing. By making inbound training mandatory – and charging for it – HubSpot ensures that every customer has the tools and knowledge they need to be successful with their platform.
At the end of the day, if a customer has spent time and money getting started, they’re more invested in your company and less likely to churn.
6. Don’t Forget about Customer Marketing
Our marketing and growth teams spend so much time focused on customer acquisition that we sometimes forget about our existing customers. Customer marketing can come in many forms, but the easiest way to provide continued value for your customers is to provide great content that may or may not be product related.
This can include content about how to better leverage your product, case studies about how other customers are using it, or webinars about a general topic that interests your customer base.
Talk to your Customer Success or Sales teams to find great customer-centric content ideas. They’re on the front lines interacting with customers regularly, so they’ll have their finger on the pulse of what your customers’ top challenges are, questions they have, and their areas of interest. Here are two questions you can ask to get started:
- What are the top non-product-related questions you hear?
- What are the top product-related questions you hear?
If left unchecked, churn can be the beginning of the end for a SaaS company. The key is to catch it early and avoid letting your churn rate spiral out of control. By really listening to what your customers care about and getting creative with how you engage and solve their problems, you can expect more of them to stick around.
Would love to hear from you! What are some of the creative things you’ve done to counteract churn?
About the Author: Hana Abaza is the Director of Marketing at Uberflip, a content marketing platform that helps boost engagement and generate leads. She specializes in digital, content, and product marketing strategies for startups. Say “Hi” to her on Twitter or follow her on Google+.