the leading reasons for customer churn in saas

PROMOTERS PASSIVES DETRACTORS

The Leading Reasons for Customer Churn in SaaSWhy customers pull the trigger and what you can do to stop them

02The Leading Reasons for Customer Churn in SaaS

Churn can be defined

simply as the rate at which

you are losing customers.

churn

If you imagine your business as a bucket

with holes, the water flowing from the top is your

growth rate, while the holes at the bottom is churn.


According to Pacific

Crest’s survey, 30% of

Saas companies have

unacceptable levels of

churn

Source: Pacific Crest

30% of Saas

companies

Statistics


http://tomtunguz.com/images/2015-PC-Survey.pdf

While a certain level of churn is

unavoidable, it’s important to keep it

under control, as a high churn rate

can potentially kill your business.


If your business has 100 customers and the

churn rate is 5% per month, you will be left

with only 48 customers in one year.


80% of your company’s

future revenue comes just

from 20% of your

existing customers

Top-Line Growth

Existing

customers


Source: Bain and Co.

Reducing churn by merely

5% can increase profits by

as much as 25-125%

Increase Revenue

25

50

75

100

125


http://www.bain.com/Images/BB_Prescription_cutting_costs.pdf

http://www.bain.com/Images/BB_Prescription_cutting_costs.pdf

61% of customer take

their business to a

competitor when they

end a business

relationship

Source: Get Satisfaction Blog


61% ofcustomers

Brand Loyalty

http://blog.getsatisfaction.com/2010/10/04/fastest-way-to-lose-customers/


The first step in fighting churn isto understand what causes it.

Why do Customers Churn?


Reasons for Customer Churn

Ignoring data

Pooronboardingexperience

Weakrelationships

Ineffectivecustomerservice

Reason #1: Poor Onboarding Experience


What if majority of your customers are leaving not because they don’t use your product, but because they don't know how to use your product?


In a highly competitive world, a poor onboarding experience can be costly, as it increases customer acquisition cost and reduces activation conversion.




That’s why brands focus on delivering "Aha!" moments to direct users towards the lower end of the conversion funnel.


The "Aha!" moment is the first user interaction that delivers clarity

on your product’s unique value proposition, and gets them hooked.


Oh, I got it!


For instance, the “Aha!” moment for Instagram is getting users to upload one picture, for Twitter it’s posting the first tweet, for WhatsApp it’s sending that first message.




As per behavioral psychology, people need "activation energy" to complete a task that they would rather not do.


There’s a reason why people find it so difficult to hit the gym in

the morning, but don't mind partying for hours.

The difference lies in the activation energy gap, which is huge in

the morning, since you have to push yourself to wake up early

and hit the gym. However, dancing at a party is tempting,

convenient, and delivers instant gratification - thereby making it

an activity with “low activation energy”.




When you want a customer to complete a task they’re least likely to do (filling forms, sharing personal information, etc.), you need to reduce the activation gap.


Lay the basic groundwork (minimise initial inputs)

Design walkthrough tutorials (step-by-step product guides, visual tours, etc.)

Deploy. Test. Repeat (run A/B tests)


1.

2.

3.


How to reduce the Activation Gap?

Reason #2: Ineffective customer service



Poor customer service is the one of the topmost reason for customer churn as it takes a single bad experience to make users choose a competitor.

Source: American Express


78% of customers bail out

on a product because of a

poor customer service

experience

78% ofcustomers


http://about.americanexpress.com/news/pr/2011/csbar.aspx

70% of buying experiences are based solely on how the customers feel being treated.

Source: HelpScout


70% ofexperiences


https://www.helpscout.net/75-customer-service-facts-quotes-statistics/

While delivering a great customer service is a

clockwork mechanism with lots of components playing

a vital role, there are two key strategies at the core:

Improve Accessibility

Ask for Feedback



Pick the right channels for your customer service delivery.

Emails, chats, and other passive communication channels are low-cost, low-energy ways for connecting with customers who have minor issues, while calls and personal interactions are expensive yet effective ways to address high-priority issues.



Solution #1: Improve Accessibility


Emails Calls

MeetingsWebsites

Live chat

Communityforums

FAQ

Social media

Communication channels with

customers


Source: Genesys Global Survey


Over 75% of customers are more satisfied with assistance by phone. The second channel of choice is email communication.

22

59

78

0

10

20

30

40

50

60

70

80

90

Web-selfservice Email Phone


http://www.ancoralearning.com.au/wp-content/uploads/2014/07/Genesys_Global_Survey09_screen.pdf

http://www.ancoralearning.com.au/wp-content/uploads/2014/07/Genesys_Global_Survey09_screen.pdf

Pick the right channels by following three factors:


Employee convenience(How easy it is to solve the query through that medium for your customer reps)

Overall turnaround time(How fast can you resolve the query through the channel)

Relative customer satisfaction(Using A/B testing to find the channel that maximises customer satisfaction)

1.

2.

3.


According to Lee Resources report, 80% of

companies believe they deliver superior customer

service, while only 8% of customers believe that

businesses actually do that.



Solution #2: Customer Feedback


Ask your customers how they feel about your

product or service (survey forms, NPS, CSAT)



https://www.retently.com/



Close the feedback loop

https://www.retently.com/blog/closing-customer-feedback-loop/

Reason #3: Weak relationships

As per White House Office of Consumer Affairs,

it’s 6-7x times more expensive to acquire a new

customer than to retain an existing one.




81% of customers are

more likely to stay

provided that they feel

connected with the brand.

Source: SalesForce


81% ofcustomers


https://www.salesforce.com/blog/2013/08/customer-service-stats.html



Be available and connected to your customers through relevant communication channels


Tips to help you build strong relationships:

Know your customers’ preferences

Conduct customer exit surveys

Re-engage inactive customers

1.

2.

3.


Reason #4: Ignoring data

“ The goal is to turn data into information, and

information into insight.”- Carly Florina



That’s why you need to pay attention to what

the data is telling you.



Analyzing behavioral traits and personalizing

experiences is the key to customer retention



If the renewal rate is decreasing, dig up the data to answer:

Why the renewals rate is low?

Which segment stopped renewing?

Where did they stop?

How can they be re-engaged?



Use data to improve customer retention:


1.

2.

3.


Track and prioritize feature requests

Personalize experiences

Analyze customer behavior

Track how clients use your product

Personalize customer experience

Analyze customerbehavior




Step 1: Pay close attention to what your customers are asking, monitor

how they use your product and what obstacles they are facing.

Step 2: Put all improvement ideas on a priority list (easy-to-fix and highly

demanded features go to the top) and pass that list to your product team.

Step 3: Track the interaction of customers with newly developed features

and use early feedback from users to refine product experiences.


Track and prioritize feature requests

Personalization not only increases conversion, but

also improves user engagement as users spend less

time finding features and more time interacting with

those features.



Personalize experience



Analyze customer behavior

The best way to reduce customer churn is to

analyze how your customers interact with your

product and optimize your service for desirable

customer experience.

• Improve your onboarding experience, always be

available to assist your customers and build strong

relationships with them.

• Pay attention to all the data generated

by how your customers interact with your product.


Conclusion

Net Promoter Score® makes it easy to identify

your brand detractors by asking one simple

question:

On a scale of 1-10, how likely are you to recommend

the product experience to your friends or colleagues?

Know What Your Customers Think About You


Retently Sentiment lets you track customer

satisfaction, improve retention and decrease churn.


Know What Your Customers Think About You

Click here to start your free trial


https://app.retently.com/account/register/?utm_source=main&utm_medium=topmenu&utm_campaign=signup

the leading reasons for customer churn in saas

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