Building a product from scratch is exciting. Once the product is built, all your efforts is put in to acquiring customers. Along with customers comes churn. While on one end time and effort is put into marketing and sales to acquire customers, on the other you find customers churning. This is what typically happens to several new SaaS companies.
Churn is inevitable for any subscription business and if the churn rate is at a reasonable number (typically in single digit figures for B2B SaaS Companies) its fine. The problem is when the churn rate is high. This is your typical leaky-bucket problem. As new customers are added at a high cost at the top, customers keep churning at the bottom.
As much as you want to focus on acquiring new customers, it will pay high dividends if you also focus on the reasons why customers churn and make the appropriate changes to reduce your churn. Remember, A CUSTOMER RETAINED IS A CUSTOMER WON!
Churn reasons will vary from one SaaS product to another but here is a list of four reasons that you could use as a starting point for your analysis along with fixes.
1. Product-Customer Fit
In SaaS, it is surprising how common it is for customers to buy products without understanding fully whether their business problem can be solved by your product. Once they realise their problem cannot be solved, they will leave you to go to your competitor.
This happens because of multiple reasons but one of the reasons is because the marketing message used by your business gave the impression to the customer that your product will address a certain problem in the customers’ mind. This will help boost numbers in the short run but eventually lead up to big churn numbers.
Work on a clear marketing message that conveys the exact problem that your product solves. Be explicit and show the customer how your product solves the problem. Target the audiences who can benefit from the solution that you provide in your outbound campaigns. Focus on the problem you are solving as opposed to the features that your product provides.
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During your early days it will be difficult to figure out which message resonates with your customers the most and that is why it is so important to ask your customers the right questions. At every chance ask your customers how they found your product, why they chose your product and what problem do they solve. Over time you will find a common ground with your customers who stick with you. That should form the base of your messaging across your website, product and content so you attract customers with similar traits and in turn find your target audience and your product-customer fit.
Customers do research to find products that solve their problem, compare your product’s features with your competitors and are convinced in the messages on the website and are confident that the problem they are trying to solve can be solved using your product and buy the product. Buying the product is one thing, putting it to use is another.
More than 20% of customers churn before adoption of the product. This could be because there are too many features, or the customer never understood how to use the product to get the value they were after.
Have a solid onboarding process and that starts by understanding what specific problem the customer wanted to solve when they bought your product. Once that is understood show your customer the quickest path to achieve their first win (aha moment) with your product.
A lot of Customers churn even before reaching the “Aha” moment because they are overwhelmed by what is offered to them. You might have 20 awesome features but only 2-3 of those features are required for your customer to reach their first Aha moment. This is where onboarding plays a huge role. Start off by asking the exact problem your customer wants to solve and focus on solving just that. They do not need to know about all your 20 brilliant features just yet. Get them to a place where they see value in the product as soon as possible.
3. Customer Support/Service
We all have experiences dealing with bad customer support and we know how we get annoyed and spread the bitter experiences with people around us. It is understood your customers will feel the same way when they are unable to get the support they need when they hit a problem with your product.
When given a choice between a great customer service vs price or features, most customers would choose a great customer service.
Customers will churn to your competitor without thinking twice if your customer support is not good.
Customer support needs to cater to your different kind of customers. Some customers prefer a self-help knowledge base, some a support ticket deck, some customers prefer live chat and others want to speak to a person. Depending on your customer profile and their expectation you need to make these channels available, so the customer is never frustrated knowing how to get an answer.
If your business is still small and do not have bandwidth, have set hours where someone is available to respond. Track your support metrics with the same vigilance as your marketing and sales conversions. It deserves equal or more importance.
When Customers realise you value their time and will respond, they will give you more time to sort out any issues they may have with your product. Build that good will and be communicative and responsive and Customers will reciprocate and stick around with you.
4. Product Value
Customers might buy your product thinking they can solve a problem but soon after realising it is not such a pain point anymore. This is where your product-market fit comes into play. You must be sure that your customer’s see your product as a painkiller and not a vitamin. If they see it as a Vitamin, they might buy it but eventually they will churn.
Review the features you have, speak to several of your customers and identify the exact pain point that they are trying to solve. Reposition your product and your brand focussing on solving that pain point. Use survey tools like Customer Satisfaction Surveys and Net Promoter Scores to listen to your customers.
If you do not sell a pain killer, eventually customers will churn. So introspect and work on your product’s positioning.
Churned Customer Interview
Even though the churn reasons mentioned above might be applicable to several SaaS businesses, the way to be sure is by interviewing your churned customers. Not every churned customer will be willing to speak but have a process in place requesting for an interview of your churned customer. Probably think of a small gift (Starbucks coffee!) that can be given to them as a token of appreciation for their time.