Recurring revenue is the gold standard for SaaS companies, and revenue churn is perhaps the most important metric that they must work to combat.
Churn is the SaaS-killer.
It eats away at your revenue, demands the attention of your most valuable team members, and can cast a dark cloud over the future of your company.
According to a study by Bain and Company, a 5% increase in customer retention can increase profits by 25% to 95%.
That is why SaaS companies must work from Day 1 to improve their churn and fend off churn increases as their company grows, which is all too common of a problem.
Just take a look at this example from Baremetrics, which shows the profound differences in MRR after one year for two different levels of churn:
Without even increasing its growth rate and simply by reducing churn, the company was able to generate an additional $25,000+ in MRR.
In this article, we’ll take a look at how some of the most successful companies in the world have been able to reduce customer and revenue churn through innovative strategies.
You can use these examples for inspiration in your own churn reduction campaigns and work toward a more sustainable future for your SaaS.
How Groove Reduced Churn by 71% By Digging Into Why Customers Quit
While 4.5 isn’t high for your average SaaS, it was an unsustainable amount for Groove based on their business model.
When management met to discuss the issue in January 2013, it immediately became clear that they didn’t have a full understanding of why their customers were leaving, let alone what they needed to do to fix the problem.
They responded by systematically researching the behavior of their users to better understand those that canceled their subscription.
Their research quickly uncovered a few key differences between customers that stayed and customers that left.
By identifying several red flags, the company was able to identify customers that were at a high level of risk of leaving the company before they actually churned.
Some of the churn red flags that their research uncovered included:
- Length of first session. Customers that spend longer getting to know the software during their first session provided more likely to stay for the long haul. Customers that stayed for the first 30 days had initial sessions that lasted 3 minutes and 18 seconds. Customers that were more likely to leave had first sessions that lasted just 35 seconds on average.
- Frequency of logins. Customers that logged in more often were more likely to stay. Customers who stayed with the service logged in 4.4 times per day on average. Those who left only logged in 0.3 times per day.
By identifying the triggers that associated strongly with churned customers, they gave themselves a roadmap for improving the issue.
The first thing they did was put together emails that went out to users whose first session were under 2 minutes.
By reaching out to these users and offering a quick Skype chat, the company was able to walk user’s who had issues through using the software.
Their email had a 26% response rent.
Of those that actually took them up on the call, 40% ended sticking around for more than 30 days after the call.
Groove also delivered an email to users who logged in less than 2 times in the first 10 days of creating their account.
This email had a response rate of 15%.
Of those that responded, more than half would continue to use Groove for more than 30 days.
Just by identifying some triggers and sending thoughtful emails to at-risk customers, Groove was able to reduce their churn significantly.
They used these tests as a basis for the complete revamping of their onboarding process with these principles in mind.
After reworking their onboarding process, the company was able to reduce its churn by a whopping 71%.
Identifying behaviors that signaled negative outcomes allowed the company to intervene at key moments and help customers with the problems that they were experiencing.
For SaaS companies, helping your customers to understand the power of your software is half the battle for fighting churn.
How DropBox Reduces Churn by Setting Milestones and Incentivizing Their Completion
When it comes to using emails to reduce churn, there are few companies that do it better than DropBox.
The company uses milestones, triggers, and incentivization to pus their customers toward using their app.
We all receive a huge number of automated emails.
It’s easy to ignore them. DropBox knows this and has done everything that they can to stand out from the barrage of automated emails the average person receives on a daily basis.
Just take a look at this email that they send to customers that have not started using the DropBox app, despite signing up for the service:
DropBox has also made great strides in reducing churn and promoting growth by offering incentives to users who take certain important actions.
For example, inviting friends to the service through email, Facebook, or Twitter allows users to secure more space helped the company to increase their signups by 60%.
You can use incentivization at other points in the customer lifecycle as well.
If you see that specific inaction is correlated with high levels of churn, you can offer your customers something in return for completing the action and reducing the chance that they churn.
Understanding the bottlenecks in your customer lifecycle can show you where your focus needs to be placed and where the best place to offer incentives may be.
Giving your customers something valuable in return for your biggest anti-churn triggers is a powerful strategy that any SaaS can replicate.
How Mention Reduced Churn by 28% By Improving Communication
Mention helps customers track what is being said about them online.
For a company with a foothold in communication, it makes sense that they would turn to what they know best to reduce their churn.
CrazyEgg published a great piece on companies that reduced churn through effective communication with customers that featured Mention among a few other companies that used similar strategies.
Mention didn’t always have problems with churn.
But as so many SaaS companies do, they began to struggle with it when they found success.
As the popularity of their business grows with a userbase that grew from 50,000 users to 200,000 users, their churn rates quickly became unsustainable.
To combat this, the company started by establishing a few facts about its users.
First, they knew that their paid and free trial members were more profitable, and likely always would be, than the people that signed up for their free plan.
They also established that the most profitable thing they had done thus far was to deliver automated emails to free trial users.
By enticing them to try out new features by teasing them through email, Mention was able to improve their adoption rates.
They put together a 3-month plan.
Using Intercom.io, the company segmented its users according to the different membership types.
They placed a priority on the most valuable users and introduced a new system for assigning support tickets:
The switch to handling support tickets in batch requests every four hours meant that their teams had freed up a lot of time to focus on other goals that they were chasing at the time.
It meant that their teams could spend as much as 50% less time on support, and their levels of customer satisfaction increased as their support teams were able to spend more time helping and communicating with paid users and those on the free trial.
By placing their focus on helping their most impactful customers, Mention enjoyed a 28% reduction in their churn, putting the company in more healthy standing.
How Baremetrics Reduced Churn by 63% By Removing Self-Serve Account Cancellation
In a blog post, Baremetrics founder Josh Pigford outlined the churn problem that the customer was having.
At the start of 2014, the company was experiencing unsustainable levels of churn — 10.3% user churn and 13.1% revenue churn.
Image Source: Baremetrics
These are extremely high levels of churn, enough to threaten the future of the company despite their growth.
They knew they needed to act quick, so the management team at Baremetrics focused all of their attention on fixing the problem.
The first and perhaps most impactful step they took was to remove self-serve account cancellation.
Being able to log in and end your subscription with a company is a perk that many SaaS users enjoy, but is a huge source of churn for many SaaS companies.
Is offering that level of convenience to your users with the customers that you will lose? Baremetrics thought not.
Removing user self-served cancellation served two purposes.
First, it allowed them to actually collect feedback from the people that canceled.
The little textbox they had on the cancellation page wasn’t actually giving them anything useful.
Additionally, they were able to save about 15% of all cancellations simply by requiring that they interacted from someone at the company when canceling their account.
Many of the customers simply didn’t realize that Baremetrics had a certain feature that they were looking for.
Next, they shifted their focus to providing more education to their users. If they wanted them to really dig into their software, they had to give them the tools to do so.
They expanded their help desk, launched several webinars, adjusted their automated emails to deliver more timely education materials, and reached out to users to help them through the process of integrating the software into their work routines.
How Intercom Reduces Churn By Targeting Big Customers With Activity Dropoff
Intercom.io’s Des Traynor has a unique view of churn.
He argues that not all churn is created equal and that the process of canceling an account actually begins as early as when the account is first created.
Image Source: Intercom.io
Throughout a churned customers lifecycle, there are clear indications that the customer is in danger of canceling their account.
Intercom dives into the engagement red flags of their customers to evaluate what those indications may be and work to offer tools that can help companies to identify their own issues.
While most SaaS companies focus on sending emails out to users that haven’t logged in in a certain number of days, Intercom emails users who have seen a significant drop off in activity, sometimes across an entire team within the company.
They take this as a sign that their software may be losing value with the customer and attempt to address the issue head-on.
By focusing on team usage, the company was combating churn with their most profitable customers.
When a team of 100 people begins to use the software less over time, the more likely cancellation becomes.
By focusing on these specific types of customers, Intercom reduced churn with their most profitable customers, proving that indeed not all churn is created equal.
How Buffer Reduces Churn and Increases Engagement with Trigger-Based Emails
Buffer has been a big advocate for reducing churn through trigger-based emails.
Identifying the key points of usage that lead to long-term customers and then prompting customers to take those steps can be a great way to reduce churn and improve retention in the long term.
For Buffer, a customer scheduling a lot of Tweets is a good sign that they are getting value out of the service.
Users that let their account sit there without scheduling anything are more likely to cancel their accounts.
But they did notice an anomaly — 33% of their churned users actually used their accounts on the day they canceled them.
This runs contrary to what most SaaS companies experience.
To reduce churn and improve retention, Buffer started emailing their customers whenever their queued social posts ran out.
This prompted them to log into their account and reload their Twitter feed, and always kept Buffer top-of-mind.
By prompting customers to keep their account filled, there was less of a chance that they would cancel their account when their feeds ran empty, which was a trigger that the company had identified as leading toward cancellation.
Reduce Churn for Long-Term SaaS Success
Churn is often tied to the success of any SaaS company.
To reduce churn is to improve your MRR now and in the future, giving your company a wider runway and improving growth.
There are many strategies that companies can use to reduce churn.
The ones outlined in this article provide some inspiration and good starting points.
However, every SaaS company is different and an understanding of your software and users is essential for success in measurably reducing your churn.