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The Leading Reasons for Customer Churn in SaaS

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Learn tips on how to provide the best experience and build strong relationships with your customers. See what crucial data should be constantly gathered and analyzed in order to decrease churn and improve customer retention.

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The Leading Reasons for Customer Churn in SaaS

  1. 1. PROMOTERS PASSIVES DETRACTORS The Leading Reasons for Customer Churn in SaaS Why customers pull the trigger and what you can do to stop them
  2. 2. 02The Leading Reasons for Customer Churn in SaaS Churn can be defined simply as the rate at which you are losing customers. churn
  3. 3. 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. 03The Leading Reasons for Customer Churn in SaaS
  4. 4. According to Pacific Crest’s survey, 30% of Saas companies have unacceptable levels of churn Source: Pacific Crest 30% of Saas companies Statistics 04The Leading Reasons for Customer Churn in SaaS
  5. 5. 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. 05The Leading Reasons for Customer Churn in SaaS
  6. 6. 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. 06The Leading Reasons for Customer Churn in SaaS
  7. 7. 80% of your company’s future revenue comes just from 20% of your existing customers Top-Line Growth Existing customers 07The Leading Reasons for Customer Churn in SaaS
  8. 8. 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 08The Leading Reasons for Customer Churn in SaaS
  9. 9. 61% of customer take their business to a competitor when they end a business relationship Source: Get Satisfaction Blog 09The Leading Reasons for Customer Churn in SaaS 61% of customers Brand Loyalty
  10. 10. 10The Leading Reasons for Customer Churn in SaaS The first step in fighting churn is to understand what causes it.
  11. 11. Why do Customers Churn?
  12. 12. 12The Leading Reasons for Customer Churn in SaaS Reasons for Customer Churn Ignoring data Poor onboarding experience Weak relationships Ineffective customer service
  13. 13. Reason #1: Poor Onboarding Experience
  14. 14. 14The Leading Reasons for Customer Churn in SaaS 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? Reason #1: Poor Onboarding Experience
  15. 15. In a highly competitive world, a poor onboarding experience can be costly, as it increases customer acquisition cost and reduces activation conversion. 15The Leading Reasons for Customer Churn in SaaS Reason #1: Poor Onboarding Experience
  16. 16. 16The Leading Reasons for Customer Churn in SaaS That’s why brands focus on delivering "Aha!" moments to direct users towards the lower end of the conversion funnel. Reason #1: Poor Onboarding Experience
  17. 17. The "Aha!" moment is the first user interaction that delivers clarity on your product’s unique value proposition, and gets them hooked. 17The Leading Reasons for Customer Churn in SaaS Oh, I got it! Reason #1: Poor Onboarding Experience
  18. 18. 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. 18The Leading Reasons for Customer Churn in SaaS Reason #1: Poor Onboarding Experience
  19. 19. 19The Leading Reasons for Customer Churn in SaaS As per behavioral psychology, people need "activation energy" to complete a task that they would rather not do. Reason #1: Poor Onboarding Experience
  20. 20. 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”. 20The Leading Reasons for Customer Churn in SaaS Reason #1: Poor Onboarding Experience
  21. 21. 21The Leading Reasons for Customer Churn in SaaS 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. Reason #1: Poor Onboarding Experience
  22. 22. 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) 22The Leading Reasons for Customer Churn in SaaS 1. 2. 3. Reason #1: Poor Onboarding Experience How to reduce the Activation Gap?
  23. 23. Reason #2: Ineffective customer service
  24. 24. 24The Leading Reasons for Customer Churn in SaaS 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.
  25. 25. Source: American Express 25The Leading Reasons for Customer Churn in SaaS 78% of customers bail out on a product because of a poor customer service experience 78% of customers Reason #2: Ineffective customer service
  26. 26. 70% of buying experiences are based solely on how the customers feel being treated. Source: HelpScout 26The Leading Reasons for Customer Churn in SaaS 70% of experiences Reason #2: Ineffective customer service
  27. 27. 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 27The Leading Reasons for Customer Churn in SaaS Reason #2: Ineffective customer service
  28. 28. 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. 28The Leading Reasons for Customer Churn in SaaS Reason #2: Ineffective customer service Solution #1: Improve Accessibility
  29. 29. 29The Leading Reasons for Customer Churn in SaaS Emails Calls MeetingsWebsites Live chat Community forums FAQ Social media Communication channels with customers Reason #2: Ineffective customer service
  30. 30. Source: Genesys Global Survey 30The Leading Reasons for Customer Churn in SaaS 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 Reason #2: Ineffective customer service
  31. 31. Pick the right channels by following three factors: 31The Leading Reasons for Customer Churn in SaaS 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. Reason #2: Ineffective customer service
  32. 32. 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. 32The Leading Reasons for Customer Churn in SaaS Reason #2: Ineffective customer service Solution #2: Customer Feedback
  33. 33. Ask your customers how they feel about your product or service (survey forms, NPS, CSAT) 33The Leading Reasons for Customer Churn in SaaS Reason #2: Ineffective customer service
  34. 34. 34The Leading Reasons for Customer Churn in SaaS Reason #2: Ineffective customer service Close the feedback loop
  35. 35. Reason #3: Weak relationships
  36. 36. 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. 36The Leading Reasons for Customer Churn in SaaS Reason #3: Weak relationships
  37. 37. 81% of customers are more likely to stay provided that they feel connected with the brand. Source: SalesForce 37The Leading Reasons for Customer Churn in SaaS 81% of customers Reason #3: Weak relationships
  38. 38. 38The Leading Reasons for Customer Churn in SaaS Reason #3: Weak relationships Be available and connected to your customers through relevant communication channels
  39. 39. 39The Leading Reasons for Customer Churn in SaaS Tips to help you build strong relationships: Know your customers’ preferences Conduct customer exit surveys Re-engage inactive customers 1. 2. 3. Reason #3: Weak relationships
  40. 40. Reason #4: Ignoring data
  41. 41. “ The goal is to turn data into information, and information into insight.”- Carly Florina 41The Leading Reasons for Customer Churn in SaaS Reason #4: Ignoring data
  42. 42. 42The Leading Reasons for Customer Churn in SaaS Reason #4: Ignoring data
  43. 43. That’s why you need to pay attention to what the data is telling you. 43The Leading Reasons for Customer Churn in SaaS Reason #4: Ignoring data
  44. 44. Analyzing behavioral traits and personalizing experiences is the key to customer retention 44The Leading Reasons for Customer Churn in SaaS Reason #4: Ignoring data
  45. 45. 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? 45The Leading Reasons for Customer Churn in SaaS Reason #4: Ignoring data
  46. 46. Use data to improve customer retention: 46The Leading Reasons for Customer Churn in SaaS 1. 2. 3. Reason #4: Ignoring data Track and prioritize feature requests Personalize experiences Analyze customer behavior
  47. 47. Track how clients use your product Personalize customer experience Analyze customer behavior 47The Leading Reasons for Customer Churn in SaaS Reason #4: Ignoring data
  48. 48. 48The Leading Reasons for Customer Churn in SaaS 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. Reason #4: Ignoring data Track and prioritize feature requests
  49. 49. Personalization not only increases conversion, but also improves user engagement as users spend less time finding features and more time interacting with those features. 49The Leading Reasons for Customer Churn in SaaS Reason #4: Ignoring data Personalize experience
  50. 50. 50The Leading Reasons for Customer Churn in SaaS Reason #4: Ignoring data 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.
  51. 51. • 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. 51The Leading Reasons for Customer Churn in SaaS Conclusion
  52. 52. 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 52The Leading Reasons for Customer Churn in SaaS
  53. 53. Retently Sentiment lets you track customer satisfaction, improve retention and decrease churn. 53The Leading Reasons for Customer Churn in SaaS Know What Your Customers Think About You Click here to start your free trial

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