If you’re in the customer success world, you’ve heard it a million times: It’s critical to reduce churn so a customer revenue stream can flourish.
According to Forrester, it costs SaaS businesses 5x more to acquire new customers than it does to retain existing ones. Marketing Metrics reports that the average probability of closing an upsell deal for businesses today is more than 3.5x times larger than the average probability of closing a new business deal.
What does all of this mean? Customer success teams are always on the hunt for silver bullets to reduce churn—but you can’t wipe it out overnight. You have to make improvements to your business’s customer journey to see incremental reductions in churn rate. The below churn reduction model from Zoho shows that reducing churn from 2.5% to 1% leads to double the customers in eight years.
With these findings in mind, it’s not a surprise that the best customer success teams are laser-focused on reducing customer churn. Here are five proven churn reduction tactics that customer churn experts swear by for customer success in 2019.
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1. Prioritize onboarding
If you’re not seeing churn at trial signup, your new user onboarding flow is likely contributing to your churn rate.
Onboarding is helping your users advance from sign-up to the point where they achieve their first success with your product. The process includes the completion of an in-app welcome flow, but it also generally includes a series of emails or in-app messages that communicate key functionality.
ConversionXL reports that 40-60% of trial signups in the SaaS space are abandoned before onboarding is even completed. Your onboarding flow needs to educate your new users on your product’s value and how to get started. If it doesn’t, they may churn before they even get a chance to know your product. Even increasing onboarding completion by 10% can help you capture a lot of incremental revenue.
Your new users’ first impression may be lasting, but it’s not final. Segmenting users by use case upon signup allows you to tailor onboarding messaging to their specific needs. (Here’s a good guide on setting that up.)
But it’s still important to know whether (and how) new users engage with the onboarding materials you send. Then you can tailor your follow-up messages based on whether they have engaged with your previous materials. You can even assess whether the collateral users do access is working by tracking page-by-page bounce rate, time spent on page, and more.
DocSend provides an affordable way for customer success professionals to do this. With instant read notifications and page-by-page analytics, you’ll know when your onboarding materials are opened and passed around. You can also find out where users are (and aren’t) spending their browsing time.
2. Incentivize annual plans
Incentivizing annual plans depends on renewal rate, so it may take a while to see results. But data from ProfitWell suggests it’s a no-brainer when it comes to reducing customer churn rate. As part of its churn study, ProfitWell reports that businesses with a larger percentage of annual contracts (rather than monthly contracts) see vastly reduced churn rates.
Ultimately, what this finding suggests is that larger, less frequent renewals are more churn-resistant than smaller, more frequent renewals. If you’re not currently offering annual plans as the default on your pricing page, consider doing so. There are calculations to compare the long-term gain in ARR from a higher renewal rate to the short-term loss in ARR from the discount applied to annual plans.
Try making annual plans the default and tracking renewal and customer lifetime value (CLV) by plan. If your sales and customer success teams aren’t actively incentivizing annual plans over monthly plans, it’s time for them to start.
3. Collect feedback from churned customers
According to Groove, 68% of customers churn because they believe you don’t care about their needs. Forum Corporation reports that 70% of customer churn can be attributed to subpar customer service experiences. Groove suggests that any given angry customer tells an average of 16 people about their experience.
One great way to reduce churn is to open a strategic channel for soliciting and receiving customer feedback. Your approach can vary based on your business and your targets. Soliciting enterprise client feedback is a different beast than collecting longtail user feedback, for example. What’s most critical to remember at this stage is to solicit feedback at pivotal moments in the user journey.
Perhaps the most overlooked point in the user journey for feedback collection is following churn itself. Feedback around customer churn decision-making offers insight to product and messaging strategy and to product and marketing prioritization.
Harvard Business Review suggests that even just asking for feedback can in some cases be enough to reduce churn. (Typeform has a useful guide for designing a customer churn survey.) Outside of churn-triggered feedback solicitation, it’s good to collect feedback throughout the customer journey. Deepen your relationships with those who provide positive feedback to turn them into brand advocates and evangelists.
You can also consult engagement metrics of assets sent to customers before they churned. This can help identify common engagement trends that may be resting beneath the surface. Listening to engagement data collected by a provider like DocSend helps you identify your key churn prevention levers.
4. Put your actionable feedback into action
Once you’ve analyzed your engagement data and determined the overarching causes for your business’s customer churn, it’s time to put that feedback into action.
Your churn prevention levers will be indicators of churn for your specific business. They’re indications that you can internally flag with marketing, product, or support for treatment. For instance, a key indicator of customer churn might be decreasing frequency of visits to your app or dashboard. The work of reducing customer churn rate would then become increasing the stickiness of your business. Alternatively, if a key indicator of churn is not utilizing a specific product feature, the work becomes boosting awareness and engagement accordingly.
Once you’ve executed the marketing, product, and/or support changes, set yourself up for some quantitative results. Strategic and tactical developments from churn feedback should be treated like any other marketing or product testing. When possible, A/B test and establish cohorts to assess the short-term and long-term changes in churn. Customer churn is a lagging metric, so consider leading and lagging churn factors when outlining your iteration plan and measurement model. Cohort analysis can be a particularly effective way to measure the results of churn reduction measures.
It can be really beneficial to experiment with a tight feedback loop among early or beta adopters of changes intended to reduce customer churn. This way, you can gain quick learnings to translate into strategy and execution refinements that produce big wins.
If changes are made to business materials or the way they’re sent, use DocSend to collect data. Stats like open rate, time spent in document, pages viewed, and forwarding activity can provide compelling evidence that you’ve moved the needle.
Whatever the churn levers you’ve discovered, collecting insightful customer feedback isn’t enough. It’s important to loop marketing, product, support, and—of course—customer success in, so that there’s unanimous investment in the initiative, but more importantly so that you can look to your full team for help. At the end of the day, reducing customer churn rate is very much a team effort.
5. Align sales and customer success
Ensuring that the goals of sales and customer success are aligned will ensure that teammates on both sides of the deal are working to eliminate customer churn. The last thing you want is highly-skilled sales reps who close deals with customers who ultimately aren’t optimal fits for your product.
To get sales and customer success truly aligned you should start by examining your messaging from the tail to the tip of the customer journey. From email copy to assets employed to seal the deal and inspire implementation, all members of your sales and customer success teams should be on the same page. It’s critical that sales and customer success are on the same page—a page that can be centrally and seamlessly updated by marketing, product, and other stakeholders. (Not to mention the simple fact that keeping materials consistent from one side of a deal to another can go a long way in building the trust you need to reduce customer churn.
In 2019, the importance of internally managing all versions of all sales and customer success assets and maintaining easily-accessible repositories of updated documents for reference and distribution can’t be overstated. This is incredibly easy with DocSend, as version control is as simple as clicking “Update” and uploading the new version of a case study, pitch deck, or other sales asset. No more sending out corrected versions or new links!
To close, here are five critical takeaways to bring to your next meeting about customer churn:
- Optimization of new user onboarding flows can go a long way. Most self-serve customer churn happens early on in the customer journey. Sometimes it’s just a matter of better educating your new users and introducing them to your product.
- Incentivize users to make fewer (but larger) purchase decisions. Larger, less frequent purchase decisions are less susceptible to churn than smaller, more frequent product decisions are.
- The most useful feedback can come from customers who have just churned. Oftentimes, this feedback can be crucial in plugging the holes in a customer success team’s leaky bucket.
- When it comes to iterating in response to feedback, tracking is everything. Without quantifiable, observable testing metrics, attributing a reduction in churn can be surprisingly challenging and convoluted.
- Reducing customer churn is a full-team effort and a full-team success. From product & engineering to marketing to sales to customer success & support, every team plays a role in the most successful customer churn reduction strategies.
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