Churn is a Reality

Churn is a reality that all SaaS companies must accept. Every customer you acquire will eventually churn. When and how depends on how your organization handles retention efforts. 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. Customer retention is a critical metric. It measures the success of your customer satisfaction programs.

Why Do You Need a Customer Retention Strategy?

A sound retention strategy is powerful enough to steer the growth of your company. An effective retention strategy should inspire customer loyalty and build 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." Through the content, you are providing value to the user. Whether this customer is active or not, they will think twice before jumping ships.

It doesn't take much to schedule such messages. What you need is a lightweight retention program. In a few hours, you can create a series of campaign messages.

The benefits of lifecycle messaging are immense. The messages go a long way in combating churn. They also instill a culture of retention marketing in your organization. Investing in user relationships from day one will improve your retention rates.

Customer Retention Strategies

Early identification of churn is the key to an effective 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 is hard to earn them back. You can not limit your focus on loyalty programs as your only retention strategy. 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 have a smooth, onboarding process. 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 one or two features that resonate with them.

By doing so, these customers fail to interact with some of your best product features. From the first step of the user's journey, you should guide them through different product features.

Motivate your customers to use other features and discover new value. There ate two ways of achieving this accomplishment:

  • Invite your new signups to a webinar or demo program. Here, you will walk your customers through key workflows and concepts. New users that attend a webinar are six times more likely to activate your services.
  • Create a brief and clear "Getting Started guide. In your guide, answer questions on features that most customers ignore.

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 those customers that are a little reluctant.

Upskill this group of users walking them through specific features and products. Product education promotes customer success.

Over time, the reluctant users will master the use of your products. Customer mastery eventually breeds brand loyalty.

Product education is an effective retention strategy. 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? You can start by promoting your product via email. Make your browser extension, desktop, or mobile app easy to add. As users integrate your products across multiple platforms, you are increasing the likelihood of engagement.

The product will grow onto your users and become part of their habits. 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. From your phone, you can access your 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. Upon attaining this achievement, you can ask your users to invite their colleges.

5. Motivate Your Customers with New Features

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

You must motivate your users with exciting new features. Some features can win customers back or retain existing users for the time being.

Offering the customer a glimpse of what is cooking can help you build the 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. Remind 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 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 pain of the customer.

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

Best Practices in Retention Messaging

1. Define "Inactivity"

Telecom companies will message 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 email is. If you notice periods of inactivity in early stages, 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 covert 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 in 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 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. Be thankful, honest, and respectful to the customer.

Winning Back Customers

Being honest, I’ve personally been reeled back in before by the company, Hulu. I was planning on canceling my membership, and when I took steps to do so, they offered me a month free, and a discounted price after that. They had me back in an instant! I enjoyed their content, not the price, so they offered an incentive.

Incentives are an effective method for winning customers back. If you give users a reason to stay, many will do so. Also, remind users of the value of what you have to offer. 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, there are measures you can take to combat the loss of customers and retain the ones you have.

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

Author Information

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