The Leading Reasons for Customer Churn in SaaS

PROMOTERS PASSIVES DETRACTORS
The Leading Reasons for
Customer Churn in SaaS
Why customers pull the trigger and what you can do to stop them

02The Leading Reasons for Customer Churn in SaaS
Churn can be defined
simply as the rate at which
you are losing customers.
churn

If you imagine your business as a bucket
with holes, the water flowing from the top is your
growth rate, while the holes at the bottom is churn.

According to Pacific
Crest’s survey, 30% of
Saas companies have
unacceptable levels of
churn
Source: Pacific Crest
30% of Saas
companies
Statistics

While a certain level of churn is
unavoidable, it’s important to keep it
under control, as a high churn rate
can potentially kill your business.

If your business has 100 customers and the
churn rate is 5% per month, you will be left
with only 48 customers in one year.

80% of your company’s
future revenue comes just
from 20% of your
existing customers
Top-Line Growth
Existing
customers

Source: Bain and Co.
Reducing churn by merely
5% can increase profits by
as much as 25-125%
Increase Revenue
25
50
75
100
125

61% of customer take
their business to a
competitor when they
end a business
relationship
Source: Get Satisfaction Blog
61% of
customers
Brand Loyalty

The first step in fighting churn is
to understand what causes it.

Reasons for
Customer Churn
Ignoring data
Poor
onboarding
experience
Weak
relationships
Ineffective
customer
service

Reason #1: Poor Onboarding Experience

What if majority of your customers are leaving not
because they don’t use your product, but because
they don't know how to use your product?

In a highly competitive world, a poor onboarding
experience can be costly, as it increases customer
acquisition cost and reduces activation conversion.

That’s why brands focus on delivering "Aha!"
moments to direct users towards the lower end
of the conversion funnel.

The "Aha!" moment is the first user interaction that delivers clarity
on your product’s unique value proposition, and gets them hooked.
Oh, I got it!

For instance, the “Aha!” moment for Instagram is
getting users to upload one picture, for Twitter it’s
posting the first tweet, for WhatsApp it’s sending
that first message.

As per behavioral psychology, people need "activation
energy" to complete a task that they would rather not do.

There’s a reason why people find it so difficult to hit the gym in
the morning, but don't mind partying for hours.
The difference lies in the activation energy gap, which is huge in
the morning, since you have to push yourself to wake up early
and hit the gym. However, dancing at a party is tempting,
convenient, and delivers instant gratification - thereby making it
an activity with “low activation energy”.

When you want a customer to complete a task
they’re least likely to do (filling forms, sharing
personal information, etc.), you need to reduce
the activation gap.

Lay the basic groundwork (minimise initial inputs)
Design walkthrough tutorials (step-by-step product
guides, visual tours, etc.)
Deploy. Test. Repeat (run A/B tests)
1.
2.
3.
How to reduce the Activation Gap?

Reason #2: Ineffective customer service

Poor customer service is the one of the topmost
reason for customer churn as it takes a single bad
experience to make users choose a competitor.

Source: American Express
78% of customers bail out
on a product because of a
poor customer service
experience
78% of
customers

70% of buying
experiences are based
solely on how the
customers feel being
treated.
Source: HelpScout
70% of
experiences

While delivering a great customer service is a
clockwork mechanism with lots of components playing
a vital role, there are two key strategies at the core:
Improve Accessibility
Ask for Feedback

Pick the right channels for your customer service delivery.
Emails, chats, and other passive communication channels
are low-cost, low-energy ways for connecting with
customers who have minor issues, while calls and personal
interactions are expensive yet effective ways to address
high-priority issues.
Solution #1: Improve Accessibility

Emails Calls
MeetingsWebsites
Live chat
Community
forums
FAQ
Social media
Communication
channels with
customers

Source: Genesys Global Survey
Over 75% of customers are
more satisfied with
assistance by phone. The
second channel of choice is
email communication.
22
59
78
0
10
20
30
40
50
60
70
80
90
Web-selfservice Email Phone

Pick the right channels by following three factors:
Employee convenience
(How easy it is to solve the query through that medium for your customer reps)
Overall turnaround time
(How fast can you resolve the query through the channel)
Relative customer satisfaction
(Using A/B testing to find the channel that maximises customer satisfaction)
1.
2.
3.

According to Lee Resources report, 80% of
companies believe they deliver superior customer
service, while only 8% of customers believe that
businesses actually do that.
Solution #2: Customer Feedback

Ask your customers how they feel about your
product or service (survey forms, NPS, CSAT)

Close the feedback loop

As per White House Office of Consumer Affairs,
it’s 6-7x times more expensive to acquire a new
customer than to retain an existing one.
Reason #3: Weak relationships

81% of customers are
more likely to stay
provided that they feel
connected with the brand.
Source: SalesForce
81% of
customers

Be available and connected to your customers through
relevant communication channels

Tips to help you build strong relationships:
Know your customers’ preferences
Conduct customer exit surveys
Re-engage inactive customers
1.
2.
3.

“ The goal is to turn data into information, and
information into insight.”- Carly Florina
Reason #4: Ignoring data

That’s why you need to pay attention to what
the data is telling you.

Analyzing behavioral traits and personalizing
experiences is the key to customer retention

If the renewal rate is decreasing, dig up the data to answer:
Why the renewals rate is low?
Which segment stopped renewing?
Where did they stop?
How can they be re-engaged?

Use data to improve customer retention:
1.
2.
3.
Track and prioritize feature requests
Personalize experiences
Analyze customer behavior

Track how clients
use your product
Personalize customer
experience
Analyze customer
behavior

Step 1: Pay close attention to what your customers are asking, monitor
how they use your product and what obstacles they are facing.
Step 2: Put all improvement ideas on a priority list (easy-to-fix and highly
demanded features go to the top) and pass that list to your product team.
Step 3: Track the interaction of customers with newly developed features
and use early feedback from users to refine product experiences.
Track and prioritize feature requests

Personalization not only increases conversion, but
also improves user engagement as users spend less
time finding features and more time interacting with
those features.
Personalize experience

Analyze customer behavior
The best way to reduce customer churn is to
analyze how your customers interact with your
product and optimize your service for desirable
customer experience.

• Improve your onboarding experience, always be
available to assist your customers and build strong
relationships with them.
• Pay attention to all the data generated
by how your customers interact with your product.
Conclusion

Net Promoter Score® makes it easy to identify
your brand detractors by asking one simple
question:
On a scale of 1-10, how likely are you to recommend
the product experience to your friends or colleagues?
Know What Your Customers Think About You

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The Leading Reasons for Customer Churn in SaaS

The Leading Reasons for Customer Churn in SaaS

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