September 11th, 2014 | by

Lowering your churn rate will help your business become more successful. You will place less of a burden on the sales team to find new clients if you can hold on to the ones you already have.

A 2011 survey by Pacific Crest suggests that about 70% of SaaS companies maintain annual churn rates of less than 10%. This means that single-digit churn rates are a good sign of success. But it is fair to say that this only applies to larger and more established companies. As Joel York at Chaotic Flow notes, a recent report lists the median churn rate of private SaaS companies with revenue above $10 million at 8.5%, while churn rate is much higher – 20% – for SaaS companies whose revenue is less than $10 million.

Gartner Group statistics tell us that 80% of your company’s future revenue will come from just 20% of your existing customers.

Although it is to be expected that new companies that are still growing and discovering their market will have a higher rate of customer churn, the important thing is to begin to put methodologies into practice that will help you effectively combat high churn rates as your company grows.

1. Emphasize What You Have That Others Do Not

When you do well, you will see more and more new competitors that will offer their SaaS at a lower price point. This entices your customers to strongly consider leaving you. The first step to deal with this is to be proactive. Study the products offered by the competition. What does your SaaS offer that theirs does not? What flaws are present in their product? What are your unique selling points?

Relay those insights into your marketing. In creating your website and landing pages, emphasize the fact that your product is different from others. Indicate areas of weakness in the competition while pointing to your own strengths. Find a way to stand out from your competitors. Offering online guidance on complicated websites or processes, such as that provided by WalkMe, is a good way to show appreciation for your customers. This should have a positive impact on churn rate by convincing customers who are considering switching to a competitor to remain with your company.

2. Reward Customer Loyalty

For years, customer loyalty programs have proven to be effective at retaining clients and lowering churn rates. Make sure the reward or benefit you offer is a tangible one. At the same time, the important aspect of customer loyalty programs is often not the specific reward itself, but the feeling of mutual goodwill engendered by the offer. Everyone likes to feel appreciated, and the SaaS customer is no different.

3. Eliminate Subscription Termination or Renewal Fees

Due to the nature of SaaS, termination and/or renewal fees are not really necessary. Removing them and letting your customers know that they are removed, will demonstrate your confidence in your superior solution and give your customers one less reason to leave. Furthermore, it will make it easy for those who already have left to return. In general, making the sign-up process as simple and painless as possible is the best way to encourage customers to remain with your company.

4. Win Customers Over With a Show of Confidence

If you truly believe in your product, you are expected to emphasize that belief. Offer customers who are thinking of unsubscribing and moving to a different service an incentive or discount if they return to your company within a certain period of time (say, three months). This will send the message that you are not afraid of the competition and are convinced that your product is superior. The incentive you offer will likely cause many of your customers to return, even after trying a competitor’s service. And since they will already be familiar with your product at this point, no onboarding process will be required.

Combating high churn rates requires emotional intelligence. If you build trust, demonstrate lack of greed, as well as confidence in your product, you are making it easy for your customers to stay on board. A company that is willing to invest in itself, is confident about what it offers, and is proactive about giving back to its customers, is likely to reach and maintain low churn rates. In the end, these policies will also help fight high churn rates in the most straightforward way of all: by generating awareness for your brand, attracting attention, and of course winning new customers.

Boaz Amidor is Head of Corporate and Marketing Communications at WalkMe and a Contributing Editor of SaaS Addict Blog.

You may also be interested in:

About the author

Henry Schuck

Henry Schuck is the CEO of DiscoverOrg, a 7-time Fortune 5000 company, which he co-founded at the age of 23. He has extensive experience managing the sales and marketing activities of fast-growing information technology data companies.