Last Updated: February 2024
How the current scenario will change the SaaS world in the short and long term is anybody’s guess. But what is clear is that as customers adapt to the altering environment, every SaaS company must gear itself for customer churn.
How do you address the churn? By keeping customers happy. It’s that fundamental. An unhappy customer will stop giving you business, no matter how good your product is.
Keep your customers satisfied, and you will create a path that shores up your recurring revenue even during a recession.
How Do You Reduce Churn During A Downturn?
Customer churn is part and parcel of business, yet most SaaS companies have no strategy to halt it. Given that churn adversely affects revenue, and hence profit, that’s not a very practical way to deal with it.
In the prevailing times, tackling the inevitable customer churn is even more crucial because existing customers are your lifeblood.
All your focus has to be on retaining them because they represent a steady future revenue stream. So, let’s discuss the steps on how to effectively minimize customer churn.
Identify Your Customers’ Business Health
The first step is to categorize all your clients based on their financial health. Analyze how much the economic recession affects them and then divide them into varying groups. This health planning gives you a blueprint for all your subsequent actions for culling churn.
How do you predict the impact of the crisis on your clients? By studying industry stats that affect their business or you could rely on internal information that account managers have to make the decision.
After you divide all your clients, start swarming those who land up in the at-risk bucket. Presenting them with incentives and better offers will keep them as paying customers and boost their morale.
Measure Customer Engagement
“60% of shoppers prefer retailers that continue to engage with them after they have bought something” because an engaged customer is a satisfied customer driving repeat sales.
Therefore, the second method of tackling customer churn is to:
- measure the online and offline engagement of each of your customers and
- get a grasp of factors that boost engagement and to work on them.
For instance, something as basic as voice-based customer support post-purchase can nurture customer relationships and increase your engagement.
Evaluate Customers’ Usage
Underutilization is one of the direct reasons for customer churn. When clients use their plans but don’t get full value from it, they will reduce their contracts after the subscription period ends.
Most commonly, the reason for the down-sell is “we shelled out extra bucks for features we never used!” So, your goal should be to find out if all your clients are getting complete value from your product after they have subscribed to a plan. Access the client’s utilization data to show them what they are missing and how else your product can help their bottom line.
A poor onboarding and set up process are often culprits of underutilization. To be more specific, 23% of customer churn is due to inadequate onboarding. Use walkthrough guides, how-to videos, and software lessons to make the procedure beneficial to customers.
Reward Customers Willing to Commit
Any customer willing to commit to your product should be rewarded with discounts and offers on long-term subscriptions. You gain two advantages to this.
One, you retain more customers as the rate of churn is lesser in committed customers. Here are some stats that prove it:
Two, you lower customer acquisition cost (CAC) and increase customer lifetime value (CLV). Clients who pay for your product for a month barely generate any income for you, and it isn’t sufficient to cover CAC.
Annual plans, on the other hand, safeguard your cash flow from the ups and downs of monthly churn.
Reward Your Loyal Customers
Forrester says that the financial burden of acquiring a customer is 5 times more than retaining an old one. More than that, a 5% increase in customer retention leads to a jump in profits, 25 to 95 % to be precise.
Now couple the figures with these: while the selling success rate to a new client is 5-20%, the same for a loyal client is a whopping 60-70%!
What does that mean for a SaaS company? Separate your loyal customers from the hoi polloi and walk the extra mile for them.
Offer them premium benefits, even simple ones like limited-time access to special features, plan upgrades, and one-time pricing for higher plans will lessen churn.
Provide Excellent Customer Experience
Poor service equals bad customer experience equals customer churn. It is why “in the U.S., the estimated cost of customers switching to a competitor brand due to poor service is $1.6 trillion.”
In crisis times, the value of exceptional customer service increases by a manifold. Every customer that you ignore or serve less than they expect is a customer who walks away.
So, put your attention on providing a customer experience that is above and beyond. It can play a valuable role in pacifying them. For example, SaaS tools can be very technical and sometimes, your users might find themselves fiddling with settings, trying to figure out what they wish to achieve. So, put a process in place that lets your team get on screen-sharing calls with the users so that they are not inconvenienced. Identify the screen sharing tools which work well for most customers and make sure your team is very comfortable with offering the screen sharing option.
More than this, most SaaS companies have customers based across the world and it can be absolutely essential to offer customer service which is not restricted to certain hours of the day. This is especially important for your trial users. 24×7 customer support, which is easily accessible via live chat, can be a major winner for SaaS.
How do you measure your customer experience? By using metrics like Customer Satisfaction Score or Net Promoter Score that tell you how likely a client is to recommend you to another.
Encourage Valuable Feedback
You can also diminish customer churn with one word – why. When a customer is leaving you, ask them why. It is crucial because complaints are like icebergs. You only know 5% of them, but when you ask ‘why,’ you get a peek into the problems that were hidden from view up until now.
Feedback should be encouraged at all times, not just when the client is stepping out of the door because asking for feedback makes clients feel valued.
Keep two things in mind: make it easy for people to share feedback and listen to the suggestions and issues put forth. Feedback is of no use if you don’t implement change.
Look back at the last recession and a clear pattern emerges. Companies who put efficiency and not growth in the forefront weathered the storm. That should be your strategy, too, right now. Focus on retaining and getting the most out of your current customer base rather than hunting for new ones.
Also, you can try Saufter – the customer service software that can help you automate and scale your customer support.