SaaS Customer Retention: The Secret to Reducing your Churn Rate

When it comes to SaaS Customer Retention, I get questions like this frequently:

Hi Lincoln, I’d like to hear your perspective on minimizing churn, especially in an industry with steadily declining prices, Adding more value with a better customer experience and more product functionality to mitigate price erosion and churn helps. Better segmentation. What else?

Churn happens for many reasons, but especially when people think your product doesn’t do something they need it to do (especially if they thought it would), if it doesn’t do that thing as easy as it should, or if the experience is incongruent with the price paid.

SaaS Customer Retention: The Seeds of Churn Are Planted Early

Clearly these are just a few of the reasons for Churn… but in many ways, these are the basis for the things you might be more likely to hear or see, like Customer Service problems or post-sale price sensitivity.

So, up-front price sensitivity often results from directly comparing your product to a cheap competitor’s product… when 12 different products seem to be identical, price becomes the main differentiator and the lowest price “wins.” (Does anyone really win the race to the bottom?)

What is really interesting to me is that Increasing Retention (or Reducing Churn) and Converting Prospects into paying customers share many of the same requirements.

It starts with attracting the right crowd and managing expectations properly early in the process.

Improve SaaS Customer Retention by Adding Value Before the Sign-Up

It is easy to say “add value” so you can charge more, but what does that mean?

Where I’ve seen success in “adding value” is in what I call pre-sale or pre-signup Indoctrination.

How you position your product, the sales copy you use, the imagery and social proof, and even what you do to engage with your prospects before they sign-up (webinars, whitepapers, etc.) will all help in that Indoctrination process.

And it will help better prepare your prospects and customers for the post-signup experience, allowing them to become more Engaged – faster – thus leading to a deeper level of Investment and, of course Conversion.

So the goal of pre-sales lead nurturing / Indoctrination is to get them engaged, then get them invested in the product.

Customer Retention / Prospect Conversion are the same in that respect…

Get them and keep them engaged, then get and keep them invested in the product.

And never stop doing that.

You can also leverage some of my ideas and tactics from this other post on Churn Reduction / Customer Retention.

SaaS Customer Retention is a Process

So yes, a great User Experience, managing expectations, Engagement, Investment (time, energy, resources, etc.) are all part of the conversion – and the retention – process.

But the secret to both is having a plan for conversion and revenue expansion.

When someone enters your Free Trial or becomes a lead in any other way, you need to have a specific conversion path that they get on as soon as they sign-up (or hopefully before they sign-up).

Now everything you do should lead them down that path, never letting them fend for themselves or virtually wander around.

Well, the same thing should happen after they become a customer, too… you want to up-sell, move them to a more expensive version or incorporate add-ons into their current plan, etc.

To keep converting customers, expanding revenue, and growing Customer Lifetime Value (CLV) requires a clearly defined path and you should guide your customers down that path in everything you do.

And, of course, if you’re constantly moving them down that path, then you know you’re engaging them and they aren’t a churn threat.

Let’s Optimize your Free Trial Conversion Rate

There is only one of me, so I can only help a limited number of SaaS providers at any one time. But if you’re serious about finally turning your SaaS Free Trial into a customer-acquisition machine, email me with the details of your situation and I’ll get back to you to setup a meeting.

– Lincoln

About Lincoln Murphy

I am a Customer Success-driven Growth Consultant. I wrote the Customer Success book which you can buy at Amazon. If you need help growing your SaaS, request at least a 15-minute call with me via Clarity. Be sure to join my mailing list - I send awesome stuff to the list every week or so. Also, connect with me on LinkedIn or follow me on Twitter.

Comments

  1. I’ll update you on our internal discussion on this topic. We’ve been working through this for a number of months and we have enjoyed your emails/articles/blogs on this topic.

    First, for us conversion vs retention (churn) is handled by 2 different people in our organization (granted we are a small shop).

    Marketing is responsible for converting the leads to customers. We have seen an incredible rise in our leads (400%+ increase) with steady work on landing pages, SEO optimization and AdWords. Now we need to do a much better job of converting our leads. We invested with the inbound marketing system Performable and we are working through this process now. It boils down to what you wrote about above and that is engagement. We are trying to serve up content based on user action or in-action and keep them moving forward in the cycle to become a customer.

    For retention (reducing churn) this is handled on our product management side of house. We have decided to invest time/resources to make Performable work for us in system (once someone is a customer) and serve up content based on both timing and action. The idea with this content is to coach the customer through the process and ensure they are finding success. This should help minimize churn with all customers.

    For our more “sophisticated customers” and/or strategic customers that are either spending more or have ability to spend more we needed to figure out how to do even more. We are doing 2 things:
    1) making changes to our account management team so even our low dollar customers are touched by a account manager at least once every 6-months – and –
    2) the bigger project will be making our system more sticky by finally hooking up our API to other applications that our customers use/need on a much greater basis – project management system and HR system. Once we make the hook here the use becomes much more flexible, much more engaging, and allows the user to gain the benefits of our system through other applications that they already use. Those are some of the challenges that we will be working on and listing as part of our 2012 strategic plan goals.

  2. Awesome, thanks for the update Ryan!

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