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How easy it is to cancel your Netflix subscription? Few clicks and you are gone. Never before has it been as easy to switch a software/service provider as it is in the era of cloud computing. That is why it has become crucial for SaaS companies to make sure that they are actively working on customer churn reduction.

What is customer churn?

Customer churn is a metric used by businesses to measure how many customers are cancelling their subscription. In the SaaS business model, the definition can be extended to not only lost customers but also subscribers, depending on the business structure.

The impact of monthly customer churn on the initial customer base

To understand the impact that customer churn has on the customer database, we need to do a few calculations. Imagine that your sales team acquired 1000 customers in December. One of the analysts reported that the average monthly customer churn is 5%. Not that much, right? Should you worry about that? The issue is that if you are losing 5% of your clients every month, it means that by the end of January you will lose 50 customers, by the end of February 98 customers and by the end of the year almost half of your original client base. If you reduce this metric to 2%, 785 customers, instead of 540, will be retained. How can you achieve that?

Strategies to reduce customer churn

1) Understand why your customers are leaving

The first step is to truly understand why your customers are leaving. Some of them might have encountered financial issues and can’t afford the subscription anymore. Others may have decided to switch the provider because the software is missing an important feature. Or maybe they simply didn’t understand the software. Analysing those reasons will allow you to prepare a preventive strategy and seal the biggest holes in your bucket.

2) Set the right expectations from the start

Not many companies realise that customer churn reduction starts at the very beginning of the customer journey, with marketing and sales. It is crucial to make sure that the software is communicated in the right way and that customers understand both its capabilities and limitations. The sales team should also ensure that the product is a good fit for the client. Prospects that won’t go enough ROI, will inevitably cancel their subscription.

3) Create a seamless onboarding experience and provide educational materials

The goal of the onboarding process is to get the customer to their first “aha” moment. It usually consists of a variety of educational materials and “to do’s” delivered through email or in-product messages. While creating an onboarding experience, try to put yourself in your customers’ shoes. Truth to be told, they are not interested in your product. They want to learn how they can solve their problem. Try to give them what they are looking for – onboarding experience that will tell them how to achieve their goals using your tool.

Realising the impact of customer churn on your business can be overwhelming at the begging. Nevertheless, it is a good start to deeper understand what your customers truly want. It will require going out of the box and completely rethinking the way you advertise, sell and design the service. I guarantee you, the journey is worth it ?

What else can companies do to reduce customer churn?

Sources:
1. image: https://headspace.design/so-your-products-got-a-leaky-bucket-problem-9ad9b5f8ccd4
2. the definition of customer churn: https://dictionary.cambridge.org/pl/dictionary/english/churn