Sales

5 proven ways to predict and reduce customer churn rate

More and more customer success teams are on the hunt for silver bullets to reduce customer churn rate—but you can’t wipe out customer churn overnight.
reduce churn rate

If you’re in the customer success world, you’ve heard it a million times: It’s critical to reduce customer churn rate 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 even 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? More and more customer success teams are on the hunt for silver bullets to reduce customer churn rate—but you can’t wipe out customer churn overnight. You’ve got to make improvements to your business’s customer journey (from onboarding to feedback collection to churn prediction, and beyond) to see incremental reductions in churn rate. In fact, the below churn reduction model from Zoho shows that reducing customer churn rate from 2.5% to 1% leads to double the customers in eight years!

customer churnWith these findings in mind, it’s hardly a surprise that the best customer success teams are laser-focused on reducing customer churn. Let’s look at five proven churn reduction tactics that customer churn experts swear by for customer success in 2019.

1. Reduce churn by prioritizing onboarding

If your battle against customer churn isn’t starting at the point of trial signup, your new user onboarding flow is likely contributing to your customer churn rate.

We define onboarding as the process by which you help your users advance from the point of signing up to the point at which they achieve their first success with your product. Onboarding includes the completion of an in-app welcome flow, of course, but also generally includes a series of emails or in-app messages that surface key functionality.

ConversionXL reports that 40-60% of trial signups in the SaaS space are abandoned before onboarding is even completed. If your onboarding flow fails to educate your new users on the value prop and how to easily get started, they may well churn before they even get the chance to fall in love with your product. Think of all the potential incremental revenue your business can capture if you improve the completion of your onboarding flow by even 10%.

Your new users’ first impression may be lasting, but it’s not final. By ensuring you’re optimizing your new customer messaging by segmenting users by use case upon signup, you can tailor resonant messaging to their specific needs. (Here’s a good guide on setting that up.)

Targeting new users with use case-based messaging may do wonders for reducing customer churn rate, but it can be difficult to scale such efforts without knowing whether (and how) new users engage with the onboarding materials you send. From enterprise clients to longtail users, there’s tremendous value in tailoring follow-up to onboarding users who have or have not engaged with the collateral you’ve sent. 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.

In fact, DocSend provides an affordable way for customer success professionals to do just this. With instant ‘read’ notifications and page-by-page analytics, you’ll know when your onboarding materials are opened and passed around, and where new users are (and aren’t) spending their browsing time.

reduce churn

2. Incentivize annual plans

Incentivizing annual plans may take a while to prove itself (since it depends on renewal rate), 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 customer 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, it’s time to revisit the architecture of that page. There’s, of course, calculations to be done comparing 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.

That said, ProfitWell’s churn study is a clear indication that you should at least test 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.

annual contracts

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 even suggests that a given angry customer tells an average of 16 people about their experience.

One great way to reduce customer churn is therefore to open a strategic channel for soliciting and receiving customer feedback. Methodology and implementation 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. Investigating and aggregating feedback around customer churn decision making lends considerable insight to product and messaging strategy, as well as to product and marketing prioritization.

Whether it’s a simple email, a phone call, or a more fleshed-out landing page, Harvard Business Review suggests that even just asking for feedback can in some cases be enough to reduce customer churn. (Typeform has a useful guide for designing a customer churn survey.) Outside of churn-triggered feedback solicitation, it’s healthy to collect feedback throughout the customer journey—and to deepen your relationship with those who provide positive feedback to turn them into brand advocates and evangelists.

Beyond the solicitation of customer feedback, you can also consult engagement metrics of assets sent to customers before they churned and identify common engagement trends that may be resting beneath the surface. By listening to engagement data collected by a provider like DocSend, you can identify your business’s key customer churn prevention levers.

engagement data

You can then turn your findings into a presentation laying out how you plan to reduce customer churn moving forward, and then share with customers. Depending on what engagement with that presentation looks like, you may need to be more proactive with revised messaging and product priorities, so as to reduce the number of churn-likely customers.

4. Put your actionable feedback into action

Once you’ve analyzed your feedback and customer asset engagement data, and once you’ve determined the overarching causes for your business’s customer churn, it’s time to put actionable churn feedback into action.

Your churn prevention levers will be key indicators of churn for your specific business, 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 team invite feature or specific product feature, the work becomes boosting awareness and engagement accordingly.

Once you’ve executed the marketing, product, and/or support changes made, set yourself up for some quantitative results. Strategic and tactical developments born 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. Given the fact that customer churn is a lagging metric, it’s critical to 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.

Since customer churn is a lagging metric, it can be tremendously beneficial to experiment with a tight feedback loop among early or beta adopters of changes intended to reduce customer churn. In this way, you can achieve quick learnings that can be translated into strategy and execution refinements that produce big wins.

If changes are made to business materials or the way they’re sent, you can use DocSend to collect data around open rate, time spent in document, pages viewed, forwarding activity, and more—each of these can provide compelling evidence that you’ve moved the needle and increased engagement with your existing customer base.

comparative stats on churn

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!

customer churn

Takeaways

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. Since 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.
  • Sometimes, the most useful feedback comes 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 that 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.

Finally, you can click here to learn more and get started with DocSend for free. If you have any questions, our support team is always happy to help.