Customer Churn Rate a Crucial Metric For Growth of SaaS Company


Keeping track of metrics is essential for the growth of a SaaS-based business. So marketers must pay attention to such crucial metrics as customer churn rate. It shows the number of customers you are losing.

a crucial metric for the growth of a SaaS company

What is the customer churn rate?

The customer churn rate is the percentage of paid customers you lose in a fixed time. For example, you have a hundred customers at the beginning of the month. You lost ten customers because of non-renewal or cancellation and only acquired eight new customers in a month. Therefore, 10% is your churn rate.

The calculation is simple in the above case. (number of lost customers / the number of customers at the beginning of the month) * 100.

However, you added new customers. But, while calculating the churn, we should exclude the new customers. So, the new customers we will add when we calculate the churn for the next month.

A higher churn rate means looking at the organization and within marketing efforts.

Important Note: A SaaS business should consider a single-digit percentage churn rate. However, it is impossible to achieve a zero churn rate.

The product must be up to a standard

Your product might need to be better. So in this hyper-competitive world, your product must be up to a standard to grow. It doesn't matter how much money you pump into marketing. Your business will struggle with a bad product.

Let the customer know how easy it is to use your product

The customer least cares about the technology you used to build your SaaS. To them, how easy it is to use is the primary concern. So you need to educate your customers. How easy it is to use. Let them know. It is possible with a knowledge base system for your product. Make it easily accessible. Find a way to embed your knowledge base link in your welcome email. An email marketing tool with an automation feature for such an activity is best. Remember to create campaigns based on customer interaction with your product.

Conversational intelligence software is good to have

Yes, you read it right. This software is must-have. You must know how to use it effectively. You can integrate this software with your knowledge base system. Your customer could quickly seek help from the chatbots. Your support team can also be at ease and focus on other issues.

A Customer Support Team

Suppose you have a great product, a knowledge base system, and a higher churn rate. It would be best to have a technical support team who can address your customers' trouble. Chat support, if needed, a call is necessary to understand your customer's exact problem. If you have a support team, train them to engage with your customer frequently and address their issue.

You might be targeting the wrong audience

So many platforms are available to run paid ads. Creating ads on such platforms and running them is a relatively easy task. The challenge is to reach the right audience and many other tasks. If you can drive relevant visitors soon, your ads will continue performing. An unrelated business will become a paid member but, eventually, leave you.

Churn Rate

Sometimes people make impulsive buying decisions, particularly in retail. In a few instances, I have also seen it in SaaS-based businesses. They got to know about a system that yields results. They buy the product hastily but need to figure out how they can use it for their benefit. You can only do a little for those customers. However, build a personal rapport so once they need it fully. Then, they come back to you.

How to reduce the customer churn rate?

Analyzing your customer churn is essential. You improve things when you know the problem. Below I have mentioned a few issues that most SaaS business face. My experience says you need a holistic approach to fix customer churn.

When a customer doesn't renew the subscription, it would be best to ask them why.

Here is how you can do it. Before the subscription is about to expire, you inform the customer about it. The moment they cancel their subscription. It would help if you asked there the reason behind it. However, The last thing you want to do is to irate a customer when they leave. So remember to make the process easier for them.

Listening to the feedback of customers helps you understand your product better. You know the shortcomings you should fix to improve them.

Another way of bringing change to your product is to look at competitors. Suppose you come up with better what your competitors have to offer. Then with this, you shall be able to keep your customers hooked to your product.

Tell them what they will miss if they cancel their subscription.

Make video tutorials

Video tutorials are a better approach to telling your customer how easy your tool is to use. One advantage you have of a Youtube tutorial is that it will give you an online presence. Therefore, upload your tutorial on Youtube.

Create a good deal for the customer

Most businesses offer a deal or discount to allure a customer. If a 10% discount you are offering for a month. If applicable to your business, make a deal with the customers to give them a 15% discount for three-month subscriptions. It would help if you worked on creating offers.

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