Churn is something that keeps us all up at night, which is why we thought that it’s best to tackle this issue before anything else.
Do you remember Superman? Do you remember what his flaw was? Because it’s time to say it out loud. All superheroes have a flaw. It’s true and yes, including Batman. A blackout would certainly drain him of his superpowers. But let’s come back to Superman, shall we? Indeed, show that man kryptonite and he’ll be screaming for Batman to come and rescue him.
Churn is your flaw, it is our flaw. It can really kill a business and instead of fighting for success, once you’ve hit churn full speed, it’s only about survival. Leaving churn completely unattended, and investing your entire budget on acquiring customers is a mistake so many entrepreneurs make, unfortunately.
It’s true, acquiring customers is a major goal. However, so is retaining customers. It’s funny how people focus on getting more and more customers on their boat and at the same time, it almost feels like they are pushing them back into the water one by one just to fit more newcomers. While your focus needs to be on your customers, it’s not just the new ones that matter. And here is another secret definitely worth sharing. If you want a trusted sidekick to help you fight churn, then you need to look towards retention. That’s where you will find the support you need, not to mention those super cool super weapons. So, enough babbling about superheroes and kryptonite. Let’s get down to business. The how to reduce churn guide starts now!
Good churn VS Bad Churn
Now, we don’t mean to alarm you. We do take things seriously, it’s true, but the fun thing about churn is that it has two sides. Just like every good story, right? It is important to separate the good churn from the bad churn, so you know when it’s time to take action.
Every business can lose a few customers, it’s only natural for this to happen. However, at one point your business will stabilize and slowly the lines that keep track of churn will stop moving. That’s good churn.
Bad churn is when you are on an all downwards hill and you are losing clients like crazy.
The different phases of CHURN
After identifying the nature of churn, after deciding whether it is good or bad churn, you need to look at its phases. Because each phase requires a different approach. And your overall churn decrease strategy needs to capture all phases not just one of them. Otherwise, whatever you are building today is going to crash by tomorrow. So, without further ado, here are the three phases of churn and the right ways to go against them.
Once you start collecting users, and they begin inspecting your product, trying to understand how it functions, you know, the usual, you might notice how some of them turn their backs on you. And yes, the timing is really bad, because you’ve just made yourself comfortable in that chair, you’ve reached your sales goal and now, everything is slowly drifting away. Pretty bad, right?
Why does short-term churn happen? There must be some kind of explanation. Now, if this was an isolated situation and it happened to two out of ten companies, you could say that it’s a great way to measure need and overall solution functionality, a method through which you were putting aside rotten apples from the good ones. But it’s not the case. Comforting and at the same time, pretty alarming, short-term churn happens to everyone.
You have two aspects you need to consider introducing in your strategy.
First of all, you need to properly introduce the product/solution to prospects. So in your content marketing strategy, make sure you are using magic words for your audience segments. Make it very clear from moment zero, what your solution does, what its core value is.
For example, if you have a project management solution, you need to show your customers how these features can actually improve the everyday workings of their business. Emphasize the unique features of your solution from day 1 and avoid selling it for what it’s not. It’s true that you have your competition to think about and you want to better than what is already on the market. But you needn’t sell yourself as being something different than you are. If you are a project management solution, be that. Don’t be anything else than you are and make it clear to your clients.
Secondly, now that your users have invested in your product, it’s time to teach them a lesson or two. And take that as it is because you should be providing users with numerous materials of different kinds to make sure that they have understood exactly how your solution functions and they are making the most of it. Tutorials, guides, articles, videos, all are encouraged and welcomed.
Also, consider improving customer experience. New users should benefit from specific onboarding experiences and be provided with support and help when faced with complicated situations or problems.
Ok, so you’ve made it past your first month. That’s great. Unfortunately, you might still be faced with the issue of churn. Even though they have purchased the solution and they have not given up on it yet, confirming that they are actually needing it, it does not mean that you can relax and make yourself comfortable in your chair. You still have to work hard to keep your customers interested in your solution, convince them to use it more and more, making it part of their daily activity. How can you do that, right? A bit of email marketing, perhaps?
Emails may just be the most used marketing tool out there. Keep reminding customers of the many benefits your solutions is offering. Constantly update your solution whenever you decide it’s time to improve or add features. Stay in the spotlight. So far, so good, but how do you get customers to subscribe? Try subscribing them automatically, as a result of a purchase made. Even though you offer tones of materials meant to inform and educate you should still keep in close contact with your customers by means of email. Also, ask for feedback and if you obtain it, use it. Then make it visible. This is the ultimate trump card. It’s the strategy that can help you win the trust of your users and trust equals a low churn rate.
Once you enter the mid-term phase and some might argue that you should really start your endeavors with phase one, offering your customers your full attention. Start those engines on customer support, customer experience, make everything run smoothly and make your customers understand that you are by their side every step of the way. This is when things start to get a lot more personal.
So, to sum up, improving mid-term churn, you really need to reach out to your customers. Keep them informed about your solution through email marketing, collect feedback, fix updates, improve customer service and if possible, add features, make changes.
As your business grows and you start gaining more and more customers, you might continue fighting off churn. Unfortunately, this is not something that goes away overnight. The fact of the matter is that you might be in an open war with churn as long as your business exists. The good news is that you have the tools necessary to fight it off. It is merely a question of building the right strategy and sticking to it. These being said, let’s dive in and see exactly what a good long-term churn fight-off strategy really is.
The secret to fighting long-term churn is upgrading. Let’s be clear about one aspect here. Churn is merely the reaction your customers are having when losing faith in your product. So, to get rid of it or better said, to keep it under control, you need to constantly re-build the faith your users have in the solution. And let’s recap, shall we? What is upgrading again? Is it not the ultimate way a customer proves to you that he indeed trusts your product? Your efforts need to go in that direction. Re-activate comatose accounts and put some life into them.
You know what the core value of your solution is. Now all that remains to do is to make others see it as well. It might seem like we are repeating ourselves because showing the customer the core value of our product was in phase 1 as well as in phase 2. So, why do it the third time? Your customers might have lost themselves in their own problems or challenges and your product may no longer be their main concern. In other words, yes they might have forgotten about you. But let’s be honest here and acknowledge the fact that it’s not their fault. You need to make all efforts to be sure that users are constantly reminded that they have a solution to work with and that solution can help them improve their work. Remind your customers of your product. Constantly. Keep them informed through updates, tutorials and most importantly, sell your product over and over again, this time by means of cross-selling and/or upselling.
Now, we’ve been rambling on and on about how to improve your churn rate, about how you need to handle customers, how to stay in touch and so on. But, should you do this intuitively simply because there is churn as a concept? Wouldn’t it be best to see if churn is a challenge for your business? Obviously, before you get into the emailing frenzy, you might want to calculate churn first. This way, you can check if your emails are actually functioning. Now, try not to laugh in our faces, saying that you know how to calculate churn. We know you do, but you might like to know that calculating churn is not all black on white.
CHURN = THE NUMBER OF CUSTOMERS WHO HAVE DECIDED TO STOP USING YOUR SERVICES/PRODUCTS DURING A SET PERIOD OF TIME.
Yes, this is the formula, but are you going to include customers that have canceled your subscription because they just don’t make use of your product or will you include those that have failed to renew their subscription as well? Also, we’ve been talking about that set period of time. So, let’s say you pick a month, any month. What customers will enter in your churn rate analysis? Because you have customer previously signed that should decide on whether or not they want to renew their subscriptions, those that have churned that month or newly acquired customers. Because calculating the churn rate can easily get from simple to insanely complicated, it’s best to always think of it as an indicator. In other words, don’t turn this metric into your one and only metric.
Because calculating the churn rate can easily get from simple to insanely complicated, it’s best to always think of it as an indicator. In other words, don’t turn this metric into your one and only metric. Let it guide you towards a strategy, always keeping in mind that numbers cannot be 100% correct given the complexity of the calculation method. Don’t ask questions.
Best keep it simple at all times:
Let it guide you towards a strategy, always keeping in mind that numbers cannot be 100% correct given the complexity of the calculation method. Don’t ask questions. Best keep it simple at all times:
CHURN = CHURNED CUSTOMER/ TOTAL CUSTOMER over a set period of time
Now, there is this thing called MRR Churn and those part of SaaS world, ourselves included, really like discussing it. It’s rather simple to imagine why. In the SaaS world, you want to keep an eye on MRR. That is your monthly recurring revenue. This too is affected by churn. MRR Churn is an important metric for the simple fact that it displays the manner in which your business might be developing. Usually, SaaS developers are terrified of this metric, because it does not bring good news all that often. However, no matter the numbers, you still need to analyze it properly and attentively and see how your business is doing.
So, to find what your MRR Churn Rate is, you need to divide Churn MRR( the total MRR of lost customers) by MRR, considering the same period of time.
THE FOUR-PART TRILOGY OF REDUCING MRR CHURN
Ok, so now you know. The MRR Churn Rate will open your eyes with regards to your business. It’s now up to you to decide what you plan on doing next. Should you, however, believe there is still a chance to improve something, then let us offer you a treat. Here are 4 ways to reduce MRR churn.
1. Implement a credit card dunning system
There is a larger percentage of payment failures, which is usually noticeable in your MRR churn rate. What you need to do is implement a system that can allow you to recover all these customers and get them to the dark side. How far you want to take dunning is entirely up to you, and up to certain factors you can’t ignore. Indeed, dunning depends on aspects such as the amount of debt or the length of time for which the actual payment is overdue. By definition, the dunning process refers to the act of notifying a customer when his credit card is declined and asking him to provide new information.
However, at a first view, the dunning process really does seem like an inefficient way to deal with customer issues. However, this is because the approach is wrong. Dunning functions as long as it is has a proactive approach. Set up a system through which everyone involved, meaning you and your customer, is made aware of the upcoming expiration date of an account payment option. You needn’t complicate the message because what matters the most is removing the urgency feeling of the situation and replacing it with a proactive attitude.
2. Wake up those users
This might have happened to you. You might have received invoices for products that you no longer remember using. Of course, it’s easy to hit the cancel button. Put your product in front of your customers, keep them focused on it, so they are tempted to cancel it, simply because they’ve lost touch with it. Email marketing can turn into an essential connection at this point because it is by means of a strategy of this kind that you can re-grasp some of the attention your product once had. So, what you need to do is keep your customer up to date with everything you are doing in terms of upgrades or improvements. Keep him informed about your solution.
Also, since we are still in the email marketing area, you could set a system in place that could monitor how often your customers are visiting the platform. When you notice that there are inactive users, ask them if there is something wrong. Tell them you have noticed that they have not been using your solution and ask them why. They could have all sorts of reasons for not properly testing your service.
Use newsletters to inform your customers of offers or useful information you have published on your blog. While no one wants an inbox filled with all sorts of messages, you still have to reach out to your customers. So, make it worth their reading time.
3. Pricing may not be your friend
Unfortunately, finding the right price is not always the reflection of its value. In other words, refer to your buyer persona when setting prices in order to stay within your audience. It would be a shame to turn the reward for your hard work into a negative trigger, responsible for churn.
It is true that there are other ways to set your price than giving customer full power over your decision-making process. Because if you should end up in the situation in which you are asking a customer what he/she would pay for a subscription, expect to hear something completely different from what they would actually do. Everyone wants to pay less or nothing when asked, but in the end, we are all willing to take out money of our pockets if the service helps us in any way. So, check the following aspects when setting your price:
Cost of production. Understand how much you have to take out of your pocket to create the product and take care of it over a long, indefinite period of time.
Price set by competition. If you charge more than your competition, you’ve got yourself a problem. If you charge less, you might have a credibility issue. So, where’s the balance?
The value of your brand. Sometimes, being who you are can either lift or lower a price. If you have gained brand authority you can lift the price of your product/service without having to explain why. It is considered that you have made plenty of investments in consolidating your brand so far and those investments can be noticed in the different services your clients will be gaining as a result of a partnership. If you are just beginning your journey within the SaaS world, then keeping prices low might be the way to go.
4. Asking around, gathering feedback
Do you know why surveys are so incredibly powerful? Because they provide you with the much needed, vital information regarding the areas in which you need to make improvements. Once you run a survey and discover why people are churning, your blindfold has been taken away from you and you see things clearly.
Feedback is absolutely crucial for any business, not just SaaS. However, in our line of work, things tend to get a bit more personal, as you want to have close relationships with your customers. You want them to use your solution for a long time, as this signifies a steady income and in some cases, depending on the pricing model you have selected, your revenue comes from the in-app purchases that might appear. For instance, you give free access to your subscribers, up to a certain point. To really make the most of your solution, they need to buy certain features.
What you are trying to figure out is which features are a good match for your subscribers. Matching features with subscribers means increased chances of making a steady revenue. But you can only decide which is a fair feature addition by looking at what your subscribers are telling you. What are they in need of? Are the features already available suitable for their needs? Should you be doing improvements in this area as well?
One of the easiest ways to ask for feedback is by means of an email campaign. Ask your subscriber how he feels about your solution. Ask him/her to provide you with details regarding the features he has access to, the problems encountered and really, his overall opinion on the good and bad parts of your service.