As a SaaS company grows, so does the potential for its subscriber base to be damaged by churn. Even if a company manages to keep the churn rate at a stable 2%, the larger the subscriber base, the more damaging a steady 2% churn rate becomes. (SaaS churn refers to the rate at which SaaS customers cancel their recurring service subscriptions.)
One industry leader puts it this way: “As a company grows, reducing churn is a lot like running in quicksand. The harder you try, the faster you sink.” If this sounds like an apt description, you are not alone. Many struggle with figuring out how to increase revenue while keeping current subscribers happy, creating long-term subscribers, and reducing churn.
Fortunately, there are working solutions used by the big names in various industries which benefit everyone.
Photo Credit: www.intercom.io
Make the Most of Your Current Opportunities
You must see this as an opportunity to not only reduce your churn rate but also to increase your profitability factor. You can do this by implementing the following course of action:
Analyze past subscribers and the reasons they unsubscribed. One of the most common techniques is to collect that important information through an exit survey. You can either implement that as part of the unsubscribe process or through a follow-up email. It has been proven that implementing exit surveys instead of an email follow-up has returned a higher response, but of course, it requires slightly more complex changes than sending automatic email.
Separate current subscribers that are trending toward opting out from loyal, lasting subscribers. An easy way to do this is to group all of your subscribers into two groups and try to slice them demographically to better understand your buyer’s persona. You might find, for example, that “larger size businesses in a specific niche with a special need for XYZ” describes the type of client that stays subscribed for a longer period of time. Everything else falls under the category of “high risk to opt out.”
Then, you can think of a way to address the situation. Here is one action you can take: call your high risk account members and try to find out how you can help them. Your offerings can include anything from a discount to walking them through using the software. Be sure to call and discuss this with them personally because only then will you know exactly what you can do to keep them happy.
Teach poorly trending subscribers how to better benefit from the services to which they subscribe, thus reducing the possibility of churn. You can create a segment in your email list to target those trending, high-risk customers and send them how-to tips, a quick guide, FAQ page, or anything you can think of that will bring them close and help them get into the water.
A great blog category that specifically teaches your subscribers how to use your software is a must have. Very few campaigns work as well as one that offers free education to users who want to succeed but may be struggling. Other subscribers may not even realize they are not getting optimal benefits from the services to which they subscribe.
There are numerous methods of education you can offer to your current subscribers, such as:
- Newsletters – a method that goes right to their inbox
- Email lessons – these are not newsletters or emails but something in-between. (A series of personal emails from CEO to CEO highlighting better ways to benefit from the services you provide will not go unnoticed or unheeded.)
- A series of blog posts or articles to enlighten your subscribers about the benefits they may be missing
- Training classes that pertain to your product and the most effective ways to use it
- Training classes on other topics related to the industry as a whole
- A learn center / video channel on YouTube
Upgrade subscribers that are doing well. Reward them for performance or longevity of subscription and/or define a path to future upgrades for those who follow your lead and begin to get more out of the services to which they subscribe. One way to do this is to offer a discount during the registration process. A yearly subscription should be cheaper than month-to-month.
Evaluate the Wisdom of your Current Format
If you are not a SaaS service provider that offers tiers, or levels of service usually referred to as service plans, you may want to consider adopting this strategy. Offering incentives to move from one plan to another increases your potential for income from each subscriber and gives you greater control.
The up-sell concept is an easy enough idea to grasp. Help your subscribers benefit enough from one service plan to grow into needing the next. In the meantime, a good way to help them grow is to provide (cross-sell) add-on products that enhance the plan they have while preparing them for the plan they will grow into.
The added value a subscriber will benefit from when upgrading will be a more natural and easy process. That’s why you will want to give a lot of thought to the differences between your Starter and your Pro subscriptions. When people have the need, they have a reason to pay.
Interact with Your Customers
It may be time to get to know your subscribers a little better and find out what makes them tick. We are not talking about simply sending out a questionnaire that a few of your current customers might fill out, nor are we asking anyone to jump on a company jet and go around knocking on doors.
However, you do have to be forceful enough to get results. If this means you are going to have to give something away, so be it. Your churn rate is not getting any smaller, so it may be time to pull out all the stops. Here are a few examples of customer interaction that many companies have used successfully:
- Subscriber Satisfaction Surveys: A 50-word bombardment 3 pages long will drive subscribers away. If it constitutes time, it constitutes work in the eyes of the takers. Ask no more than 10 or so carefully thought-out questions that will give you the greatest insights. Knowing what makes your subscribers happy helps you tailor the best possible products for them. I use Survey Monkey.
- Help-us-help-you Questionnaires: If you convince your current subscribers that answering your questions will help you serve them in new and better ways, you will get more results. Smother your request with honey and you will catch more flies. You want to provide the best possible service. Now, make sure the subscriber knows this as well.
- Social Media Polls with Incentives for Participation: If you, as a SaaS provider, have not launched a social marketing campaign aimed at retaining current customers, you already are behind your competition. (Welcome to the age of social media marketing.) A social media fact-finding campaign aimed at your current and past customers is an excellent way to speak to subscribers past and present on a more personal level.
- Social Media Branding Campaign: Branding builds loyalty. Loyalty makes it harder for people to cancel for reasons other than monetary, such as competitor influence. Once you have learned why your churn rate is growing, having a pre-established link via social media will come in handy. This is your best vehicle for reaching out to your current, new, and past subscribers directly, speaking to them as a group.
- A Product Feedback Bar: As a SaaS service provider, you have subscribers that have questions. Many of them do not have the time or inclination to use the normal lines of communication found on your “Contact Us” page. A Feedback Bar embedded directly into the product nets incredible results. (Just ask KISSmetrics about theirs.) Need help? The folks at UserVoice and others are happy to help out:
Photo Credit: User Voice
Track Only the Metrics You Need
The key to using analytics to understand and track churn and relate that to your monthly recurring revenue (MRR) is to refrain from over-complicating what you use to track the churn. Selecting key metrics, rather than 20 overkill metrics, will help keep things in perspective.
Choose the top five metrics that relate best to your company and product and focus solely on those. With those metrics and customer interaction, you will have all the ammunition you need to reduce your churn rate while increasing your MRR.
Recognize Milestones and Reward Them
Your churn rate is growing and you are on a quest to find out why. Wouldn’t it be great if the rest of your subscribers would remain intact while you search for answers? The fact is if you want to stanch the flow of blood from your wounded service, you are going to need a proper bandage.
So, this may be the perfect time to introduce an incentive program for subscribers that are still with you. A length-of-contract award with either a small monetary gift or free software often works wonders in the loyalty department while you are out mending fences. Specifically, you might want to consider the following:
- A coupon code the subscriber may use for upgrades or software enhancements to their current subscription
- An offer for a free software download in the user’s related niche
- A free month of service for one year of continuous subscription
Build Loyalty through Customer Service
Develop and maintain the best customer service program possible. Study your direct competition and improve upon what they do. Once you have the best customer service in the industry, brag about it.
Back up every promise you make and then some. If you promise them an inch, give them a mile. Never make a claim you cannot meet, and always go above and far beyond every claim you do make.
Involve your subscribers in the improvements you make and give credit where it is due. Your customers know what they want and need from the services you provide. Really listen to them, give them the very best, and applaud them for their insight. In doing so, you create loyalty, and that is a powerful part of any long-term relationship. Your customers will appreciate commendations like these:
- A mention on their social media pages thanking them for an ingenious idea
- The name or names of the companies that suggested new software on the software’s acknowledgment page
- A tribute to the subscriber for their excellent ideas directly on your website or blog
Understand Client Satisfaction
Now that you have looked at your product and the way it is offered, at your subscribers (both past and present), and at yourself, through critical eyes, it may be time to have another look at your competition. Like any good, competitive company, you keep a constant eye on those against whom you compete. However, be sure to look at them from their standpoint. See them the way the subscriber sees them.
Looking at your competition as well as yourself through the customers’ eyes gives you the unique perspective of seeing how you compare in the satisfaction department. Do you look more enticing than your competitors? Is there anything you could be doing differently to widen the margin between you and your closest rivals? The tool, Client Heartbeat, can give you all of this information and much more.
This unique tool tells you how satisfied your clients are with you and how satisfied your competitors’ clients are with them. Comparing this information opens an entirely new perspective on ways in which you can improve. The ability to increase your subscriber’s satisfaction with your services is invaluable. This kind of information can also point out what mistakes you may already be making in your customer satisfaction/retention efforts. For instance:
- Are you paying attention to and responding to client feedback?
- Are you remembering client contact on birthdays, anniversaries, and other special occasions?
- Are you savvy about all of your clients’ social media hangouts (and interacting with them on other topics?)
These are just a few of the things you can do to ensure your customers are more satisfied with you than your competitions’ clients are with them. It also gives you an idea of what promises your competition may be making and not delivering.
In the final analysis, increasing revenue while decreasing churn comes down to knowing your subscribers, knowing your product, knowing your competition, and being the very best you can be. Communication is the key. The SaaS company that has the best communication with their clients and that follows through on their promises is the SaaS company that will have the highest revenue and the lowest churn rate.
Seeing yourself as your subscribers see you may not be flattering at first, but once you change by achieving the goals described above, you will have a satisfied subscriber base upon which you can build.
About the Author: Asher Elran is a practical software engineer and marketing specialist, the CEO of Dynamic Search, and the founder of Web Ethics.