Churn is a Reality

Churn is a reality that all SaaS companies must accept. Every customer you acquire will eventually churn. The “when and how” depends on how your organization handles retention efforts. To put it concisely, churn is a silent killer of the modern-day SaaS business.

What is Customer Retention

User retention is the rate at which your SaaS company can keep its paying customers over a specific period of time. Customer retention is a critical metric that measures the success of customer satisfaction programs.

Why Do You Need a Customer Retention Strategy?

A sound and effective retention strategy is powerful enough to steer the growth of your company, inspiring customer loyalty and building long-lasting user relationships.

A study by Price Intelligently revealed that a single percent increase in customer acquisition has a 3.3% impact on your bottom line. A 1% increase in retention rates can extend your customer lifetime value. You will also enjoy a 7% increase in your bottom line.

The impact of user retention is twice as powerful as that of customer acquisition. One retention strategy that works surprisingly well is lifecycle messaging. This tactic involves contacting your users through in-app messages and emails. 

Imagine sending your clients a guide on “How to Get Started.” A few days later, you send them another guide on “How to Work with Freelancers.” By sharing such content, you are providing value to the user. Whether this customer is active or not, they will think twice before jumping ship.

It doesn’t take much to implement this strategy, a lightweight retention program. In a few hours time, you can create a series of campaign messages.

The benefits of lifecycle messaging are immense. The messages go a long way in combating churn. In addition, they will instill a culture of retention marketing in your organization. In short, investing in user relationships from day one will improve your retention rates.

Customer Retention Strategies

Early identification of churn is the key to a successful retention strategy. A gradual decline in customer engagement is a strong indicator of customer churn; this is the window for action.

Once you lose a customer, it’s hard to earn them back. You cannot limit your focus to loyalty programs as your only retention strategy. Rather, we recommend embedding the culture of retention in your organization’s operations.

Below are some customer retention strategies that you should consider:

1. Defend Against Early Churn

The moment you acquire a customer, the race to churn begins. Everything about your product is unfamiliar to the user at this point.

You cannot expect a customer to figure out your product on the first try. You should prioritize onboarding. And it’s important to mention that even after onboarding, some aspects of the product may still feel unfamiliar to the customer.

To ease a user into your products, you need to provide an exceptional user experience. Most users tend to gravitate towards only one or two features of the product, and as a result, your customers fail to interact with some of the best features of your product.

From the very first step of their journey, your customers should be guided through the different product features, motivated to utilize its various features and discover your product’s important value. There are two ways to accomplish this:

  • Invite your new signups to a webinar or demo program. Here, you will walk your customers through key workflows and concepts. New users who attend a webinar are six times more likely to activate your services.
  • Create a brief and clear ebook that focuses on your brand and answers questions that potential customers might ignore. Check out our ebook – 7 Key Marketing Strategies for Technology Companies – for an example.

Don’t wait until they’re gone; captivate your audience from day one.

2. Help the Customer Achieve Product Mastery

Not every user will be passionate about discovering your product. You should be ready to teach them and walk them through specific features of the product that will be of most benefit to them. Basically, product education promotes customer success and should be considered an effective retention strategy.

Over time, these reluctant users will master the use of your products, and most importantly, customer mastery will eventually breed brand loyalty.

Customer success begins in the onboarding process. Here, your customer learns about your keyboard shortcuts and esoteric features.

At this point, the user engages more with your product as you work together to achieve product mastery. A user who invests a lot of time learning about a product is less likely to churn.

3. Embed Your Product into the Customer’s Workflow

We can learn a lot from big companies like Facebook, Twitter, and Google. All these organizations have one thing in common: they create habits among their customers.

How do you create a habit around your product in the same way that social media companies do?

First, you can start by promoting your product via email. Make your browser extension, desktop, or mobile app easy to add. As users are able to use your products across multiple platforms, you are increasing the likelihood of engagement.

Dropbox had an interesting take on this strategy. New Dropbox users who neglected to install the mobile app were unable to enjoy the value of access to files. Those who did were able to access their files from anywhere.

4. Embed Your Product into the Customer’s Organization

A churn-resistant service is one that encourages its users to build and share connections within the software. This strategy works best for collaborative products like Intercom, Asana, and Slack.

Embedding your product deep into a company’s operation is one way of combating churn. With this strategy, your software becomes an integral part of the company’s workflow. Ripping out such a product will be expensive.

For this strategy, it is important to know when to bring people into the fold. Set a milestone, and upon attaining this achievement, you can ask your users to invite their colleagues and so on.

5. Motivate Your Customers with New Features

Product engagement does not drop because customers forget to use your product. The decline is due to a loss of interest.

You must motivate your users with exciting new features which should aim to win customers back or retain existing users for the time being.

Offering the customer a glimpse of your product’s significant capabilities can help you generate hype and excitement for future releases.

Retention-friendly features are those that save time, increase efficiency, or add value. One of the best performing email messages is one that lists new features.

The key rule to user motivation is, “Don’t ask your customers to do something, motivate them to respond.” Proper motivation is essential to customer retention.

6. Be Proactive About Expiration

Always remind your customers of their expired credit cards before renewal. Inform them that they risk disruption if they don’t act.

Credit card expiries cause retention problems. Customers churn without their knowledge. You can reduce churn from credit card expiries by sending the customer notifications or selling a long-term subscription.

If a customer buys a one-year subscription, they will continue to enjoy your services even when the credit card expires during this year-long period.

7. Collect Customer Feedback

Conduct exit interviews to collect user feedback. Such interviews provide you with detailed information about the pains of the customer.

With such insight, you can work to improve your products and services.

Best Practices in Retention Messaging

1. Define “Inactivity”

Telecom companies will contact their customers after 30 days of inactivity. Their definition of inactivity is 30 days of non-engagement. Before you can formulate a strategy for retention messaging, you need to define “inactivity.”

How long should a user not engage with your product before you can define the customer as inactive? It depends on the nature of your company and the goals you set out to achieve.

2. Use Email Early On

Your app may not be a core part of your customer’s life, but emails are. If you notice periods of inactivity early on, use email to engage the customer.

3. Target the Right Customers

Retention is not binary. There is a difference between a year-long customer who starts to slip away and a user who fails to convert after a 30-day trial period.

The trial customer may require some education on the value of the product while the year-long user may need a check-in by an account manager. Define your customers and target them the right way.

4. Be Personal

Accuracy is key to retention marketing. For example, when approaching a high-value VIP client who contacted customer support several times within the week, your messages should reflect that.

All of your messages should be cordial and warm. Address the user as “Dear Customer.”

5. Be Thankful, Honest, and Respectful

Some amount of customer churn is natural. When a customer decides to leave, ensure that they do so in good terms upon canceling your services. Always be thankful, honest, and respectful to the customer.

Winning Back Customers

Companies like Hulu have implemented successful strategies to win back their customers. Upon cancelling a membership, Hulu is known to offer a one-month subscription for free, as well as a discounted price after that.

Clearly, incentives are an effective method. If you give customers a reason to stay, many will do so. Also, it is important to remind users of the value of your products. Give them reasons as to why they need your software, and why they should keep it.

Unfortunately, losing customers is a part of owning a business. It will happen to your company throughout its life cycle. However, as we discussed here, there are measures you can take to combat the loss of customers and retain the ones you have.

Always work to minimize the number of customers who stray away from your business. It’s possible to do so, and it’s up to you to be proactive.

Interested in learning about more ways to reduce churn? Make sure to check out our SaaS Retention Show that covers the strategies and tactics a SaaS company should be using to reduce their churn and increase retention.

Insivia specializes in helping SaaS and technology companies scale fast by utilizing digital business and integrated marketing to drive leads and close sales.

Contact us today to learn more about our offerings.



Author Information

Insivia is a Strategic Growth Consultancy helping software & technology companies scale through research, brand strategy, integrated marketing, web design, and retention.