How to Shape SaaS Customer Retention Strategies that Beat Churn

Customer Retention Strategies

Earlier in the month, I wrote about what churn is, and how to calculate it. Now, I’m going to cover how to beat it.

This is part 5 in an ongoing series on customer success for SaaS companies. Here are the previous 4 parts if you need a solid introduction to customer success:

  1. What is customer success?
  2. Why is customer success important?
  3. What is churn?
  4. How to calculate NPS

If you’re ready to beat churn, read on and we’ll get started.

The long road to churn, and why it’s so disappointing

It took months of preparation. Nick learned about your product through your content marketing, where you helped him with his problems and even provided a bit of lunch break entertainment.

He saw your product’s name over and over again thanks to your PPC ads, social media presence, and content promotion. Respected influencers are buzzing about your product on Twitter, and he heard the other marketing team in his company were getting on well with it.

After reading the copy on your landing page, he didn’t bounce. He stuck with it through the signup form, the activation email, and the onboarding tour. He even invited the rest of his team to try it out.

Over the course of the first week, Nick was engaging with the product less and less, and ignoring emails from your customer success team. Before the first month was over, he did something heartbreaking — canceled his subscription and churned out.

SaaS Customer Retention Strategies Comic

There’s Nick. Most people in the world won’t make it as far as him. He had hundreds of chances to lose interest before he visited your landing page, he clicked the activation email or finished your user onboarding tour.

You never found out why, so you can’t help him or users like him. He was out as quickly as he came in, churning before he could become a valuable customer.

In this post, I’m going to look at the reasons customer churn and how you can stop them with customer retention strategies.

Voluntary churn: it’s not me, it’s you

According to LessChurn (a service for SaaS companies that helps them keep customers around and gathers feedback from those who leave), churn can be divided up into two types. The first is voluntary churn.

Voluntary churn is what happens when the customer decides your product isn’t worth their time, money or attention. Maybe they’re wrong and can’t see the value, or maybe they’re right and your product isn’t a good fit.

Churn can be your fault, or it can be out of your control. If your product doesn’t appeal to everyone, that’s likely a good thing because it’s highly targeted at a certain type of person. As Seth Godin says in his Inbound 2015 keynote:

Crappiness is sanding all the edges off to make everyone happy.

You don’t have a crappy product, right? Well let’s focus on the areas that are your fault — the areas in your control, such as:

Confusing user onboarding

User onboarding is a ridiculously expansive topic, and it’s hard to condense into an entire book, never mind about a subheading. To get you started, I’ve written before about both the user onboarding process and empty states (the first thing your user sees when they go into your app). But these articles aren’t 100% focused on churn, so I’ll apply the ideas here.

Reinforce the value of your product during the user’s first session

I say ‘reinforce’ because the user understands the value since the signed up in the first place. Go and look at the promises made on your landing page, and connect them to the actual user experience of your app. If your user doesn’t understand the relationship between what they saw in your marketing material and the real thing, that’s a big problem for you.

Design your app’s empty state

The empty state is what your user sees when there is no data to show. This could be because there’s been an error, they’ve cleared out the example content, or simply haven’t created anything yet.

Here’s an example from Basecamp:

UX Customer Retention Strategies

Make sure your empty states are helpful, not actually empty, and make sure they tell the user how to fill them up.

I’ve written a big article about exactly this, so if your users drop off after their first session, go here to read about a fix for this problem.

Clarify your app’s features with an onboarding tour

What’s the first thing you expect to see when you start using a new app? It’s probably an onboarding tour. A small box with several slides, each explaining a key element of the app and the benefits that come with it. Here’s what it looks like:

App customer retention

While I’d bet a chunk of people skip them completely, it makes more sense to explain to users than to leave them to figure it out alone.

Your app’s too young

At Process Street, we have an app a ton of users love. It’s right for a lot of people, and many stick around for the long haul. We do, however, get the same feature requests over and over. Things like task-based assignment, forms, and task-snoozing. We know that when we get those features built, we’ll hook the kinds of users that previously churned because we didn’t have the features they needed.

By keeping a close eye on what your users ask from you, you can reduce churn while building your product naturally. You can survey your users with a tool like Typeform, or keep a Trello board of features your users most want.

You’re charging too much (but this kind of churn is great for your support staff)

SaaS pricing is an interesting topic there are far more arguments in favor of raising pricing than lowering it. But, with this said, high prices are a common reason for churn. How does this work?

Well, it’s quite simple. Founder of WP Engine, Jason Cohen reported that the churn amongst users who bought his software with a coupon was much higher.

Low prices attract unloyal customers. The kinds of people who choose your platform because it’s the cheapest, but still have a bunch of problems they think you should address or risk losing their $5 bill on your doormat each month.

Low-quality customers wonder why the software doesn’t do what they expected it to do because your more expensive competitor does it. They give your support team more headaches than any other group, and you’re better off without them. That’s what I’d call positive churn (ha).

Involuntary churn: it’s not you, it’s me

Involuntary churn is what happens when a user can’t continue to use your product because of reasons out of their control. It’s not worth dwelling on ways to stop this  because it’s not your fault, but understand that a lot of the time, users don’t choose to quit.

  1. Their boss decided to go with another product. (This could be related to your app’s features, but it’s a gatekeeper’s choice, not your customer’s).
  2. They ran out of money (see ‘You’re charging too much’ to realize it’s not worth doing anything about that).
  3. Their company went broke.

First steps for patching up your leaky product

The next 5 parts of this blog post series will be about reducing churn, so I’m not going to dive into a 10,000-word lecture just yet.

David Skok came out with a really interesting post on lifetime value on ForEntrepreneurs recently— while is something of a sidenote, it’s going to be extremely important as part of your long-term customer success strategy. That’s especially true when you consider how that a company with negative churn can have a customer lifetime value (LTV) of infinite. That sounds broken, right? David suggests a better way to handle it in this great post.

By the end of the guide, you’ll have learned the fundamental aspects of customer success, how to reduce churn and how to provide the right support for your customers. The closing articles will be all about how to create and refine your own customer success process so you can train your team and launch into action with a foolproof strategy.

But for now, here are some prerequisites.

1. Gather customer feedback

This is monumentally important. For starters, it can be as simple as attaching a survey to your automated email that gets sent out when a customer cancels. See last week’s post about NPS surveys to learn how you can embed surveys in emails or set them up using something like Wufoo or Typeform.

While this is one way you could do it, Groove recommends asking an open-ending question like this:

Customer retention email

2. Work out what your app’s Aha! Moment is

As we saw at the start of the article, the journey from awareness to long-term use is a rocky one.

You need to get your user from their first few seconds inside your app to their moment of first value as quickly as you can. When I think about the ways you can do this, my brain boggles at how many different strategies there are.

One good way that straddles the UX and customer success disciplines is analyzing what today’s power users did in your app when they signed up. For example, Twitter’s Josh Elman found that the users who stuck around had a common trait:

“It turned out that if you manually selected and followed at least 5-10 Twitter accounts in your first day on Twitter, you were much more likely to become a long term user, since you had chosen things that interested you. And if we helped someone you know follow you back, then even better. As we kept tweaking the features to focus on helping users achieve these things, our retention dramatically rose.”

The same goes for Facebook. Its VP of growth, Chamath Palihapitiya, said that he noticed that repeat users had one thing in common: they had mostly made 7 friends in 10 days.

What do your best customers all have in common? How did they start out with your app? Answer that, and you’ll know what to emphasize during your app’s first-time use.

Customer retention analytics

Looking at user flow in Google Analytics can help you pinpoint the step with the most friction — where the majority of users drop off.

3. Start targeting the right kinds of customers

Let’s take Process Street as an example again. Process Street isn’t designed for a vertical, like HR teams or lawyers. It has a horizontal appeal. It works just as well for advertising agencies as it does for real estate agents, healthcare professionals, and retail executives.

But let’s say we take a look at our data one day and find that from our best customers, 90% of them are marketing professionals. That means that there’s something particularly appealing about our app to that segment, even if we don’t know what it is.

SaaS customer personas

So, what would we do? Probably get in touch with them for a start. Ask them what they like about Process Street — have a chat with them or send them a survey.

Then, we’d gear our marketing material towards marketing teams. We’d start writing content they’d be searching for, and maybe make a custom landing page targeting a keyword they’d come across. From the survey responses we’d get back we’d know which features are most important to them, and we would be able to emphasize them early on, develop them further and make the ultimate marketing operations tool.

Maybe that would mean we’d not be so widely appealing, but remember the Seth Godin quote about crappiness?

Crappiness is what happens when you try to be the best product in the world for every customer. Being the go-to product for marketing teams is definitely sufferable and it’s not like there’s not enough money in that world.

If it means reducing churn, don’t worry about going after what you thought was just a subset of your customers.

Join me next Tuesday for another chapter of the Customer Success Guide for SaaS Companies. If you made it all the way down here — thanks! Let’s continue the conversation in the comments.

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