Customer churn, or client attrition, refers to the loss of clients. This can occur at virtually any point in the client lifecycle, from the initial client acquisition to the renewal period. In the context of software-as-a-service (SaaS), customer churn refers to the number of customers who cancel or do not renew their subscription to SaaS products.
Customer churn can be a significant issue for SaaS companies because the recurring revenue model depends on retaining customers over time. High churn rates can lead to decreased revenue and profitability, as well as a decrease in the overall size of the customer base.
But what causes customer churn for SaaS companies? And what are some proactive ways to reduce churn and build a strong customer base? Lastly, where can you access automated onboarding solutions to increase customer retention and satisfaction in a scalable way?
In today’s post, we will answer all of these questions and more, so let’s get started!
What Causes SAAS Customer Churn?
Client churn can come in many forms, including:
- Non-Starters - The deal is closed, but for whatever reason, the client never ends up going through with the onboarding process.
- Rollout Jumpers - The client has been onboarded but fails to adapt and actively use the product.
- Non-Renewals - Though some companies may not include non-renewals in their data, they are a common form of client churn.
- Active cancellation - The client specifically requested to cancel the relationship, which may be a reflection of multiple reasons
While the different churn categories listed above can help you identify customer churn, they don’t necessarily help you get to the root cause of the problem. The truth is that many factors can contribute to customer churn in the SaaS industry. Here are just a few of the most common issues:
- Poor Product Alignment - If customers are not satisfied with the product's functionality, reliability, or security, they may choose to cancel their subscription and look elsewhere.
- Lack of Customer Support - If customers feel that they are not receiving adequate support from the company, they may decide to switch to a competitor.
- Pricing vs. Value Mismatch - If customers feel that the product's price does not correlate to the value they get out of the product, they may look for alternatives or go back to the prior processes.
- Lack of Innovation - If customers think that the product is not evolving to meet their needs, they are less likely to stick with one product or company for the long term.
- Poor User Experience - Consumers can often judge the UI of a product within minutes of installation. If they cannot easily use and navigate the product, they may dump it for something else.
- Competition - If customers find a similar product with better features, pricing, or customer support, they are definitely going to consider abandoning the current product.
- Change in Business Needs - If a client needs change and the product is no longer relevant, they will have no choice but to find something else.
- Failed Onboarding - As of 2022, over 89% of mobile app users deleted a new app within 30 days of installation. While the rates are not quite as high for desktop software (around 70%), it still points to a failure to properly onboard most new clients. This is far and away the most common cause of customer churn in the SaaS industry.
As you can see, many different factors can contribute to customer churn, but the primary cause of failed relationships begins during the onboarding process. By understanding the hangups in onboarding that lead to customer churn, SaaS companies can take steps to minimize the churn rate and retain their customers over time.
10 Ways to Build an Onboarding Process That Preempts Early Termination
Preventing customer churn in the SaaS industry requires a multi-faceted approach. Let’s take a closer look at some of the best ways to improve your onboarding and implementation processes to stop client churn before it starts:
You can’t understand what matters to a potential client unless you know who holds a stake in the business. Are you onboarding a small startup with one or two founders or a large corporation? Either way, ensure you identify the stakeholders and, ideally, contact each of them during the onboarding process.
Confirm Project Scope
When you know the size and scope of a project, you know how much time and resources you need to allocate to it. If you fail to grasp a project's scope, you could over-invest, causing you to fall behind with other clients. Alternatively, if you under-invest in a large-scale project, you could lose your customer early because you simply can’t keep up.
Listen to the Client's Needs
During the first stages of onboarding, listening is your #1 job. If you don’t fully understand your client's wants and needs, you will almost certainly experience high churn. So, always listen to your client’s needs and do everything you can to exceed their expectations.
Establish Positive Working Dynamics
You always want to have a good working relationship with clients, regardless of how long you’ve been working together. That said, establishing positive working dynamics during the initial onboarding process is particularly crucial. Failing to do so early on could sour the relationship before it has time to flourish.
Many SaaS companies fail to consider the major changes a business must undergo when implementing new software. Entire management processes may be upended, which can cause a lot of grind and confusion in the early stages. Always be empathetic and work to help the client overcome any rollout issues.
Don’t Overlook Training
Rollouts don’t just require troubleshooting. In all likelihood, you will need to train members of your client’s team so that they can use your products or services to their full potential. So, don’t be afraid to allocate additional resources to training.
Implement a customer feedback loop by encouraging customers to provide regular feedback on their experience with your software. Then, try to act on their suggestions in a timely fashion. This will show customers that you are actually working to provide them with a great experience.
Review the Final Deliverables
Even if you’ve covered all of your bases, you shouldn’t just phone things in when the onboarding process is closing. Instead, review the final deliverables to ensure they align with the customer’s needs. If they don’t, talk with the client to make the necessary adjustments.
Stay Connected After Onboarding
After the product rollout, make sure to stay connected with your client to ensure high adoption. If you onboard a client who fails to use the product, they will likely fail to renew when the time comes. This is a common form of customer churn that is frequently overlooked.
Monitor Customer Usage and Engagement
Use analytics to monitor how customers use your software and identify potential issues that may lead to churn. Continuously tracking engagement data is one of the best ways to keep customers for the long term. If you notice sudden drops in usage, you can quickly reach out to troubleshoot the issue.
Get Smarter Customer Onboarding With Setuply
Smart onboarding begins with automation, as it allows you to scale your business without sacrificing customer satisfaction. Automated customer onboarding also helps you save on the time and resources required to bring on new clients. When you use a quality automated onboarding platform like Setuply, you can expect:
- Improved Customer Satisfaction - Smarter client onboarding can help ensure that new clients have a positive experience with you from the start, increasing customer loyalty.
- Increased Adoption - A well-designed onboarding process can help new clients quickly and effectively adapt your products or services, leading to increased usage and higher revenue.
- Faster Time-to-Value - Automated client onboarding can help accelerate the time it takes for new clients to start realizing value from your products or services, which can increase the likelihood that they will remain a customer for the long term.
- Increased Efficiency - Setuply’s platform streamlines the onboarding process, reducing the time and resources required to get new clients up to speed with your company's products or services.
- Improved Scalability - By automating parts of the onboarding process and standardizing the information and resources provided to new clients, a smarter client onboarding process can help a company scale its operations more efficiently.
With Setuply, you can automate your onboarding process so your team can focus on what they do best. For the best automation solutions that allow you to deliver an unparalleled onboarding experience, reach out to the team at Setuply today!