One of the best things about SaaS business models is the ability to predict monthly income with reasonable accuracy. Subscription software businesses are great for producing reliable income without storing inventory or purchasing stock, but it’s up to you to ensure those subscriptions remain reliable.
Churn is the big SaaS killer, and if you don’t proactively look for and manage signs that a customer is about to leave, you are missing valuable opportunities to keep churn to a minimum.
What should you be monitoring? Here are some of the common warning signs, and what to do about them:
Changes In Pattern Of Use
Clients who log in like clockwork and display regular patterns of use aren’t likely to leave. It is when their levels of activity drop off that alarm bells should be sounding.
As Intercom points out; “Activity churn is where the rubber hits the road. Typical Churn stats use account cancellations as a measurement but cancellation is only ever a trailing indicator. It’s the last thing that happens.”
Customers don’t usually stop using your app all of a sudden and cancel their accounts – there tends to be a decrease in activity over time, which leads to the “danger zone” before cancellation.
Image source: Intercom
When a customer realizes they’re paying monthly subscription fees without getting use from the product, cancellation is highly likely.
What to do about it
User activity is something you should be monitoring so that you can intervene early and try to re-engage them. You could call customers if you have the capacity, but one of the easiest strategies is to send out a series of re-engagement emails.
The idea is to demonstrate to those customers why your product will provide them with value that they need. Different calls to action will appeal to different customers, so you may want to try segmenting your audience based on the emails they show interest in. This way you can take a targeted approach to offering further education or incentives.
You should also examine the steps you have in place already to keep people engaged. Do you need to communicate more regularly? Could you be producing more educational materials, FAQs or even a content library? Give your clients every opportunity to remain engaged in the first place.
[tweetthis]Churn is the last thing happens: monitor activity levels first and be proactive about engagement.[/tweetthis]
Payment Method Is Expiring
Credit card expiry is a very common reason for SaaS churn. On average, credit cards expire every three years, which means that around 2.8% of your customers will have an expiring credit card this year.
Not only do credit cards expire, but there are a number of other reasons that a payment might not be processed. Some of these include fraud alerts, billing address changes, balance limits and the remarkable 30% of failed transactions that are simply due to a computer error.
What to do about it
You can’t predict every possible credit card issue, but you can be prepared for them. Credit card expiry is best dealt with prior to the card actually expiring and the transaction being declined. This is where a dunning and pre-dunning service such as Stunning is your best friend.
Taking care of credit card payment issues is actually simple if you have a system in place. A service which takes care of pre-dunning and dunning will send out emails based on any number of events of your choosing. For example, the expiry of a trial period, reminders to update billing information ahead of card expiry, and dunning emails when a transaction has been declined.
We like this kind of system because it is automated and doesn’t require a huge amount of effort from the SaaS once it is all set up. You could actively monitor your payment system yourself, but that would take away from time spent building engagement and growing your business.
Whatever method you choose, being proactive about credit card issues is a quick win. If you stay on top of this, you should see an impact on churn rates.
Sometimes customers leave without saying a word, but many others practically put up a billboard announcing why they are leaving. If you’re seeing complaints come in, negative comments on social media or even queries as to why your SaaS doesn’t do something that the customer initially thought you did, then you need to take action to address the feedback.
Negative sentiment may not even be expressed directly; you might notice that a client has visited your cancellation page, possibly indicating that they’re looking at leaving. Another warning sign is that they’re downloading or deleting data where you have a storage system.
A business that doesn’t listen to customers doesn’t tend to be one which stays in business, so you need an effective complaints process which lets customers know they are being heard.
What to do about it
A happy customer derives clear value from you and helps grow your business. We’ve tackled simple ways to keep your customers happy before, including finding ways to delight your customers and encourage communication with you.
If your product is great and does what it’s meant to do, negative sentiment is often a result of poor communication or a perception that the customer is not listened to. For this reason, you should always look for feedback and show that you listen to your customers.
Satisfaction surveys are proactive and allow you to keep a finger on the pulse before receiving complaints. People do tend to be suffering from “survey fatigue” though, so we recommend that you keep them straightforward and don’t overuse them. Be open with clients and show that your surveys are worth their effort. You could do this by communicating any changes that you are making “as a result of your feedback.”
Your onboarding process plays an important role in whether customers stick around. You should be setting expectations right from the beginning and showing clients exactly how to get value from your app. This is a vital part of the communication piece, as failing to meet expectations is a common complaint.
If a customer has visited your cancellation page, consider reaching out to them directly. It could have been an accident (especially if their usage is normal), but if it was an indication that they’re interested in cancelling, now might be the time to seek feedback. The same goes if they’ve been downloading or deleting data. It may just be that they’re backing up important files or deleting obsolete ones, but it could be that they’re preparing to leave.
Another important strategy is to use software to monitor events and sentiments which indicate that the customer is unhappy. This is specifically why we built Retained, so that SaaS can monitor insights which indicate how likely a customer is to churn.
Your Own Processes Are Cumbersome
We all like things that are easy. How easy are your processes for your customers? This directly relates to the feedback you should be asking for from the last section, but you should also know where any of your sticking points are before asking customers about them.
What to do about it
UX testing is one thing, but you should also be a user yourself. Look for any of the typical things that your customer needs to do (functions of your app, updating payment or account details, asking a question…), be aware of any cumbersome processes and rectify them early.
Getting help is a big one in this regard. Customers don’t want to have to repeat themselves to multiple people or wait an excessive amount of time for a response. You should also look out for anything that is not easy to find. Your processes should be as intuitive as possible, and customers should not need to spend a long time clicking around.
Don’t Leave Anything To Chance…
Reducing SaaS churn involves knowing the warning signs that you are about to lose the customer and proactively managing them.
Monitor customer activity and look for ways to keep them engaged. Stay on top of payments and show customers that you are prepared to listen to and act on feedback.
While growth activities traditionally take up a lot of time in any SaaS, retention strategies should be just as important. It’s much easier to hang on to current customers than bring in new ones.
Kill your churn. Keep more of your customers. Get an invite to Retained.