Customer churn rate is a really important metric to manage for subscription-based businesses. On average, SaaS businesses report that they calculate churn rate of between 5% - 7%. Keeping your churn rate as low as possible helps your business grow and your monthly recurring revenue (MRR) soar.
And, naturally, the easiest way to reduce your voluntary churn rate is to ensure your customers are happy and your product continues to meet their expectations.
So, how can this be achieved?
5 Tips to Improve Your Churn Rate
A customer success team is imperative to increasing your business's customer retention. It's their job to help new customers be successful with your product and enable existing customers to use it to its full potential.
But customer success isn't the only customer-facing team that plays a role in improving the customer churn rate. Marketing, sales, and customer support all have a hand in the game.
1. Know Your Customer to Improve Your Churn Rate
How well do you know your customer? Have you interacted with them recently?
Part of a customer success representative's job is to regularly connect with existing customers to build an ongoing relationship between them and your business. Your CSRs should be regularly reaching out to customers to ensure they're still happy with your product. That way, even if a customer churns eventually, your business won't be blindsided by the loss.
Part of the check-in process should involve identifying any feature gaps within your product. How many customers churn because your software product is no longer meeting their needs?
Your customer retention efforts should involve evolving your product around your biggest customers' needs when it makes sense to do so.
Customers that feel that a brand is taking their personal preferences into consideration are more likely to stay loyal. Ask for their feedback and use this information to develop and improve your product.
2. Inform Them of The Latest Changes
No matter how big or small the change to your product, getting your customer to recognize that you’ve made additions or fixed your software’s small glitches shows you're continually developing and improving customer experiences.
And reaching out to make sure they know about it shows you're invested in their ability to use your product to its full potential—especially if you've just released a feature requested by a customer.
At the same time, you're creating another touchpoint for customer interaction. All of this combined elevates customer experience to reduce that annual churn rate.
Have your marketing team send a regular email newsletter of software updates to inform existing users of any changes. As a bonus, you can use the email click data to see what your customers are interested in. These insights can be leveraged for more effective marketing campaigns.
3. Tell a Story
Here's another way your marketing team can join in on the efforts to decrease your customer churn rate.
To promote your business, tell a story about your product or service. This is known as product-led storytelling, and Tim Soulo, CMO of Ahrefs, is a huge proponent of it. He says, “My theory is that people don’t sign up for your tool and then learn how to use it. My theory is that people first learn how to use your tools, and they sign up because they know how to use your tool.”
When you tell a story, you make your product up to 22 times more memorable than if you were to simply list facts, helping you to not only retain customers but to expand your client list.
So when you promote your product, make the story about your customer. Validate your product or service by telling the story of how your customers have benefited and include customer testimonials.
Strategically using storytelling as a marketing tactic—through a case study or blog post—allows the reader to see themselves in the story.
And if your customer success team relays these success stories to similar customers, it could positively influence your churn rate by enticing a higher number of customers to remain with your business.
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4. Make Your Customers Feel Special
Providing good customer service is imperative for cutting down on your customer churn rate.
Not only that, but it can help improve your expansion MRR: 89% of consumers are more likely to make additional purchases after a positive customer service experience with a business, according to Salesforce.
Personalize your interactions and let the customer know you care by:
- using customer details to personalize every interaction
- sending information that's relevant to the customer, and
- sending educational content to your existing customers.
By making sure your customers feel valued, you reduce the number of lost customers. It's about having a customer service culture and knowing your customers' needs and how best you can meet their demands and expectations.
5. Make Realistic Promises
And finally, here's a tip for the sales teams: Present your product honestly and sign only the prospects that are truly a good fit for your services.
Make sure you can deliver on your promises. Don't over-promise and be sure to manage expectations. Under-achieving will make the customer disgruntled and this can be disastrous for future customer relations. And, naturally, these customers will eventually raise your churn rates.
Signing bad-fit customers creates a similar effect. These are customers that don't quite match your ideal customer profile (ICP), and for whom your product doesn't effectively solve a problem but sign on anyway. This portion of your customer base is bound to churn sooner or later.
"If you put your product in front of the wrong users, you'll bleed customers," says Steli Efti, CEO and founder of Close CRM. "When those users get tired of trying to deal with a product that isn't helping them, they will stop trying to figure out your product. They'll cancel their subscription."
When you misrepresent your product in demos or sign bad-fit prospects, these customers don't stay long enough to help you recoup your customer acquisition costs. In the end, they tend to cost you more than they make you.
Bonus Tip: Use The Right Fintech Tools to Stay on Top of Churned Customers
No matter what calculating churn looks like for your business, you'll need the right tools in your arsenal to monitor it.
One such tool is a holistic, modern automated recurring billing software. It will:
- calculate customer churn rate for you,
- show you the lost customers, expansion MRR, and contraction MRR for any given time period,
- allow you to create customer segments to find patterns in your customer churn rate, and
- provide you with insights into your customer database to help you identify and define your ICP.
High levels of customer churn are problematic for many software businesses, especially for startups just starting out and finding a niche. But by implementing these five tips—plus this bonus tip—you'll be well on your way to lowering that dreaded churn rate.