Five reasons you have high churn in your product, if you’re not into SaaS business, churn is a number of people that cancel every month.

For example, if there’s a $200 lifetime value of a customer and if they’re charged a $100 a month it means that two months and that customer leaves. Similarly, if there’s a 10-month lifetime value where essentially if there is a 10% or 12% churn every month, a company must every 10 months go find a 100% new customers just to keep an even keel.

If you do it right you literally can have a product that has an 8% annualized churn. I can give an example of a company called Flowtown, it was an email marketing SaaS product that integrated social data and emails. Six months into the product they found that they had a 12% per month churn and built a marketing channel to support that so now they are growing 20% to 30% every month.

I’m going to share today what is missing in a firm that leads to high churn. Here are five reasons that might lead to high churn.

[Reason #1] Customer service

I know it sounds so trivial, here’s what I want to say it’s about responsiveness you know one of the things we did at PushCrew my current company which is a web push notification tool, is that we ensured every query that the customer raised was resolved on time and as CSM’s proactively reached to them to ensure everything they do is well monitored. In the PushCrew dashboard itself, we had provisions for the customer to email us directly if they ever faced an issue and accessibility to the library of FAQs and other feature related articles. We created a priority mechanism in our support ticketing system such that depending on the customer plan and their query, tickets were prioritized which was later resolved based on priority. Also, we categorize the customers based on plan value and the strategic nature of the account upon which the type of engagement with them differs.

One other Example of great customer service is Tesla because they ensure high-value customer service and prompt feedback-to-action implementation. Recently, on twitter, a customer complained that Tesla drivers leave their cars parked in front of the charging station even after they were fully charged which resulted in a long queue of cars lined up to charge. Upon this tweet, Elon Musk replied to him saying that it was becoming an issue, and just 6 days later, the company introduced an “idle fee” for better-charging availability for other customers. Although, Tesla is not a SaaS company we can surely take notes from their prompt feedback-to-action implementation.

[Reason #2] Onboarding Experience

If you do a free trial to paid conversion like a 14-day free trial, you need to make sure that the onboarding experience gives the customer exactly what they expect and need. This takes them right into what I call the core value of your product. Many people when they sign up for product they have the need today, but they’re working on solving it over few months and they’re willing to wait and pay monthly fee knowing that they’re going to jump back in but as soon as they realize that the product isn’t as good as they thought or they find alternatives they’ll just cancel it. So, if you can get somebody deployed and activated in that first trial you’re going to have an incredibly reduced churn.

Hence, there are two things that you must ensure during the customer onboarding process. They are –

1) Make sure the customer see some small wins or in other words make sure they’ve achieved “initial success” with your product. (You can consider this as First Value Delivered — FVD)

2) The “Aha!” moment which makes the customer realize the real value potential of the product through the relationship with the Customer Success. But, it’s not something the sales or marketing convey as value to the customer from the product, it’s the relationship that Customer Success establishes.

[Reason #3] Recurring Value

As much as you want people to pay every month, the onus is on the Product Managers to make sure that product delivers recurring value every month and as CSM’s we must make sure that the customer derives value from your product by helping them use the product efficiently.

In a SaaS perspective that is a huge problem if you don’t have what the customers are expecting from the product. Although it’s impossible to completely satisfy every single customer, you must at least make sure that most of your customers are satisfied with your product features if not all.

At PushCrew, we are in constant touch with customers to know what improvements or enhancements that they want in our product. We ensure that the feature requests raised by all segment of customers from the low paying ones to the high paying ones are systematically categorized and fulfilled on time. We pursue different methods to know the customer requirements which involves periodic customer interviews, feature request queries and much more.

[Reason #4] Lack of customer Success

Sometimes it’s just a lack of customer success. I really think that there are three core phases to the product, which are

— Attract

— Convert

— Expand

Attract is just getting them to the site in the first place, Convert is making sure that the free trial or the demo does well to get them as a customer and then Expand is not even just retain them, it’s also looking at opportunities to expand their product usage.

So, the CSM’s job is to map out all the customers and ensure that they deploy and leverage the features you’ve built to get more value from the product. The CSM’s play a vital role in the convert and expand phases. For example, in the convert phase the CSM’s proactively engage with customers who are given trial to show them the value of product and similarly in the expand phase the CSM’s monitor the customer’s product usage and recommend them on how to efficiently use the product and look out for opportunities to make the customers upgrade their plan with more feature set.

[Reason #5] Natural Causes

There are sometimes reasons customers are churning is from natural causes and you need to understand that these are real things. For example, credit card details expiring. Such cases occur literally for most companies and it could be around 4% to 5% the customer base that their credit card details expire and it must be updated. Another example is that the customers are downgrading, this could be because they might not have been using a lot of features or found another way to solve the problem hence they downgraded their feature set causing negative turn on the revenue side and then finally there are cases where just businesses die or they run out of funds to invest in your product.

Just understand you can do your best to improve them but at the end of the day there are going to be companies that go out of business and downsize and that’s part of building a SaaS businesses.

So those are the five reasons that cause churn of customers and it’s very simple to understand what an engaged customer looks like. You can just write some simple code to monitor that how they use the product and how frequently they use. If somebody don’t log in for two weeks, if somebody is not using the features and if he or she signed up and they haven’t used the product a whole lot you can flag them as Member-At-Risk and then have the customer success team reach out to them to make sure they go from a Member-At-Risk to a high retained customer, that is your opportunity.

Tip #1

Create a charter to establish the importance of customer success and communicate the vision and mission internally and externally

For starters, you must find a framework that fits your business and your customers. Benchmark your strategy and effectively communicate it all to internal and external stakeholders that will be impacted or interacting with your team.

Truly organising around the customer experience requires the business transformation, which requires buy-in from your executive leadership team. The Charter statement is an introduction that provides context around the following -

1. Why customer success initiative needs to be created

2. The problem that needs to be solved

3. How the initiative is aligned to the greater business strategy

4. The expected business impact

5. The cost that your company would incur if they do not solve this problem.

Tip #2

Organize for Customer success by establishing executive support and leadership as well as defining roles and responsibilities across the teams.

For this you need to know what are the roles of each person interacting with the customer? what are the rules of engagement for your internal stakeholders?

I believe that customer success is a function and the primary role that supports that function is the customer success manager or the CSM for short there are four components within the customer success function and these are

1. On-board

2. Adopt

3. Expand

4. Renew

There are specific activities within those four components such as

1. Deployment or Service Enablement

2. Usage or feature utilization

3. identifying upsell and cross-sell opportunities

4. Proactively managing the customer renewal

The metrics that are generally used to measure success across activity fallen to protect or defend and grow the business with such metrics such as usage pattern, renewals, upsell or cross-sell lead generation, and Churn.

Customer success managers must be able to focus both on the internal activities and actions required of them as well as the customer facing responsibilities. whenever possible the customer success managers to assist from a pre-sales perspective. In an example of a true SaaS business customer success managers would be aligned to their customers from service enablement all the way through the renewal and there’s a fantastic benefit from a customer care perspective and taking this approach.

Tip #3

Use the right key performance indicators to measure program effectiveness and create compensation models to drive results.

There are multiple ways to measure success in performance, teams can drive toward a shared target for example a group renewal rate. You can look at lead gen or key revenue initiatives which can be measured to encourage new growth while defending churns. The number of account reviews extended or strategic consoles is directly tied to success and measuring the number of these are critical. On the MBO side measuring outcomes of strategic consoles campaigns and on-site success metrics support the non-dollar based target.

Tip #4

Utilize a revenue lifecycle management framework and maturity model to drive continuous innovation.

There’s no one way to approach this but you need to know where you are currently in your evolution to know where you want to end up. You can benchmark your clients against the framework that looks like this. At level 1 which says you’re doing nothing and then all the way to the right at level 5, you’ve mastered the art of revenue lifecycle management or customer success.

Tip #5

Leveraging data about your customers to create a systematic approach to engage with them and identifying risks early on.

What do we mean by data specially usage data, how are the customers interacting with the solution, how frequently for example. Reading the customer’s digital body language is tracking how your customers are engaging with your product or service and the features that you offer.

Many companies don’t have usage data so even if you feel amateur you can use additional information and track the engagement of your users with things like usage data these can be very helpful in understanding and personalizing the engagement with your customer and as you begin the phase of your revenue lifecycle management journey focus on three things

1. Centralized your data sources

2. Hire a data scientist or implement strong data governance

3. Learn how to use the data to drive the right interaction with the right resource at the right time

This allows you to have a systematic approach to how you’re engaging with your customers and how you’re identifying risk early on is really important as you build out a practice.

Tip #6

Consult with customer engagement experts, leverage the expertise around you to guide your customer success strategy there are so many great resources available from conferences to books.

The industry experts that have been doing this for years take advantage of all that is out there and use it to build a customer success team that’s right for you and your company.