There are currently millions of cloud solutions, so the consumer can choose to their liking and depending on their needs. This leads us to be more demanding with our applications, trying to get them to perform as well as possible and keeping our consumers in them for as long as possible.
Why is it so important to reduce the Churn Rate?
One definition given by Jelvix in their post on SaaS metrics, comments that the client abandonment rate indicates the number of clients who left “after logging in”.
In software businesses, the largest investment is in application development and customer generation. In this respect, they put most of their efforts and must try to keep their customers, for whom they have previously invested in achieving it. Churn Rate is one of the most important metrics of SaaS companies. The data you give us is the percentage of people who are leaving our company. The Churn Rate of revenue can also be calculated, providing the data on the percentage of revenue left behind by those customers who have left behind.
Reasons for a high Rate Churn Rate
This metric is one of the easiest to calculate, as it depends only on one factor, the abandonment of a customer. So, we must understand why the customer is leaving our software.
- The product doesn’t deliver on what’s promised: Generating expectations that are superior to reality can lead you to lose customers. Sell what you have, it’s better to surprise than to disappoint.
- Lack of customer service: If when your customers ask for help, you are not able to fix it, you will generate discomfort in them and look for better options. Get exceptional customer support and attention.
- Lack of customer adaptation: The customer’s needs are always the same to us, they change over time. Both external factors are amending these needs and the internal values of our application.
There is a possibility that we are also losing a customer because our product has already met all your needs. Even so, this remains a problem, as we can increase the characteristics of our product to increase our customers‘ LTV.
What is considered a high Churn Rate?
There is no valid or entirely true answer to this question. Every SaaS application is a world and we must put ourselves in the situation of the service we offer. If we put ourselves from the point of view of SaaS applications, you always have to compare yourself and try to improve what we have in the company. If we want to take out data that can serve as a reference, we will talk about that an optimal Churn Rate would be between 5-7%.
Similarly, we can make that Churn Rate negative, even if we lose customers. Let’s give an example:
We have 3 customers who leave our app, of 10$ for each subscription. Similarly, 5 of our customers upgrade from $10 each to a Pro version. In this way, we have a Churn Rate balance of positive income, even if we have lost 3 customers. Here is one of the possible solutions for your Churn Rate.
How do I lower my Churn Rate?
Next, we’ll give some of the actions that are taken within the company to lower the churn rate figures.
- Find out the reasons for cancellations: Customer communication is essential in SaaS business. Get a customer to think about it when a customer leaves your business.
- Study the data: Generate data and find out which is the typical client that leaves your tool. This will make you better segment your communication and go straight for possible abandonment.
- Use loyalty campaigns: Take care of your longest-lived customers, try to get them to stay with you, worry about their needs and offer them advantages over the rest.
- Properly segment: Linked to data analysis, don’t be generalistic. Try targeting when sending information via e-mail.
In conclusion, you should listen to your customers and generate data. These two actions are key to the health of your business. Currently, customer care is one of the most important actions, providing them with value and making them feel“unique”. In this sense, an Inbound marketing strategy can be perfect for reducing your Churn Rate.
Inbound marketing is a methodology that uses content to lure customers to a product, so they end up buying it. For Inbound marketing to make sense we must offer quality content, which they provide to the customer and not just try to generate their purchase.
If you need help performing an Inbound strategy, do not hesitate to consult with us.