It’s disheartening to see a hard-won customer cancel their contract. Beyond being disheartening, churn can be an existential threat, especially for software as a service (SaaS) companies. The difference between positive and negative churn can mark the difference between successfully growing your business or struggling to stay afloat.
With churn, like most things in life, an ounce of prevention is worth more than a pound of cure. Paying attention to the right leading indicators and acting decisively can make all the difference.
Pay attention to early symptoms.
While churn typically manifests itself when a customer’s software contract is up for renewal, the seeds are sown much earlier, and the symptoms start manifesting themselves as early as the first 90 days of a customer relationship. Here are three things to look for:
Product onboarding: The first 90 days are absolutely critical when it comes to churn prevention. Closely monitor product usage and customer education data to track if users are successfully onboarding with your product. Pay particularly close attention to the delta between the number of software licenses sold and the number of users taking training and logging on to the product. Any gulf is a sign of trouble. Also, pay close attention to the tasks you have outlined for users to derive value from your product in the first 90 days. If you’re not seeing users complete these tasks, that’s a red flag.
Per-user product engagement: Beyond the first 90 days, keep a close eye on product usage at the per-user level. Are you seeing users log on to your product consistently? Are they discovering new and advanced features as they spend more time and grow more comfortable with the software? What is the nature of support tickets that they’re creating? Are these related to introductory or advanced features? Are you seeing a drop-off in product usage once users hit a certain set of features?
The breadth of usage in the customer organization: Also important to track, beyond the first 90 days, is the footprint of usage in the customer’s organization. While this depends on the nature of the product, it’s typically a bad sign if you’re seeing only a select group of users interacting with the product, especially when the product was designed for broad consumption. This is a doubly worrisome sign if you’re also not seeing a good depth of usage with users.
Proactively address the drivers of churn.
What can you do to avoid these symptoms? And what do you do when you notice these symptoms are happening with a new customer? Here are some ways to churn-proof your business.
Clearly define value: It’s important that you develop a good understanding of how customers define value and of the behaviors that generate this value. You can do this by analyzing the journeys and actions of your best customers and encouraging the adoption of these behaviors with the rest of your customer base.
Shorten time to value: In the product onboarding process, it’s important to design the shortest possible time to value for new customers. Doing this right takes a set of thoughtful investments in user experience, onboarding emails, in-app cues and customer education. A good way to address this is by having a set of stakeholders across the product, customer success and marketing teams own and optimize the onboarding process.
Create customized learning paths: It’s not enough for training to be product-focused; it should also be designed to help customers achieve results. With this in mind, work backward from the goals you would like your customers to accomplish. By customizing learning paths by personas (roles), knowledge-level and lifecycle stage, you can improve completion rates and thereby influence product adoption.
Adopt continuous user onboarding: Although the first 90 days of an account are easiest to identify as the most critical, for most businesses, individual users come and go. In fact, your user base may experience 100 percent turnover in a year (due to changes in employment and/or role) even though the “account” appears stable. Best practice is to adopt continuous, self-service user onboarding strategies, such as on-demand training, whenever a new user appears in the system.
Have a single source of truth: When gauging account health for a given customer, it’s important to build the health score based on a holistic combination of product usage, customer education adoption, support ticket volume and Net Promoter Score (NPS) inputs. Your CRM system can act as an excellent single source of truth for this data. Tracking this data consistently lets you act on it in the form of email nurture streams, direct outreach and more. During the sales process and customer conversations, be sure to understand who should be using the product in a given organization and track this throughout the customer lifecycle in your CRM.
Identify drivers of churn: Churn happens. When it does, taking the time to analyze the situation is valuable for learning and growing as a customer-focused organization. Instituting a “Correction of Error” process for churned accounts can help with pattern recognition and facilitate new processes that could proactively prevent future churn.
Negative churn is the promised land.
Remember that churn isn’t a zero-sum game. The important thing is to start early, focus on the right set of metrics, and involve stakeholders across teams in making an impact. Doing this can lead to negative churn and set in motion an amazing flywheel of growth for your SaaS business.