Many Software-as-a-Service companies struggle to retain customers. The customer churn rate of a few SaaS vendors will be higher; here are a few effective ways to reduce it.
Organizations spend a tremendous amount acquiring new clients. Hence, having a better client retention rate is crucial to reduce customer acquisition costs (CAC). This blog looks at the best ways to prevent SaaS customer churn.
Foundations of Customer Churn Prevention Strategies
Before they embark on a journey to reduce customer churn, organizations should look at the following overview. Enterprises face customer attrition because of multiple reasons, and there is no one perfect solution to reduce churn regardless of how efficient the strategy is. SaaS decision-makers can classify their customer churn into the following segments:
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Active churn:
customers that are Voluntarily looking for options to cancel their subscriptions
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Passive or delinquent churn:
canceled customer subscriptions resulting from failed payments fall under passive customer churn.
Other than these two segments, businesses can classify churn in the following two ways:
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Pre-churn event:
clients that cancel before the subscription renewal is due.
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Post-churn event:
canceled after the contract is over or failed.
CXOs must consider these four quadrants to segment customer churn prevention strategies broadly.
Also Read: Re-Igniting SaaS Marketing Strategy in the Post-Covid Era
While developing a constructive plan to reduce the overall churn rate, businesses must consider the following aspect:
Maintain a Happy and Active User Base
Decision makers should consider embracing customer engagement activities that prompt the users to adapt to a new feature and subscribe to annual plans.
Cancellation Reason
Businesses must understand why the client cancels and make offers to retain the customers.
Payment Acceptance
Decision-makers need the best strategies and tools to prevent failed subscription payments and result in higher churn.
Recover Payments
Organizations need to recover all failed credit card payments and other fraudulent charges.
Customer success officers need to enforce the best practices to develop a holistic SaaS customer churn prevention strategy based on all four quadrants. Organizations with the best strategies will enable them to optimize their challenges of minimizing churn and improving the ROI.
Following are a few strategies that business decision-makers can consider to prevent customer churn:
Efficient Onboarding
Most users sign up for a free trial or demo of the SaaS application and will never buy. Even though prospects that want a free trial or demo; will not contribute to the churn rates. Because prospects do not contribute to the company’s revenue cycle, however, businesses need the best strategies to interact with the customer with the right intention. Presales teams need to have impactful interactions keeping client satisfaction a top priority. Marketing teams that offer customers the relevant solutions to overcome their operational challenges will create an impact that matters. Offering more benefits than the competitors will help the customers to return to the brand.
Identify Customer Journey’s Red Flags
Evaluating user behavior will enable organizations to determine the clear behavioral difference between customers who stay and those who leave. It is one of the most effective ways to identify the red flags in the client journey that lead to churn. SaaS companies can evaluate the user’s behavior in the initial first days once they start using the tool or the application. Challenges faced by the clients to use the application or tool are the red flags that organizations need to look out for. Because any enterprise will integrate a SaaS tool or software to streamline its operations, but if the users cannot use it, all their investments and implementation efforts will be in vain.
Determining the red flags in the customer journey will help to understand why customers leave. Customer experience officers need to identify the red flags and make strategic changes in their SaaS products to prevent customer churn. Businesses must look for red flags such as irregular log-in, longer time to accomplish simple tasks, and users not utilizing the software to its full potential. Organizations that identify the red flags can segment the customer based on the identified risks of churning. CXOs can define customized customer churn prevention based on the potential retention reason.
Improve Customer Engagement
Customer churn is less likely to happen if user engagement with the SaaS product or tool is high. One of the most effective ways to reduce churn is by improving customer engagement. SaaS companies must interact with the users and train them to make the most of the application. SaaS product pieces of training and demonstrations to all the users across the enterprise will help to prevent customer churn. CXOs should consider designing and enforcing workflows that encourage their teams to interact with the users frequently to improve the customer engagement rate.
Constantly Add Value to the Product and Service
Another way to prevent customer churn is by adding value to the products. SaaS vendors must embrace the latest technologies and seamlessly integrate with all the third-party tools to improve the efficiency of the client’s workflows. SaaS DevOps teams need to constantly look out for opportunities to enhance the functionality of the tool or the application. In contrast, the after-sales teams try to improve the customer experience. Maintaining a happy customer base and offering a robust tool are the most efficient ways to prevent SaaS customer churn.
Customer churn is bound to happen regardless of how efficient or effective the customer service SaaS vendors offer. Business decision-makers need to have the best technologies in place that to help maintain a happy customer base.
Moreover, successful businesses are those where the customer concentration rates are low. SaaS vendors can consider these strategies to prevent or minimize customer churn to improve the business ROI.
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