SaaS churn threats aren’t just a signal that you have an at-risk customer; these are literally threats to your business, your revenue, your valuation & your ability to grow and they should be taken very seriously.
And since churn is a customer lifecycle issue, not just something that happens at the end of the customer lifetime, the seeds of churn are often planted early and they actually start to sprout over the course of the customer lifetime.
If you aren’t looking for it, you could miss that your customers are telling you that they’re going to stop paying you at some point very soon.
They’re telegraphing their next move and it’s up to you to read the signals and jump into action.
Get Proactive on SaaS Churn Threats
The beauty of the SaaS business model is that you have visibility into the behaviors of your customers… and you should use this to reduce your SaaS churn rate.
Specifically, you should be looking for signs that your customer is getting ready to leave and then do something to stop it.
However, what you do to stop it – and how you do it – depends entirely on your relationship (or the relationship you should have) with your customer.
If your customer (segment) requires high-touch – perhaps you sell into a relationship-driven market – then make how you reach out to deal with a SaaS churn threat high-touch. You could use a system like Woopra and set it up to ping your Customer Success team when certain behaviors are detected so they can pick up the phone, move the customer onto a path of realizing value again, and maybe even get the up-sell to expand revenue!
On the other hand, if your customers – or certain customer segments – prefer a self-service model, then how you reach out can be automated… trigger an email to get them to take a particular action – roll your own, use Vero or USERcycle, or use Intercom’s in-app messaging to communicate directly with the customer inside your SaaS.
Continuing the theme from the last post on monitoring, measuring, and encouraging Customer Engagement, you can see that everything from the high-level strategy around SaaS churn reduction to the low-level tactics we use are all customer-driven.
In fact, keeping a customer-centric approach to everything you do will eliminate…
The Biggest SaaS Churn Threat
My definition of engagement is “when your customer is realizing value from your SaaS‘ so in my book, the biggest SaaS Churn Threat is lack of engagement at any point in the customer lifecycle.
No matter where they are in the customer lifecycle – during their Free Trial, in their first 90 days when they’re just getting started, on day 366, or on day 578 - when your customer fails to realize value from your service – when they aren’t engaged – they’re actions are telling you they probably won’t be sticking around much longer.
But if you don’t know what Engagement looks like for your customer or that it is 100% unique to your customer at their specific point in the lifecycle of using your service and aren’t proactively monitoring for that, you might miss it and lose a customer when you really didn’t have to.
So lack of engagement is the absolute top priority Churn Threat to monitor for and take action against to move your customer back on a path to value recognition.
Once you’re monitoring for – and reacting to – the biggest SaaS churn threat of them all, you can expand your Customer Retention campaign to include monitoring for these…
Common SaaS Churn Threats
While Engagement is 100% specific to your customer, your SaaS, and their position within their lifecycle as your customer, there are some common threats to your company that every SaaS provider should monitor for and react to.
Now, in addition to some of the more well-known churn threats – like customer-wide usage drop-off or low scores on a Net Promoter System (NPS) survey - here are four examples of common churn threats to monitor for:
1. Gaming the System – If you charge for storage (way to commoditize your valuable service, BTW) and people start deleting files, records or other objects to keep from moving to a more expensive pricing tier, they’re likely just buying time until they can find a better solution (perhaps one that gets them better than you do)… Sure, you didn’t get your pricing right to begin with, but maybe you can still salvage this customer by reaching out and getting them on the path to value realization.
2. Downloading their Data – They might be backing their stuff up… or they might be packing up and heading out of town… you should probably find out what’s going on. Might be worth a phone call.
3. Credit Cards Expiring – Far too many SaaS companies – especially those dealing with SMB customers – get a substantial amount of churn from expired credit cards. Many times the SaaS provider doesn’t want to “bother” the customer (read: wants to hide from the customer) to let them know the card is going to expire. Some might try to salvage the deal after the card expires… but even more will just let the customer go without ever “bothering” them.
Others might try offering a substantial discount to get customers on an annual plan, but fail to realize this just cuts their Customer Lifetime Value (CLV) down substantially and prolongs the inevitable (the card will probably be expired when you try to run it 12 months from now, too…)
Bottom line, once the card is expired the chances of getting ‘em back is much worse than getting them to update the card ahead of time.
It’s a big psychological difference… once they aren’t a customer anymore they have to make the decision to once again become a customer rather than just updating some information.
So start communicating 60-days out, letting them know the card is going to expire. Call ‘em, email ‘em, put a notice on their invoice or receipt… include a notice in every email you send out to them – both marketing and transactional – that their card will expire soon.
Do something – anything – to keep the card from expiring… unless you don’t care about saving the customer.
If you can, subscribe to – or use a payment processor like Braintree that offers – credit card updater services (Visa/MC/Discover offer these – Amex just does it for you) and where you can’t – get proactive with your communication.
Some cards can’t be updated because they didn’t just (or only) expire… they were cancelled. Those will have to be dealt with manually for sure, but how great would it be to only have to deal with those and not all of the other expired accounts?
Look, this is all very simple and there is simply NO EXCUSE for not at least trying to get the card info updated before it expires.
4. Visiting the Cancel page - If they get to your cancel page but don’t take action that’s a reason to reach out… did they accidentally get there or were they foreshadowing a future action? Step up and reach out or next time they might hit the cancel button and it’ll be too late.
Sure, you can always make that last-ditch phone call to try to save an account (usually by providing some type of discount) after they cancel, but by recognizing behavior early and stepping in to help move your customer to a position of value recognition, you save the customer before they even become a serious churn threat.
Okay, those are interesting and could probably save several customers every month if you only implemented those four ideas… but what about some super-ninja, data-driven, but…
Less-Common(ly Monitored) SaaS Churn Threats
These are SaaS churn threats that are less commonly monitored for, but are fairly common (depending upon product category & market position) and just as detrimental to your customer retention rate and bottom line.
1. Trigger Events - The worth of a specific customer to you – either on a monthly basis or over their lifetime – will dictate how much you want or need to invest in this type of thing, but you should at least keep this type of customer intelligence gathering in mind. It’s often said that the only acceptable churn is when a customer goes out of business or is acquired.
Well, acquisitions aren’t always the kiss of death for your relationship with your customer, but M&A activity often requires you to work hard to stay in the mix and that means getting in early. If the first time you hear that your customer is being acquired is when they give that reason for canceling their account, it’s probably too late and that’s your fault. You had options.
Look to something like Dow Jones Factiva Companies & Executives to actively monitor Company-level activity, M&A, good news and bad – they can feed that directly into your CRM or you can hook in via API – to give your Customer Success team a heads-up on what’s going on with your best customers. Or your worst customers so you can just let them go!
2. Your Users Leave the Company – Factiva will show you when a high-level executive is moving to a different company, but what about the lower-level executives or departmental heads. While those departures are not likely to make news, they are more likely to directly affect your relationship with that company.
The person that brought your SaaS into the company might leave, or your internal champion could move on and you are now at risk of being ousted by the person that takes over… they might have a favorite SaaS and that isn’t yours. The problem is you don’t know this because the new person takes over for the person that left and is using their account!
But if you leverage a service like FullContact, InsideView, or NetProspex you can be notified when a person associated with a customer account changes companies. If Sarah is now at ABC Company and her account is still being used at XYZ Company, now’s the time to reach out to XYZ and see what’s going on.
Oh, and ABC Company is now an opportunity because Sarah – a longtime user of your SaaS – is now your foot in the door at ABC, right?
3. Account Owners / Administrators Change - This is different than #2 above because it is a transparent event that takes place completely within your SaaS. And it could be nothing or it could be bad. Does the new owner/admin have experience with your service? Are they an existing user that was promoted to admin or a new addition? Do they have the same level of passion and trust for your service as the last person or are they going to start looking to bring in the SaaS that they’re used to using?
How you handle a situation like this could dictate your future with that customer… no matter what, never forget you sell to people – human beings – even in Fortune 500 companies.
Oh, and if you see that the person that was replaced is now at a different company because you are using one of the services I mentioned in #2 above… there’s also a new opportunity for you to pursue!
4. Widget Removal – Many SaaS providers have some type of widget or logic payload that their customers can embed in their site – chat, surveys, opt-in forms, pop-overs, bars, analytics/tracking objects, etc. – and almost all require that this is completed to get to 100% in the on-boarding process.
And for many of these companies, this is their entire business model… if a customer deactivates or removes the code from their site, the customer is no longer realizing value from the service and is definitely a churn threat. But few of these companies actively monitor to see if their widget/code is still being served and the ones that do rarely do anything with that knowledge. Don’t miss out on taking action on this super-obvious churn threat.
And of course you can take it further by seeing what – if anything – they replaced you with by either directly checking or using something like BuiltWith. If they did that before they canceled your account, you’d have more intelligence to leverage to save the account when you talk to them.
And if they’re too far gone, well… knowing what they replaced your SaaS with would certainly add some much needed context to their exit survey responses, right?
I hope I opened your eyes to some of the things you can look for if you’re really interested in keeping your customers.
Of course, if they are determined to leave, you have to let ‘em… but successful SaaS companies create Exit Funnels to extract value from their departure…
… and I’ll show you how in an upcoming post.
Let’s Improve Your SaaS Churn Rate
For immediate consultation and advice on improving your SaaS Churn Rate, schedule at least a 15-minute meeting with me via Clarity. If you feel a more involved engagement is required for me to help you, email me with the specifics of your situation (as much detail as you’re comfortable giving) and we’ll setup a meeting to work through the particulars.