3 Proven Ways to Reduce SaaS Customer Churn

There’s significant potential for SaaS companies to grow revenue by impacting customer retention.

reduce customer churn

Most struggling SaaS companies recognize that their primary problem isn’t generating new sales—it’s keeping customers happy after the initial sale. For example, a multi-year study conducted by Totango found that 25% of SaaS companies have high churn (>10%) and 31% have medium churn (5-10%). Only about one-third of companies have low churn (<5%). This indicates there remains significant potential for SaaS companies to grow revenue by improving customer retention.

Sadly, more than 2 out of 3 companies have no strategy to prevent customer churn. But, you don’t have to be part of that group. Here are three sure-shot ways that can help your SaaS company reduce churn.

1Find out why a customer wants to leave

One of the main reasons for customer churn in SaaS models is the lack of customer satisfaction. In a survey by PWC, 32% of respondents commented they would stop taking services from a brand they love just after one bad experience.

You can’t eliminate all your business weaknesses at once. However, you can take feedback from the customers about what’s troubling them the most and contribute to the increasing churn. So, focus on feedback collection—ask direct questions about how you can improve.

Algolia, a search and discovery solution, has built a brilliant cancellation flow. When customers choose to delete their account, it necessarily requires them to put in their feedback. The Delete tab is disabled until then.

2Offer trust-building and value-adding elements

Reducing churn isn’t a passive process. To get customers invested in your services proactively, you must offer them more value.

Include trust-building and added-value elements in your services that make them want to continue using your services and improve customer relationships at the same time. No, you don’t necessarily need to burn your money with free promotions. Instead, you can offer free tutorials, provide guides or resources or send personalized video emails.

Gusto, a human resource management software, offered deferrals during the COVID-19 crisis along with new, more convenient payment options. These moves reflect a sense of empathy and are a positive move towards strengthening customer relations.

Such methods also bring new customers to your company. For example, studies show that 77% of customers refer a company to a friend if they’ve had a great experience.

3Adopt personalized strategies for each customer group

Your sales team adopts different approaches for prospects in the various stages of the sales funnel, right? Likewise, your customer service team should employ this same strategy for your customers. For example, a client who has been with you for years has very different needs than someone who joined your service plan two weeks ago. Therefore, segment your customers into groups to target them more effectively.

After segmentation, plan personalized strategies for each group. You can set up automated emails for particular circumstances. For example, a nudge to log in would benefit a customer who hasn’t logged in for a week or more. Or, if a customer isn’t leveraging a particular feature, highlight it to them, listing its benefits to make their experience more engaging.

According to a survey by Think with Google, 90% of marketers say personalization significantly contributes to higher engagement and business profitability. In addition, such personalized strategies result in better communication and hence, reduced customer churn rates.

Customer churn is inevitable—every SaaS company goes through it. The goal is to detect it and correct it as soon as possible. Applying the strategies outlined above and monitoring the results will empower you to implement the appropriate changes and prevent users from turning away from your SaaS company.

Remember, it’s an ongoing process. If you can’t implement these best practices consistently, consider working with a customer retention services company. For example, Gravy Solutions, a payment-recovery business, is designed to optimize customer retention and reduce churn for SaaS businesses. Book a demo with us to see how we can help you recover your failed payments.

Doug Liantonio

Marketing Outreach Analyst at Gravy Solutions

Doug Liantonio

Marketing Outreach Analyst at Gravy Solutions