How to Reduce Churn Rate and Increase Retention: 12 Practical Tactics

Wondering how to reduce churn rate and increase retention?

While customer churn is a grave concern, retention is what can help you tackle it and make your product successful. Customer retention brings you more customers who tend to spend more, refer others, and provide valuable feedback that drives product improvement. So, efforts to simultaneously reduce churn rate and increase retention are the formula to your product’s success.

In this article, we’ll delve into how to identify churn and 12 practical tactics to reduce churn rate while increasing interaction.

TL;DR

• Customer churn refers to customers discontinuing their usage or subscription to your product.
• A good customer churn rate is 3% or less for SaaS companies.
• You can identify potential churn in the following ways:

1. Monitoring user interactions and identifying sudden spikes or drops in activity.
2. Using segmentation and tracking feature usage to measure engagement.
3. Spotting friction points with funnel analysis.
4. Using in-app surveys to collect and analyze customer feedback.

• To reduce churn rate, you can follow practical tactics like:

1. Personalize customer experience from the start by tailoring onboarding and in-app guidance.
2. Implement onboarding checklists to drive users to the activation point.
3. Use interactive walkthroughs and trigger contextual tooltips to offer customers step-by-step and relevant guidance.
4. Measure customer satisfaction by triggering contextual surveys during onboarding.
5. Leverage secondary onboarding to deliver value continuously.
6. Trigger new feature announcements and send webinar invitations to educate relevant user segments.
7. Offer a comprehensive in-app resource center to provide self-service and prioritize proactive customer service.
8. Implement exit surveys to collect feedback from churning customers about their cancellations.
9. Measure customer loyalty through Net Promoter Score (NPS) surveys, reach out to detractors, and address their concerns.

• You can book a Userpilot demo to start with reducing churn rate and increasing retention.

What is customer churn?

Customer churn (also called customer attrition) refers to the rate at which customers discontinue their usage or subscription to your product or service.

What is a good customer churn rate?

While the average churn rate for SaaS companies is around 5%, a good churn rate is 3% or less.

The benchmarks for customer churn rate are:

• Monthly churn rate: The average for SaaS companies is approximately 1%. However, it may be up to 5% for small and medium SaaS businesses.
• Annual churn rate: The average for large companies is around 1-2%, while smaller ones may have up to 10-15%.

How to identify potential churn?

To learn how to reduce churn rate and increase retention, it’s first important to know how to identify potential churn.

Analyze customer behavior and in-app activities

You should delve into your customers’ behavior and in-app activities to understand them. Closely monitoring and analyzing customer behavior and in-app activities provide insights into the potential churn.

You can monitor key user interactions, such as clicks, page activities, and engagement with specific features. It is also important to be careful about any sudden spikes or drops in your user activity. While a sudden spike may indicate a positive response to anything new, a significant drop may signal dissatisfaction or frustration.

For example, you can see the number of visits to a shared flow page. You can check the possible sudden drops and see if there’s any churn possibility because of it.

Identify at-risk customers using segmentation

Segmenting users based on specific attributes is useful for identifying at-risk customers effectively. You can attribute them based on key metrics like Net Promoter Score (NPS), product engagement, etc.

Then, you should filter out the disengaged and dissatisfied users to identify the at-risk customers. Since these users don’t engage much with your product and don’t find confidence in recommending it, they’re not getting any value from it.

For instance, you see a segment of users who have scored less than 7 in NPS surveys, dismissed the onboarding checklist, and are not engaged with flow events. You should filter these at-risk customers and try to put extra effort into retaining them to reduce customer churn.

Track feature usage to monitor customer engagement

Tracking feature usage helps you monitor customer engagement and gain insights into how users interact with your SaaS product. Tagging important events and features for customer jobs to be done (JBTDs) helps you understand the value of the features to customers.

You can monitor and analyze feature usage to clearly understand customer engagement levels. You’ll find which features have low engagement as you can determine the low and high engagement. The features with low engagement are the reasons why customers churn, and you should be wary of them.

Spot friction and drop-offs with a funnel analysis

Funnel analysis is a great approach for identifying friction points and drop-offs within the customer journey. You should identify key touchpoints and the expected flow of user actions by checking that of loyal customers.

After mapping the touchpoints, you can analyze them to see how your users progress through your product. It also provides a framework for understanding the ideal progression and where potential drop-offs may occur.

Then it is essential to identify friction points and drop-offs within the funnel. You should consider them as potential reasons for churns and take proactive measures against them.

Collect and analyze customer feedback across the customer journey

Collecting and analyzing customer feedback to gain insights into customer opinions is a crucial practice. You can trigger general and instruction-based surveys to collect valuable feedback at various touchpoints along the customer journey.

General surveys, such as Net Promoter Score (NPS) or customer satisfaction surveys, will give you a holistic view of customer sentiment. On the other hand, interaction-based surveys will gather feedback related to specific interactions. Analyzing the collected feedback from these surveys will help you uncover insights to understand customer expectations.

For example, you can trigger a survey after your customers interact with your customer support team. You may ask them if they had good or poor customer service and how satisfied or dissatisfied they are with the company.

12 Tactics to reduce churn rate and drive customer retention

Let’s go through the best 12 tactics that reduce customer churn and boost retention.

Personalize customer experience from the start

Personalizing customer experience helps you understand and meet the unique needs of your customers. Tailoring the onboarding process takes the personalized experience further right from the beginning.

You should use welcome surveys to gather relevant data about your customers’ goals, preferences, and pain points. This data allows you to customize the onboarding journey and provide targeted guidance and support. It ensures customers feel valued and understood right from their first interactions.

For example, you can ask your users about them, like what’s their role, what they want to accomplish with your product, etc.

You can also tailor the in-app guidance according to individual preferences to deliver a personalized customer experience. For this, you should leverage the customer data you’ve collected through the welcome surveys.

Implement an onboarding checklist to drive activation

You can implement an onboarding checklist to provide a clear and structured path for customers to follow. You should use it to create a list of core actions that new users should do to experience value and become activated.

For example, Userpilot’s users don’t get activated until they build their first flow, and it is a core activity in its checklists. You can also include a progress bar to create a sense of achievement and motivate users to complete tasks.

You should utilize the checklist as a roadmap to drive users to the activation point. It lets you make users realize your product’s value. As a result, you can easily retain customers more proactively to reduce the possibility of churn.

Use interactive walkthroughs to guide users in-app

Interactive elements such as tooltips, pop-up messages, etc., make the onboarding process more engaging and enjoyable for users. You can use interactive walkthroughs in your product to enhance the user experience. By providing step-by-step guidance within the app, you can help users easily navigate complex features or processes.

Interactive walkthroughs also let you drive user engagement by providing real-time guidance and support. Instead of leaving users to explore the product on their own, you can proactively assist them through interactive walkthroughs.

Trigger tooltips to drive feature engagement

Showing contextual tips and guidance prompts feature discovery and encourages customers to interact with your product. You should use tooltips to provide timely and relevant information to users.

Implementing tooltips is simple and easy to do. You need to identify the core features for each user segment. Then you should strategically decide where to place the tooltips for those features.

You can analyze the feature engagement to identify features with lower engagement. The lower engagement features signal potential friction. So you can offer extra guidance by implementing tooltips for those features to eliminate the friction.

Measure customer satisfaction during the onboarding process

Measuring customer satisfaction during onboarding lets you understand the initial user experience better. This practice allows you to identify areas of improvement and address any concerns or challenges early on.

You should trigger customer satisfaction surveys to users while they are proceeding through the onboarding flows. Analyzing the survey responses will enable you to identify early signs of friction and provide extra help where needed. You can then offer more in-app guidance to those areas and reduce churn possibilities by eliminating friction points.

Leverage secondary onboarding to retain existing customers

Secondary onboarding aims to keep the existing customer base engaged and satisfied by consistently delivering value. You should address that customer success is an ongoing process and go beyond initial onboarding to provide further guidance.

Segmentation plays a vital role in secondary onboarding. You can segment highly-engaged users and introduce them to more advanced features. Since they already were highly engaging while being new customers, you need to capitalize on this opportunity to deliver more value and turn them into power users.

Trigger new feature announcements to relevant user segments

Triggering new feature announcements to relevant user segments is one of the most valuable customer retention strategies. It helps reduce customer churn rate by ensuring customers stay informed about product updates and continue seeing their benefits.

You can introduce new features to advanced users and those who find them relevant. Advanced users are more likely to embrace new functionalities and leverage them. Customers who request features through feature request surveys will also find these features captivating.

Keeping users informed about new features continuously unlocks value for your customers. It also demonstrates your commitment to improving your product or service continuously.

You should also add an option to try out the new features contextually in the feature announcement.

Send webinar invitations to educate customers on new or advanced features

One of the challenges SaaS products face is feature blindness, where customers may be unaware of or underutilize certain features. Sending webinar invitations to educate customers on new or advanced features can help you overcome this challenge.

Webinars offer a platform to show customers how to leverage features through use cases. You can help customers see the benefits and understand how the features fit into their workflows rather than simply listing the functionalities.

It is also a good idea to schedule webinars and new feature announcements. You may also trigger webinar invitations when users interact with advanced features.

Offer in-time help with an in-app resource center

One of the primary benefits of an in-app resource center is that it reduces the reliance on customer service for basic inquiries and troubleshooting. It lets the customers access the resource center directly from within the application.

You should ensure your in-app resource center offers a comprehensive range of resources. It should include knowledge base articles, FAQs, video tutorials, step-by-step guides, and best practice documents. As a result, customers will have access to information that caters to their different learning preferences – written articles or videos.

Prioritize proactive customer service to re-engage users

You need to reach out to customers to show your commitment to ensuring customer satisfaction. Proactively addressing any issues or feedback quickly helps you solve them before they impact customer experience and prevent customer churn.

You should send personalized messages to any users facing any issues and assure them that you’re looking into it. Then, you must prioritize solving the spotted issue as soon as possible by putting your maximum effort into it. In this way, you can re-engage those users who may have disengaged from dissatisfaction.

Implement exit surveys to capture churn reasons

You should strategically implement exit surveys within the cancellation flows to create a moment of reflection for the churning customers. This moment of good friction can prompt customers to reconsider their decision and provide feedback on why they cancel.

In the exit surveys, you should ask questions like “Before canceling your subscription, please let us know what made you cancel today?” or “Is there anything we could have done differently to have you with us?”

Capturing churn reasons can be immensely valuable in understanding customer pain points and uncovering the areas for improvement. After that, you should take prompt action to bring change to them and let them not make any more churn.

Measure customer loyalty and reach out to detractors

Net Promoter Score (NPS) surveys are popular for measuring customer loyalty. You can use the NPS surveys at key touchpoints throughout the customer journey.

NPS dashboards make it easier by showing the NPS score, the distribution of respondents across different categories, and trends over time. With it, you can analyze NPS results at a glance to visualize and understand customer sentiment.

You can identify the detractors (who score less than 7) and reach out to them to address their concerns. The next step is to close the feedback loop by implementing actionable solutions to address their concerns.

Conclusion

It is critical you know how to reduce churn rate and increase retention to ensure long-term success for your SaaS business. We hope the practical tactics we’ve discussed will help you achieve sustainable growth.

Want to get started with how to reduce churn rate and increase retention? Get a Userpilot Demo and see how you can do that firsthand.