Want to improve the current customer attrition rate in your SaaS company?
Customer attrition is one of the main problems for SaaS companies. Although you’ll inevitably lose customers occasionally, you should always keep the attrition rate at a minimum.
In this article, we’ll discuss customer attrition in depth and discuss the strategies you can use to reduce churn and increase customer retention and loyalty.
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What is customer attrition?
Customer attrition, also called customer turnover, customer churn, or customer defection is the loss of customers.
If your product doesn’t help them reach their end goals, they’ll stop investing their time and money in it.
Customer attrition vs customer churn
Customer churn and customer attrition are just different terms used to describe the same thing. They both indicate the loss of customers, either through active attrition or passive attrition.
Types of customer attrition
There are two types of attrition:
- Active or voluntary attrition.
- Passive or involuntary attrition.
Active or voluntary attrition
Active attrition occurs when customers voluntarily end their subscription with your product or don’t opt for a subscription renewal.
There might be multiple reasons why customers would leave your product, but the primary cause is dissatisfaction. The ultimate goal of customers is to gain value from your product. Thus, if your product fails to help customers accomplish their goals, they become more prone to churning.
However, this also means that it’s possible to identify and remove the cause of dissatisfaction to prevent voluntary churn.
Passive or involuntary attrition
Passive attrition takes place when customers can’t keep using a product for reasons either completely or partly out of their control. It can happen for several reasons but not necessarily due to customers’ dissatisfaction with your product.
The most common causes of involuntary churn are payment failure due to inadequate funds or expired cards, failed transactions due to credit card limits, and not flagging payments as recurring ones.
What causes customer attrition?
Let’s go over some of the most common triggers of customer attrition.
- Poor onboarding experience: Your onboarding process should provide sufficient in-app guidance to help users gain value from your product faster. For example, if your new customers don’t get instructions on navigating your product, they can fail to reach the activation milestone and churn before converting to paying customers.
- Wrong product-market fit: Your product should meet the needs of your target market and deliver continuous value. Otherwise, there will be insufficient demand for your product among the target audience.
- Bad customer support: One bad experience with your customer support team can push customers to consider leaving your product.
- High pricing: The subscription plans should reflect customers’ perceived value of your product. If customers feel you are charging more compared to the value they’re getting, they are likely to churn.
- Long time-to-value: Time-to-value is the time taken by customers to reach the AHA! moment and experience your product’s value. A longer TTV can indicate the presence of friction in the onboarding process that will leave customers dissatisfied.
- Bad user experience: Factors such as poor onboarding flows, friction in using the product, and missing features ruin the user experience and cause a drop in engagement.
- Buggy product: If your product needs frequent bug fixes, customers will likely get frustrated and leave.
How to calculate customer attrition rate?
The customer attrition rate, or the customer churn rate, is the percentage of customers who leave your product in a given period.
To calculate the attrition rate, divide the number of customers lost during a specific period by the total number of customers present at the beginning of that period and multiply the ratio by 100.
Suppose you had 1,500 customers at the start of November. The number dwindled to 1,400 by the end of the month. Thus, your customer attrition rate will be:
(1,500-1,400)/1,500 * 100% = 6.67%
What is a good customer attrition rate?
There’s no single ‘good’ churn rate for SaaS businesses. While customer attrition rates should never be too high, the appropriate range for churn rate varies depending on the size of the company and the industry it operates in.
In general, a good annual attrition rate for SaaS companies lies between 5% and 7%. On the other hand, the rate is much lower for large enterprises since they focus more on long-term business contracts and high-volume profits.
To benchmark the customer attrition rate, you should check out businesses that have similar annualized contract values as your company. Businesses with similar ACVs tend to have similar attrition rates.
Actionable tips to reduce customer attrition and increase loyalty
Now let’s take a look at the 10 strategies you can apply to decrease customer attrition and improve customer retention and loyalty.
Segment customers based on their JBTDs and personalize the onboarding experience
A welcome screen is not just useful for greeting customers with a warm message. It’s also very effective in collecting information about your new users and personalizing their onboarding journey.
You can add a microsurvey to the welcome screen to get basic information about your users, such as the company they are from and the purpose behind using your product.
The information allows you to understand each user’s jobs to be done so that you can segment them accordingly. Segmentation helps you offer personalized in-app guidance to make users reach the activation point faster.
For instance, Kontentino, a social media management tool, has two activation milestones: linking the social media accounts and scheduling the first post.
By implementing Userpilot, Kontentino used the data collected from welcome screens to segment customers. It then built customized interactive walkthroughs and checklists for users. As a result, the company saw a 10% rise in activation in the first month.
Provide in-app guidance to assist new and existing customers and drive product adoption
Interactive walkthroughs are step-by-step visual guides. They help customers complete a series of events that would shorten the time-to-value or learning using a new feature.
However, what is considered an activation point in one company may not be a milestone in another company. This is why it’s advisable to use welcome screens to segment your audience and create customized walkthroughs for each user segment.
Moreover, you can create walkthroughs on features that are relevant to their use case. This increases user engagement and thus improves feature adoption and product adoption.
Moreover, walkthroughs are a better alternative to product tours. While the latter drops a lot of information in one go, interactive walkthroughs provide contextual help.
You can see in the example below that the instruction on the next step in chat widget styling is triggered only if users have completed the previous step.
Gamify the onboarding and offer incentives to engage customers
Onboarding gamification incorporates fun elements in certain contexts to motivate customers to complete different activities. It usually gives rewards to make the tasks interesting and competitive. Therefore, customers tend to experience value faster.
The most widely used reward elements are leaderboards, points, badges, and elements of rivalry among customers.
Gamification helps improve engagement and increase the adoption of newly released features. Rewarding customers for their efforts makes them feel appreciated and inspires loyalty toward your brand.
Track in-app user behavior and identify at-risk customers
Customer segmentation plays a crucial role in identifying at-risk customers. Once identified, the main challenges are re-engaging these customers and driving continuous value for them.
Track in-app customer behavior by using feature tags. It enables you to get an overview of feature usage and discover features that have low engagement.
In addition, you should segment customers depending on their feature usage and behavior, such as power users, inactive users, and more.
You can then reach out to the inactive user segment to learn precisely what’s wrong with certain features and develop data-driven retention strategies.
Enable 24/7 self-support with an in-app help center
Your customer support team may not always get the time to promptly help customers. This is where self-service support comes in.
According to Harvard Business Review, 81% of customers try to solve problems by themselves before contacting support agents. If customers have 24/7 access to self-support, they will not only get faster solutions to their problems but also feel accomplished after resolving issues on their own.
Create an in-app resource center that will have FAQs, documentation, a live chat widget, video guides, webinars, and a link to your knowledge base. Whenever customers run into repetitive problems, they can access this center without any hassle.
Consequently, self-service support helps boost customer retention and improve customer lifetime value.
Use microsurveys to measure customer satisfaction regularly and act on
Customer feedback helps you understand customers’ needs and complaints better. That said, you should collect feedback regularly at all stages of the customer journey.
Microsurveys are effective ways for collecting user feedback. They are short and concise, so customers can quickly fill them up.
You can evaluate customer satisfaction by sending microsurveys such as the customer satisfaction score (CSAT) survey, Net Promoter Score (NPS) survey, customer effort score (CES) survey, etc.
Moreover, you can add a qualitative question to know exactly what dissatisfies customers and what they like the most about your product. When customers see you resolving their problems based on their feedback, they feel heard and tend to become loyal to your product.
Send NPS surveys and categorize customer feedback
Net Promoter Score (NPS) is a great measure of customer satisfaction and loyalty.
An NPS survey asks customers to rate the likelihood of their recommending your product to others on a scale from 1 to 10. Based on the responses, you get 3 groups of customers:
- Promoters – who give a rating of 9 or 10
- Passives – who give a rating of 7 or 8
- Detractors – who give a rating of 6 or below
The promoters are your loyal customers. You can convert them to brand advocates by implementing strategies like gamification.
Passives are indifferent to your product. This makes it essential to increase their engagement level so that they don’t switch to competitors.
However, the customers at the highest risk of churn are your detractors.
You can add a qualitative follow-up question to NPS surveys to learn the exact reason behind each score. Tag the responses to split feedback into themes, such as ‘missing features’, and look at the parts where detractors are complaining the most.
This helps you identify recurring patterns and friction areas. It will help you address their frustrations and improve retention.
Follow up on negative scores and offer help to avoid customer turnover
To prevent customer attrition, you need to reach out to detractors as quickly as possible.
For instance, you can proactively send emails and directly ask about their issues. This way, you can personally reassure them and handle their problems before they can churn.
You should also create hyper-personalized onboarding flows to re-engage your detractors and track their in-app behavior regularly to monitor your progress.
How to collect data to conduct a customer attrition analysis with Userpilot?
Userpilot is a powerful onboarding and product adoption tool.
From creating various kinds of microsurveys to enabling advanced segmentation and analytics, Userpilot helps you gain a thorough understanding of your customers’ needs. You can use the tool to build flexible, contextual, and personalized experiences for each customer segment.
For example, you get NPS feedback statistics on your NPS dashboard and use response tagging to pinpoint customer grievances. Then you can provide in-app guidance in the form of walkthroughs, checklists, or tooltips that are tailored to each use case.
Conclusion
Customer attrition is an inevitable phenomenon. However, you should keep it under control at a minimum level by regularly tracking user behavior and improving their experience.
When customers find you paying attention to their needs and gain value from your product, they can become loyal customers and give positive reviews to others.
Want to collect in-app feedback, and track user behavior so you can reduce customer attrition? Get a Userpilot demo and see excellent results for your business.
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