This is a guest by Aazar Ali Shad. Aazar is the VP of Growth at Userpilot, and has more than 5 years of SaaS Experience. He is currently helping 300+ SaaS companies improve user onboarding and increase product adoption.
Churn? It’s a scary word for every SaaS entrepreneur, marketer, and customer success team. It’s one of the reasons that SaaS founders might be missing out on sleep.
Even Fortune 500 companies can’t claim zero churn rates. Generally, a reasonable churn rate is 5%. If your churn is above that, you will need to rethink your strategies and try to do something that will help you to retain more customers.
In this article, we’re covering a range of approaches to help you reduce your churn rate in each stage of the customer lifecycle.
We will walk through 10 actionable steps you can take, as well as some successful examples of how to prevent churn. At the end of this article, you will be able to implement the same tactics to your system; preventing churn, improving retention, and increasing your trial-to-paid conversions.
Before we dive in-depth into each way to reduce your churn, let’s cover the basics.
Churn benchmarks – where do you belong (and why it’s important to reduce your churn rates)
As we mentioned, it’s understandable to have some customer churn, and it’s almost impossible to have zero churn rates.
Here, we will take a look at some of the most important churn benchmarks and statistics.
Churn correlates with different company types and stages. For example, younger companies have a tendency to have bigger churn rates as well as companies with lower MRR.
The higher your MRR, the less churn you will have. It’s the same as for the company age – if you’re an older company, you should have much lower churn rates than younger companies.
When it comes to the statistics that prove that reducing churn is important, these data from InsightSquared are mind-blowing.
According to InsightSquared, acquiring new customers costs 5 times more than retaining remaining ones. If you reduce your churn rates by 5%, your revenue can increase by 25-125% depending on your industry.
Let’s break down the basic principles of the customer lifecycle, churn types and see how can we prevent churn in each stage of the customer lifecycle.
Customer lifecycle teardown and churn types
In most cases, customer lifecycle looks like this:
So, the basic and the most important stages of customer lifecycle are:
- Ad or First Touch: This is the moment when your potential customer has their first contact with your company. In most cases, these are PPC ads, social media promotions, or blog posts.
- Signup: At this stage, your potential customer actually becomes your trial user. This is the moment where they input their contact data and register on your platform
- Activation: User activation is the moment when your users start to gain value. It’s a phase where a user fully engages or activates the initial set of persona-relevant key features in the product. Activation events happen inside your product during the user onboarding stage. In most cases, to fully adopt your product, your trial user will need to go through several activation points each targeting different feature and in-app events.
- Paid User: After the trial user finishes the user onboarding process and adopts the product, they become a customer. This usually happens after the end of the trial period if the customer is satisfied enough.
- Power User/Customer: After some time, when your paying customer fully adopts the product and feel it’s value in his own example, he becomes a power customer. Power customers are usually customers who are engaging with your brand on every step.
At each of these stages, you will need to try to reduce your churn. We will cover several approaches to (and examples for) each of these customer lifecycle stages.
Before we see how to reduce churn in the first stage of your customer lifecycle (Ad or First Touch), let’s look at some different types of churns.
Not all churn depends on you. Sometimes your customer leaves your product because their company failed. But there are many types of churn you can handle within your team.
Two most important types of churn are:
- Active churn
- Delinquent churn
Active churn usually happens because your user isn’t satisfied with your product, doesn’t know how to use it, or it doesn’t solve their problems. You can and should fight this churn type.
Delinquent churn usually happens because of technical problems with payment gateways or card expiration. In some cases, you can fight with this churn type too, but in some, you can’t. If your customer’s payment card just expired, what can you do about it? The only thing you can do is to let them know to update their payment method.
Before you even start taking on your churn rates, you must understand what churn type is dominant in your business.
This is very important, since identifying different churn types inside your customer lifecycle will help you to think of different strategies and approaches.
For example, if the card expiration causes the majority of your churn, how much energy should you put toward active churn?
The best way to identify churn types is to use product analytics or user onboarding tools and measure your dropouts.
Now when we know the basics of the customer lifecycle and most important churn types, let’s see how to prevent churn in each of these stages.
Prevent churn in user’s first contact with your company
As we mentioned, your potential customers often have their first contact with your company through ads.
Whether it’s via PPC or a social media ad, the rules are the same.
The most important thing here is that you must ensure that after clicking on your ad, your potential customers see what they’re expecting to.
One of the best examples for this are matching messages – i.e. when the messages on the ads correspond with the landing pages.
Here is an example from Comcast:
And here’s the landing page that corresponds and shows the same message as the ad:
What can we learn from this example?
- The offer is exactly the same on both the landing page and the ad
- Both the ad and the landing page use the same copy: “any internet”, “add tv/phone” and “$34.90 more per month”
- The colour combinations are complementary, so it’s easy for visitors to assume that they’re in the right place.
If you’re leading your visitors to the landing page with features, pricing, signup or home page, in order to prevent the churn and build interest in your offer, your landing page should answer the following questions:
- Is this something I need?
- Will it solve my pains/needs/problems?
- Is the price right?
- Can I trust this company?
- Do they care about the customer?
Having clear and informative answers will not just help you to capture their attention and build interest in your product- it also prevents churn.
Another great way to improve conversions on your landing pages and prevent the churn is to monitor your competitors’ website pages, and see how are they converting their visitors.
They might be more experienced in your industry, meaning they’ve already A/B tested a lot of different copy, CTAs, and landing page designs.
Design an engaging signup flow
There are two types of signup flows you can create:
- Friction-based signup flow
- Frictionless signup flow
If you’re unfamiliar with “friction” in this context, the team behind ConversionXL defined friction as “the measure of how much effort the user has to exert to sign up.”
Here are some things you can measure to see is your signup flow friction-based or frictionless:
- The number of steps your user needs to complete the flow
- The number of fields to fill in
The signup method you use depends mostly on your software.
More complex products that require more data and information from the user to start seeing the value usually require friction-based signup flow.
For products that are relatively easy to use, you should implement frictionless signup flow.
To illustrate this, here are examples of both friction-based and frictionless signup flows.
That’s the main reasons why they chose to use friction-based signup flow.
On another hand, Airtable is relatively easy to use. It doesn’t require any special steps.
This frictionless signup flow collects only the basic information of your trial users.
Of course, there are many benefits and shortcomings of both types of signup flows.
Benefits of friction-based signup flows:
- Higher activation rate after completing the signup flow
- Easier to reach the “aha moment” after the user enters the UI
- Help you to differentiate the ideal users from spammy users.
- Adds a level of security – less abuse of the trial period.
- You will collect more data you need about your customers, so later, you can create engaging and behaviour-based in-app experiences and user onboarding.
Shortcomings of friction-based signup flows:
- A lower number of completed signups
- A higher number of dropouts during the signup flow
Benefits of frictionless signup flows:
- Higher number of completed and successful signup flows
- Quickly leads your trial users to the UI and give them the chance to find value on their own.
- Gives users the ability to get to the “aha moment” at their own pace.
Shortcomings of frictionless signup flows:
- More spammy users and users who are going to abuse the trial period
- You will collect less information about the trial users
- Users might find it difficult to continue and complete the activation process on their own.
In both cases, you should choose the type of signup flow based on the nature of your product. It’s always okay to add a little bit more friction in the signup flow, especially if you have more “complicated” software like the FullStory team has, but try to reduce the friction as much as you can.
Prevent churn in the user onboarding process
User onboarding is the moment when your trial user starts exploring and learning about your product.
In this stage, you should try to lead your trial users towards the “aha moment” and the activation events as fast as you can.
Understand user onboarding
The basic user onboarding process consists of three different stages:
- The “aha moment” is the stage where your users perceive the value of your product
- Activation point is the moment where your users actually feel the value of your product in their specific use patterns
- Product adoption is the moment where your users fully understand your product and use it regularly
The ultimate goal of user onboarding is to create power customers from trial users.
The process of transforming your trial users to power customers takes time. And the best way to make sure your trial user doesn’t lose the attention during their user onboarding journey is to drive them to the multiple “aha” moments and activation points.
Long story short, the full process of transforming your trial users to power customers looks like this:
Now that we understand the basics of user onboarding processes and what the user onboarding journey should look like, let’s explore some useful ways to prevent churn, and improve retention (as well as trial-to-paid conversions).
Use Checklists to clearly tell your trial users what to do
Checklists are a great way to make sure your trial users set up everything they need and experience the “aha” moment and activation events as soon as possible.
Not only that, but Checklists are also based on the Zeigarnik effect – a psychological bias that explains how people have a tendency to better remember uncompleted than completed tasks.
With checklists, your users will easily start using your product and see the value you’re offering.
Here’s an example of a great user onboarding checklist from StoryChief:
StoryChief implemented two different psychological tricks that help its customers to successfully complete account set-up:
- Progress Bar
Both give its customers motivation and lead them towards the “aha” moment and user activation point.
Use context-driven and triggered actions to boost product adoption
As we mentioned, user journey and user onboarding flow are based on the consistent “aha” moments and activation points.
In other words, your user journey could look like this:
As you can see, user onboarding is based on multiple feature activation points.
Now, what are context-driven in-app experiences?
Context-driven in-app experiences are any type of action inside your product that is triggered by some behaviour.
Long story short, don’t try to build generic product tours showcasing each of the feature’s use cases.
Let users explore your product on their own to some point.
- A user navigates to the certain point of your product and only then you show them the tooltip about that feature
- When the user activates some feature inside your product, only then you show them a modal that tells them what to do next.
- Lead your users towards the “feature B activation” only when they activate feature A
The great example of using context-driven and triggered actions in user onboarding is HubSpot.
Whenever HubSpot’s user has yet to try the template feature (feature B) but tries to copy and paste some template in the email body (feature A), Hubpost shows its users this modal.
Do you see the power of context-driven in-app experiences?
Pro Tip: Create persona-based user experiences
If you’re serving different types of user personas (like CEOs and Social Media Managers for example), try building different onboarding UX and in-app events that are suitable for your target persona.
Success celebration is a great way to motivate your users to go forward and complete another activation point.
A great example of success celebration comes from MailChimp:
Optimize your transactional emails
Transactional emails are one of the most powerful ways to engage with your new users and users who forgot about your product.
If you’re not familiar with the term transactional emails (or user onboarding emails), these are emails that are triggered by some user’s action.
According to Smart Insights, transactional emails drive 4-8 times better open rates and click rates.
If you’re not using transactional emails in your user onboarding, now it’s the best time to do so.
With transactional emails, you can target user who:
- activated some particular in-app feature
- didn’t activate some of the core features
- didn’t visit your app for a while
- disconnected your script snippet
- haven’t bought a paid subscription
- and many more
The possibilities are endless.
Look at the following example from Competitors App:
This particular email is triggered when Competitors App’s users don’t add their domain address. In order to monitor their competitors, this step is a must.
Whenever Competitors App detects a user who hasn’t added his or her domain yet, it sends this email.
This particular email has open rates higher than 50%, and more than 30% of customers who open this email actually add their domain (which is the first user activation point in the Competitors App’s user onboarding).
How do you prevent churn after your trial users become customers?
By now, you have successfully onboarded your trial users, and they are your premium customers.
But, will they be your premium customers for a lifetime? Certainly not.
At some point, they will leave your product.
Of course, there are some things you can do to prevent churn from happening in this stage.
Listen to your churned customers
One of the first steps towards understanding your churn is actually understanding why customers are leaving your product.
You can conduct a range of analysis and look in product analytics, but the best way to understand the reasons behind your churn is to actually speak to your customers.
You can do this in various ways. One of the most effective ones is to use transactional emails (again).
When you see that someone is about to leave your service or product, send them an email and ask for feedback. Figure out what went wrong.
Let your customers know about the newest features
Whether you have a product or feature releases, let your customers know about your constant improvements.
Feature adoption will not just help you to prevent churn and improve retention, but it will also help you to convert your paying customers into power users.
The process of feature adoption is very similar to user onboarding (and product adoption in general). Make sure to unleash the “aha moment” and lead your customers towards the activation points.
The great way to get your customers to use your new features or add-ons is to use in-app tooltips and modals.
Whenever Facebook releases new features, you can see these cutting-edge tooltips:
Focus on annual payments
When a user finishes the trial period and is ready to start using and paying for your product, you should try to emphasize annual payments over monthly payments.
Companies who have few annual contracts tend to see churn rates around 10.40%. On another hand, companies who have 75-100% annual contracts can see churn rates around 2.59%.
Create an in-depth knowledge base
The knowledge base is a dedicated page for offering your customers in-depth and valuable answers to their questions and concerns. It’s a set of usable information every customer should have access to
According to eConsultancy, more than 51% of customers prefer technical support through a knowledge base over any other kind of self-serve support.
There are various examples and use cases of great knowledge base pages.
Long story short, a great knowledge base page should:
- Be easily searchable
- Provide valuable and in-depth answers
- Help to answer follow-up questions
Prevent churn via email
Churn happens when a user unsubscribes from your services and stops paying for it. These users were previously invested in your services, but aren’t anymore. How can you prevent churn with your email campaigns?
You need to act preemptively and if the user clicks on the “cancel my subscription” button or “disconnect my account” send an email to prevent it.
Offer great customer support
Although this may seem cliche, offering great customer support can really help you to prevent your churn rates.
According to American Express, one-third of the consumers said that they will consider changing vendors after just one poor customer support case.
Without a doubt, customer support plays a significant role in every business.
Here are some tips to improve your customer support
- Offer customer support through different channels (live chat, call center, social media, etc.)
- Build an informational and in-depth Knowledge Base that answers all of your customer’s questions
- Use chatbots to offer customer support to pre-users
- Offer different in-app widgets and useful links within your product
Reduce support requests and in-app UI friction
This is what most product’s UI looks like:
Focus on one CTA per view, rather than many CTAs per view
Recover Failed Payments
Failed payments are delinquent churn, and they can have a huge impact on your revenue. Credit card expiration is a very common issue, but luckily there’s a bullet-proof toolset to deal with this form of churn.
Churn Buster helps detect, prevent, and manage your failed payment and delinquent churn. They are the gold-standard for professional dunning.
The bottom line
Congratulations! If your user passed through all of the customer lifecycle stages we’ve mentioned, that means that they are now a power customer.
We’ve seen different stages of customer lifecycle, from user onboarding through the user journey. At each of these stages it becomes more and more important for you to try to prevent churn.
Just remember one of the statistics we’ve mentioned – reducing churn for 5% will result in 25-125% profit increase. Sounds desirable, right?
What will be the first tactic you will implement to prevent churn? Let us know in the comments!