You are not the only business looking into how to reduce churn in SaaS. While customer churn isn’t unusual, it becomes a problem when you start losing customers faster than you retain them. Ideally, your SaaS business’ monthly churn rate shouldn’t exceed 3 to 8%, meaning you should retain at least 92% of your monthly users.
If you lose more than 8% of users monthly, it could be due to poor customer service, bad product-market fit, unimpressive UX, or other issues. Regardless of what’s causing your churn, keep reading. In this guide, we’ll explain churn reduction and reveal the best strategies to reduce churn to protect your customer base and long-term business success.
What is churn prevention?
Customer churn prevention refers to measures or strategies implemented to dissuade customers from quitting your product. An excellent example is Meta’s recent tactic that stops users from quitting Threads – Deleting your Threads account will automatically delete your Instagram account.
However, it’s not enough to stop users from abandoning your product. The best churn prevention strategies motivate users to maintain a lasting relationship with your brand. The longer a customer stays with your brand, the higher their customer lifetime value (CLTV) will be, meaning you can earn more from that user.
The first step to creating an effective churn prevention strategy is understanding why customers churn. Once you’ve identified your churn causes, you can take proactive measures to prevent losing more customers.
Churn prevention vs. churn reduction
People often use churn prevention and churn reduction interchangeably, but there are notable differences between the two terms. Churn prevention consists of proactive measures that anticipate and stop churn from occurring.
Unlike churn prevention, which seeks to stop churn before it occurs, churn reduction aims to minimize ongoing churn within a SaaS company. This means churn reduction is reactive instead of proactive. Besides minimizing churn, churn reduction mitigates the impact of attrition by re-engaging and re-acquiring lost customers. Re-acquiring churned users will revitalize your customer base and protect your profitability.
11 ways to reduce churn for your SaaS product
If you know how to reduce churn in SaaS, you can stabilize and grow your customer base, maximize revenue, and build a stronger brand reputation. Here are the most effective strategies for keeping your SaaS customer churn rate within an acceptable range.
1. Optimize onboarding
23% of customer churn is due to poor onboarding. Onboarding introduces and shows new customers how to use your SaaS product to experience value and solve their problems quickly. If your onboarding process is slow, lengthy, or confusing, users may feel overwhelmed, frustrated, and unengaged because they don’t understand your product. Such users will consider your product a poor fit for their needs and not worth their effort, making them more likely to churn.
Why this strategy works
Improving onboarding increases customer retention because it helps users quickly understand what your product can do and how to use it to achieve their goals. Since such users have a short time-to-value, they are less likely to churn because your product is already improving their lives.
Also, an optimized onboarding process eliminates the obstacles and challenges customers face when using your product for the first time. Making users’ initial experience as smooth as possible will motivate them to continue using your product.
How to do it
User onboarding is a multistage process that involves welcoming new customers and teaching them how to use your product to their advantage. Optimize your onboarding process with these tips:
Simplify your sign-up and sign-in process.
Collect user information gradually instead of forcing users to provide all their information at once before using your product.
Give users interactive checklists for tracking their progress through the onboarding process.
Offer real-time support to help new users quickly overcome any obstacles they encounter during onboarding.
Assign dedicated onboarding specialists to guide new users if you have a complex product.
Use in-app videos and interactive walkthroughs to familiarize new users with your product’s features.
How to measure it
After optimizing your onboarding process, check if the strategy has improved customer retention. Below are metrics you can monitor to check if onboarding improvements have boosted your user retention.
Time-to-value (TTV): The metric reveals how long it takes new users to experience value with your product. The TTV should be as short as possible to ensure users experience value quickly.
Engagement metrics: High user engagement proves customers find your product valuable and useful. Metrics you can track to gain insights into engagement include login frequency, time spent using the product, bounce rate, and interaction time with different features.
You can also run a comparative analysis to compare users’ behaviors and outcomes before and after improving your onboarding. If fewer users churned after your onboarding improvement, your upgrades worked.
2. Personalize customer experience
You won’t find a how-to-reduce churn in SaaS guide that doesn’t mention customer experience personalization. According to a McKinsey report, 71% of customers want personalized interactions, and 76% are unhappy when they don’t get it. Personalizing customer experience involves using data-driven insights to tailor a user’s journey to their unique needs, preferences, and goals.
Why this strategy works
Customer experience personalization helps lower churn for several reasons. For example, tailoring the user journey to a customer’s preferences makes your product feel better suited to the user’s needs. Also, tailoring recommendations or solutions to address a user’s unique pain points provides a better experience. A SaaS product tailored to deliver these benefits is more likely to retain users and keep them engaged.
How to do it
Provide a personalized user experience by first collecting relevant data regarding user preferences, pain points, and needs. Insights from the data will help you tailor relevant aspects of your product to make it more engaging and valuable.
Aspects of your SaaS product or service you should consider personalizing include communications, pricing, feature recommendations, onboarding, and special offers. You can also offer users the option to customize your product’s user interface or dashboard to match their preferences.
How to measure it
Check if customer experience personalization has improved churn rates with a segmented churn analysis. A segmented analysis will split users into groups that received personalized experiences and those that didn’t. You can then compare each segment’s engagement rates to identify the one with a better user experience.
Alternatively, use a comparative A/B test to identify if user engagement was higher before or after you provided a personalized customer experience.
3. Continuous communication
Continuously communicating helps reduce SaaS churn by fostering lasting relationships with users and boosting engagement. It involves keeping users updated about coming features, new ways to use your product, special offers, and more. However, continuous communication is more effective for reducing churn when users can respond by providing feedback.
Why this strategy works
Frequently communicating with customers keeps you at the forefront of their minds and improves engagement. Boost retention and user activity by telling customers new ways to use your product to complete tasks and improve their lives. Sharing new ways to use your product will reduce attrition by giving users fresh reasons to explore your product and new ideas to experience value.
But don’t just talk to customers. Provide customers opportunities to talk to your brand and share their insights, ideas, reviews, and more. Listening, responding, and acting on what your customers say can boost loyalty, trust, and customer satisfaction, leading to improved retention.
How to do it
Are you curious about how to reduce churn in SaaS with communication? Start with user research to identify your customers’ preferred communication channels.
Most SaaS users prefer email, social media, and in-app communications. Personalize and schedule communications to deliver when users are most likely to read and engage with them. You can discover such insights during your user research. If communicating via social media, promote discussion by motivating users to share their experiences with your product or ideas for improvement.
How to measure it
Track email open rates and click-through rates to see if users actively engage with your messages. You can also run a segmented analysis to see if users who receive communications are churning less than customers who aren’t receiving your communications.
4. Value-driven pricing
If customers feel your product isn’t worth the price, they will abandon it. At the same time, you don’t want to lower your price to the point your product becomes unprofitable.
Attract and retain customers by choosing a pricing model that represents your product’s value and fits your SaaS business model. Value-based pricing makes customers less averse to paying for your product because they feel its value is worth the cost.
Why this strategy works
Since customers are always looking for the best deal, they may leave your product for a less expensive alternative. However, customers are less likely to churn if your price is competitive and your product is worth the price.
Customers won’t churn in this scenario because they believe your product delivers a satisfactory return on their investment. In summary, users will remain loyal customers as long as they get their money’s worth or more out of your product.
How to do it
Offer transparent tiered pricing so customers know what each price tier offers. Each higher tier should provide more value and benefits with clearly differentiated features. The setup allows users to choose a price plan that fits their budget and needs.
Alternatively, let users tailor plans to their unique needs. For example, let users pay for the features they want and modify their plans as their needs change.
How to measure it
Monitor your churn rate to see if more users quit your product after changing to a value-driven pricing model. You can also measure the performance of value-driven pricing by working with customers to quantify their return on investment (ROI) after using your product. Lastly, look at renewal rates to see if customers who have experienced your value-driven pricing are renewed plans more than other users.
5. Proactive customer support
An excellent how-to-reduce churn in SaaS tip is providing quality customer support proactively. Proactive customer support involves identifying and addressing customer issues before they escalate. A proactive approach to resolving user issues will enhance customer satisfaction and help build lasting customer relationships.
Why this strategy works
Satisfied customers have no reason to churn. So, help customers avoid issues that might cause them to churn by resolving the issues before they can disrupt the customer experience.
If an issue occurs before you can nip it in the bud, minimize your response time to customer complaints. Answering and resolving customer issues quickly lessens user discomfort, so they don’t have time to consider churning. 90% of customers want an instant response when they need customer support, and instant support means getting help within 10 minutes.
How to do it
The first step to providing proactive customer support is to identify areas of friction. Accomplish this by monitoring user behavior on your SaaS product and analyzing support history. You will gain insights into issues users typically experience while using your product. You can then develop a plan to resolve those issues proactively.
Also, by monitoring user behavior and activity in real-time, you can quickly intervene and help if you notice users having trouble. For example, a user that repeatedly stops using your app at the same point, such as at checkout or while using a feature, may have issues. You can contact that user to offer assistance with using the troublesome feature.
How to measure it
Proactive support addresses user issues early to prevent customers from becoming frustrated and churning. Measure if your proactive support strategy works by using exit surveys to learn why customers churned. You can also use Customer Satisfaction (CSAT) surveys to measure customer satisfaction related to your proactive support services.
6. Usage analytics
You need usage analytics when looking into how to reduce churn in SaaS. Usage analytics provide clear insights into why customers abandon your product. Knowing the cause of churn simplifies improving retention because you can fix the identified problem before other users disengage.
Why this strategy works
Monitoring usage analytics helps you understand user behavior and shows the user patterns that lead to churn. For example, if most users complete your free trial and churn instead of upgrading to a paid plan, it could mean your pricing scares off users. You can fix this issue by making your pricing more attractive.
Also, understanding why users churn can provide you with early warning signs that help you take proactive measures to prevent attrition. For example, a customer that uses your product less or stops using critical features may churn soon. Thanks to the early warning from usage analytics, you can reach out to the user to address their concerns and prevent churn.
How to do it
Usage analytics involves tracking and analyzing user interactions and behaviors within your product. The process requires first identifying relevant metrics for tracking user behavior and patterns. Examples are metrics for tracking user interactions, feature usage, session duration, and clicks.
With the data, segment users according to their likelihood to churn. Next, contact the most churn-prone users to discuss and fix their pain points.
How to measure it
Below are the most important metrics to track for usage analytics:
User adoption
Feature usage
Session duration
Usage frequency
Conversion rates
Alternatively, use heatmaps to see where users click and hover within your interface. It can help you identify elements that confuse or frustrate users before they churn.
7. Continuous education
Your SaaS product will come with multiple features, and some of those features may be unfamiliar to users. If existing customers don’t understand a feature, they can’t use it to experience value. However, with continuous education, you can teach users about advanced features and encourage them to leverage the features to experience more value.
Why this strategy works
Continuous education helps users better understand your product as it evolves so they can experience more and more value with it. The more customers can use your product to their advantage, the better their customer experience will be, leading to increased loyalty and user engagement. Loyal and engaged users are less likely to churn.
Continuous education also improves product stickiness because it drives users to experience more of your product’s value. These users will come to rely on your product to complete tasks and improve their lives, making them less likely to churn.
How to do it
Do you want to know how to reduce churn in SaaS with continuous education? Continuously educating users involves providing information about your product and services through webinars, tutorials, and other resources.
You can share these resources or links to such resources via social media updates, newsletters, blog posts, or scheduled online events. The important thing is to share the updates and resources via your users’ preferred communication channel. Otherwise, they might not see or engage with your educational content.
How to measure it
Collect customer feedback to discover if your educational content has improved user experience. For example, you can use Customer Satisfaction (CSAT) or Net Promoter Score (NPS) surveys to gather insights into user satisfaction with your educational resources.
You can also track the consumption of your educational materials to see if users actually study and use them. For example, you can check how many users complete your online courses or engage with your tutorials.
8. Continuous feedback
Image Source: Convas
Customer feedback gives you real and valuable insights into your product’s value, shortcomings, and areas of improvement. By actively and continuously collecting user feedback, you can learn your product’s shortcomings, fix them, and eliminate factors that could cause users to churn.
Why this strategy works
User feedback tells you exactly what users dislike about your product. With this insight, you can optimize your product to be more attractive and valuable. For example, you can discover and fix customer issues that cause churn. You can also discover and add new features your users want to make your product more valuable and attractive. If you eliminate all the factors that typically cause users to churn, you will have more satisfied customers and stronger user retention.
How to do it
Collect continuous user feedback by placing a feedback widget within your product. Users can click the widget to provide feedback, report bugs, or request features without leaving your application.
Alternatively, email surveys to users monthly. The survey should contain questions regarding user satisfaction and areas of improvement. You can also run polls on social media to engage users and learn their preferences.
How to measure it
Track your monthly customer churn rate to identify if churn has reduced since you started collecting and acting on user feedback.
9. Renewal reminders
It's not unusual for people to forget to pay their bills. But your SaaS customers neglecting to renew their subscriptions means you lose money. Avoid such revenue churn by sending users renewal reminders before their subscriptions expire. You can also motivate users to renew subscriptions on time by providing incentives. For example, users may lose stored data if their plan expires without renewal, or renewing before expiration costs less.
Why this strategy works
The strategy is effective because it proactively stops users from churning due to not renewing plans. Also, customers who rely on your product daily won’t like losing access to it because they forgot to subscribe. Such users will appreciate the reminder because it ensures uninterrupted access to your product.
Lastly, you may have users who think they’ve renewed but actually had failed transactions. Your reminder will let them know their renewal failed so they can resolve it and avoid passive churn.
How to do it
Set up automatic reminders that users will receive days before their subscription expires. Users should continue receiving the reminder until they renew their subscriptions. You can send such reminders via in-app notifications, email, or text messages.
How to measure it
Measure the effectiveness of renewal reminders with metrics like monthly recurring revenue (MRR). MRR reveals how much your SaaS product earned within a month. If your MRR from the previous month is higher than the current month, it means fewer users renewed their subscriptions in the new month. You can also track customer and revenue churn rates to identify the number of customers and how much you lost due to users not renewing plans.
10. Engagement incentives
Engagement incentive is another effective strategy regarding how to reduce churn in SaaS. The incentive rewards customers for using your product, and as we’ve established, appreciated and engaged users are less likely to churn.
Why this strategy works
An engagement incentive is a reward given to users to motivate them to continue using your product. Users will only receive such rewards if they’ve crossed certain milestones, such as using your SaaS product daily for a month. The strategy is effective because it rewards users for being loyal customers. The reward will motivate users to continue using your product because it delivers a benefit they can’t get elsewhere.
How to do it
Gift rewards to customers who have used your product continuously for a period of time or have completed specific tasks with your product. The reward doesn’t have to be financial, such as discounts. Instead, it could be exclusive feature access for a limited time or loyalty points that users can accumulate to access other benefits.
Alternatively, the reward could be as simple as badges, such as the types Grammarly and Duolingo award users for consistent usage and crossing milestones. Studies show that gamification tactics like this increase customer engagement, which is essential for boosting retention.
How to measure it
Measure customer lifetime value to see if users exposed to your engagement incentives are more loyal and generating more revenue than non-incentivized users.
11. Customer success managers
Customer success managers build relationships with users and help them experience value with your product. They accomplish this by showing users how to achieve their desired outcomes with your product as quickly as possible.
Why this strategy works
Customer success managers ensure users have a positive customer experience that boosts engagement. This makes them essential when strategizing on how to reduce churn in SaaS. With a customer success team, you can ensure new customers get onboarded quickly and receive the assistance they need to experience value with minimal effort.
How to do it
Set up a customer success team that targets new customers or existing customers who have trouble using your product. The team will help such users experience the value of your SaaS product by showing them how to use its features to their advantage. Doing so will boost user engagement and loyalty to minimize the risk of churn. It also creates opportunities for the success team to generate more revenue by upselling and cross-selling to users.
How to measure it
Segment your users according to who received and didn’t receive assistance from your customer success team. Next, measure the tactic’s effectiveness by looking at the CLTV, churn rate, and retention rate of users. Compare your user segments to see if customers helped by your success team churned less and achieved a higher CLTV.
Contact DevSquad today to develop a SaaS product optimized to minimize churn and boost retention.
