Customer Churn Reduction: 10 Solid Strategies To Fight Churn & Boost Retention
If you’re in charge of your SaaS company’s growth management, you’re likely dealing with a churn reduction nightmare.
Customer churn is a big problem in SaaS companies where monthly recurring revenue is a necessity and buyers have multiple options. To maintain rude financial health, you need to acquire new customers and retain existing ones.
In this article, we’ll discuss what customer churn is and why it matters. Then, we’ll consider 10 customer churn reduction strategies and how to implement them.
- Customer churn measures the number of customers that have abandoned your product over time.
- Increasing customer retention by 5% leads to an increase in profits by 25% – 95%, due to the extreme costs of customer acquisition.
- Lack of in-app guidance, ineffective support systems, poor onboarding, and unclear or insufficient value proposition are the leading causes of customer churn.
- Voluntary churn is when customers deliberately cancel their subscriptions, while involuntary churn is when they’re forced to do so.
- The first step to reducing the customer churn rate is to set the right expectations.
- Personalize the onboarding process and take advantage of in-app tooltips and modals to provide progressive onboarding.
- Collect user feedback on different features or processes using CSAT, NPS, and churn surveys to identify and fix friction points.
- Employ gamification to make your product more fun and engaging for your customers, thus encouraging them to stick around.
- Userpilot helps you collect invaluable user insights from in-app to identify drivers for customer satisfaction or dissatisfaction. Book a demo to learn how!
What is customer churn?
Customer churn or customer attrition refers to the number of customers who stopped using your product or service over a fixed time frame.
Why does customer churn matter?
According to Accenture’s research, US companies lose about $1.6 trillion yearly due to customer churn. Meanwhile, customer acquisition costs (CAC) are five times higher than customer retention costs.
Customer acquisition is also more challenging than customer retention. And, bringing new customers up to the standard of old customers is even more difficult and expensive. As such, increasing customer retention by even 5% increases profits by 25% – 95%, according to an HBS report.
Beyond the numbers, large-scale customer churn also leads to reputational damage. Unhappy customers leave negative reviews, “warning” others against a product or service they consider ‘bad.’ Negative reviews harm your reputation, making customer acquisition even more difficult.
What are the reasons for customer churn?
Reasons for churn differ from one customer to the next. Still, research indicates that poor onboarding, ineffective support, lack of in-app guidance, and limited value proposition are among the leading cause of customer churn.
Let’s take a closer look at some of these factors:
Lack of in-app guidance and self-service support
The onboarding process is one of the most important processes for any SaaS product or service. Poor onboarding and lack of in-app guidance frustrate new users, making it difficult for them to reach the ‘Aha moment’.
On the other hand, a well-thought-out onboarding process provides users with proactive customer service. It continues beyond the welcome screen, guiding users past potential challenges and helping them identify new features.
Not enough value in the product
Customers first buy into your messaging before they actually purchase your product. Your messaging, thus, sets the tone for their expectation. As a result, salespeople who overpromise set users up for disappointment.
Once customers realize they can’t achieve customer success with your solution, they leave.
Poor customer service
Stellar customer service is the backbone of any SaaS product or service. A lack of timely and sufficient resolution of customer issues can irritate customers, which discourages them from using your product. You can achieve the opposite result when you prioritize proactive customer service and ensure that your product is always of value to your customers.
Buggy product or service
Excellent customer experience is a necessity. A bug-riddled, glitchy, or difficult-to-use product derails the user experience, making the product difficult and frustrating to use. Failure to fix identified bugs increases the customer churn rate.
Types of customer churn
Ultimately, we can categorize the reasons for customer churn into two major groups – voluntary and involuntary churn.
This type of churn matters the most. The voluntary churn rate captures all the customers who consciously decide to cancel their subscriptions to your product or service.
Understanding why these customers voluntarily exit your product is critical to improving your retention rate. Were they unhappy with the product? Did they fail to derive value? What drove their decision? Answers to these questions will help you prevent churn in the future.
Involuntary churn occurs when customers are “forced” to abandon your product or service. This churn is driven by circumstances beyond the control of your users – such as going out of business or payment failure due to outdated information or incorrect details.
Because the involuntary churn rate is beyond the control of the customer, it isn’t considered when looking to reduce customer churn or during retention calculations.
Customer churn rate benchmarks
Customer churn rate benchmarks help you assess your business’s churn rate versus the industry average. This is important when analyzing and understanding your situation and how to turn it around.
Interestingly, the customer churn rate for B2B and B2C companies is almost the same. Whereas B2B companies have an average voluntary churn rate of 3.5%, B2C companies have a 4.04% churn rate for the same category.
10 Strategies to reduce customer churn and boost retention
For the most part, some degree of churn is unavoidable. But, you can successfully minimize your churn rate by following the right customer retention strategies.
Consider some of these:
Set the right expectations from the very beginning and shorten the time to value
One of the primary reasons for poor user engagement after sign-up is the empty state. Customers who land on a blank screen when they log in may freeze, unsure of the next step to take. This often leads to a lack of engagement, which, in turn, destroys your conversion rate.
Improving a customer’s time to value begins with the welcome screen. Personalize the content on the welcome screen to the user. Show them what the product looks like in action by filling empty states with sample content.
Nail user onboarding and win the hearts of new customers
The onboarding process is a crucial phase that impacts customer success with your product. Optimize the process to provide customers with enough information for success. Avoid boring your users with lengthy product tours that give them too much at once.
Make the most of onboarding by using interactive walkthroughs to guide users. To ensure users only receive the guidance they need, identify their use case early on and personalize their experience accordingly.
Below is an interactive walkthrough that demonstrates rather than explains features.
Use tooltips to overcome feature blindness and drive feature adoption
Use tooltips to help users identify hidden but key features. It is especially important for product features whose purpose is not immediately obvious to users.
Tooltips help point a user’s attention to hidden features, preventing the user from searching for them in your competitor’s product. Tooltips also help you provide users with relevant guidance to make the most of available features. Notice how the tooltip below alerts users to the presence of pre-made templates in the Notion software.
Userpilot helps you create interactive tooltips and modals to help users find value in your product. These can be automatically activated when a user first opens a page or when they first interact with a feature.
Use CSAT surveys to measure customer satisfaction and collect feedback
Customer satisfaction (CSAT) surveys are excellent tools for gauging a customer’s satisfaction with a brand, product, or service. Use CSAT surveys across stages of the customer journey to collect customer feedback. The responses will help you identify problems that may lead to churn in advance.
These in-app microsurveys improve response rate, providing you with important quantitative and qualitative data to:
- Improve your product’s features and usability
- Discover and eliminate friction points
- Help the customer success team understand where users struggle
- Offer better customer support
Note that the question, formatting, and response type for each customer satisfaction survey will differ for different parts of the user journey. For instance, look at this sample CSAT microsurvey which pops up after a chat with a customer support agent.
Offer an in-app help center to help customers get support effortlessly
Providing excellent customer service is one of the quickest ways to build customer loyalty. Take advantage of the self-serve support model to help customers quickly find answers to their questions.
Provide an in-app help center widget to provide on-demand support to customers. This resource center can contain different resource types, from micro-videos to a collection of knowledge base articles, or even a live chat feature.
With users able to quickly solve the bulk of their challenges, the customer support team will receive only the most complex issues. This reduces the work of your customer service representatives and eliminates frustration in your user experience.
Use secondary onboarding to make existing customers discover more advanced features
Your primary onboarding (right after sign-up) should highlight the core functionalities of the product. These core functionalities are the features that help users quickly arrive at the aha moment! But onboarding shouldn’t end there.
Use secondary onboarding to turn activated users into power users. Secondary onboarding allows you to highlight extra features that provide the user with added value beyond the primary use case for your product.
In this video below, Userpilot’s Head of Content, Adina Timar, discusses all you need to know about optimizing your secondary onboarding. She also goes over how to determine your user journey and how you can build interactive walkthroughs for your secondary onboarding flow with Userpilot.
Use gamification to motivate users and boost customer loyalty
One way to improve customer engagement and motivate users to stick with your product is through gamification. Gamification leverages fun elements via game-styled mechanics to incentivize users to engage with your product.
You can also gamify users’ experience by celebrating major user milestones.
Providing badges and milestone celebrations as “rewards” fosters a sense of achievement and pride in users, driving them to repeat the actions that led to their success. Thus, gamification drives engagement, which, in turn, drives customer retention.
Asana provides a masterclass in gamification, animating simple actions to make them fun while using a celebratory unicorn to herald achievements.
Track product engagement and usage to identify inactive customers and re-engage them
Ensure your product engagement efforts are successful by tracking user actions in the app. This will give you a sense of feature adoption levels across the app, informing you of features used by more customers and those with lower usage.
In-app activity monitoring will also help you identify engagement levels on a user-by-user basis. Are there customers with low engagement? At what point did they abandon the product? Proceed to segment users based on their product usage data.
Then, try to re-engage inactive customers by reaching out to them. Using a carefully-worded personalized email, inform the user that you’ve noticed their absence and would like to have them back. Avoid sending this message in-app as an inactive user wouldn’t be available to receive it.
Use NPS surveys to identify at-risk customers and proactively reach out to them
The Net Promoter Score (NPS) is a metric for tracking customer loyalty and satisfaction by asking customers how likely they are to recommend your product to others. In-app NPS surveys help you identify those likely to promote your product as well as those likely to churn.
In addition to the ratings, users should provide the reasons behind their given score – high or low. Once the responses are in, calculate your NPS score to measure your performance. Use response tagging to identify common trends between scores.
Pay particular attention to users with low scores and the trends in their responses. Understanding why they rate your product so low will provide invaluable insight into why your customers churn.
Use churn surveys to identify churned customers and implement a win-back strategy
Customers who are about to cancel their subscriptions might already have enough but you can still take action to prevent that. Implement exit surveys to understand the reason for their exit. Build exit surveys into the cancellation flow to trigger immediately after the customer clicks on “cancel subscription.”
Understanding the reason behind each customer attrition will help you reduce customer churn in the future.
You may also seek to prevent churn at the moment by offering users alternatives to permanently closing their accounts. Could they downgrade their account instead? How about temporarily pausing the account instead of deleting it?
Reducing customer churn: best tools to retain customers and improve loyalty
Customer retention is key to increasing your customer lifetime value. With the right customer retention management software, you can collect, organize, and analyze user data for improved retention. Two of the best tools to help you do that include:
Userpilot – for in-app guidance and microsurveys
Userpilot is an excellent tool for collecting, analyzing, and deriving actionable insights from customer data. It allows you to collect data in multiple ways, including event and attribute-based analytics and in-app microsurveys.
You can begin collecting important user data right from the welcome screen, segmenting users according to their responses and presenting them with targeted interactive walkthroughs for features based on their segment. This increases your chances of quickly activating the user.
You can also ensure a smooth user experience by collecting customer feedback via microsurveys, providing secondary onboarding for advanced features, using distinctive UI patterns to highlight certain features, and providing in-app self-service support.
Identify which users engaged with your onboarding features and easily spot areas where users face challenges from the analytics dashboard.
What’s more, you do not need to write a single line of code! Simply sign up and begin building workflows into your existing product. To get even better results, Userpilot enables you seamlessly integrate with top tools like Google Analytics, Intercom, and Kissmetrics.
Ready to get started? Book a demo today to get started with Userpilot for free. Or, check out the pricing options for the package that matches your customer base and product goals.
Kissmetrics – for product analytics
Kissmetrics is a powerful retention tool with a focus on web analytics. It delivers key insights and user interaction data from your website, helping you track important data like your landing page conversion rate, customer bounce rate, cart sizes, abandoned cart products, etc.
It helps you analyze, segment and engage your users from a user-friendly interface. You can also integrate the software with Userpilot to keep all of your important analytics data in one place.
Pricing begins at $299 for the basic package, with the biggest package open to custom pricing according to your needs.
Customer retention is crucial to the financial health of any business. To achieve this goal, you must work to reduce customer churn and revenue churn. To successfully build an army of loyal customers, focus on providing a great, hassle-free experience for your users.
Want to get started with implementing the best churn reduction strategies for your business? Get a Userpilot demo today to learn how Userpilot helps you better understand your customers so you can act accordingly.