On this episode of the SaaS Boss podcast I interview Anita Toth. We discuss everything you need to do to reduce your churn rate.
Anita Toth is a churn consultant to growing B2B SaaS companies, helping them reduce churn, decrease acquisition costs, increase revenue, and grow customer loyalty by helping them make the customer experience better.
Show Notes
How Anita started working with SaaS companies
She was working as a research coordinator in a research institute at a University and she was laid off about four and a half years ago as a result of funding cuts.
She got into online business and had a digital agency which introduced her to a friend who was a software engineer, that was building an AI platform. She and a partner who was also a qualitative researcher wanted to build their SaaS on the platform but the SaaS idea did not work out.
Through this experience she discovered that her skillset in qualitative research could help SaaS companies understand more about why their customers churn in an effort to keep them longer.
SaaS Churn Benchmarks
Annual recurring revenue tends to have lower churn rates than monthly. If you have a 2% churn rate with your product, that means you have got good stickiness. At 5% churn rate you have not got the same level of stickiness perhaps the product market fit isn’t great but it is still alright.
Anything above 5% shows that there are some real challenges however when a company is just starting out, their churn rates are usually high before they hit that product market or inflection point, it is not uncommon to find 10% – 15% or even more churn rates at this point.
If you have been operating for a while and your churn rates are still quite high then it s likely indicating there are some issues around product market fit.
2% monthly churn rate is very good, 5% is okay and anything above that is bad.
Easy fixes you can make to reduce SaaS churn
One of the low hanging fruits you can make is around involuntary or delinquent churn and this often occurs when credit card payments fail, it is often overlooked but it is something that is within your control.
You can set in app mentions to remind users that they are going to have a renewal soon and also check if their credit card information is up to date or you can send them an email a few days or weeks to remind them.
I also chime in on how I was able to get back over $1000 for my husband’s SaaS company. His company subscription product is $200 a month, I looked at the number of accounts whose credit cards were declined and called them on the phone. I discovered that they didn’t return the emails because they were no longer with the company eventually I was transferred to the new marketing manager of the companies and I was able to get back over a $1000 within two days.
You need to start segmenting your customer base, find out who your top 20% of users are, get to know your customer avatar. Find out the differences between what the top 20% of users do, who they are, how they interact with your platform and how that differs from the majority of users who don’t interact this way or who aren’t as active.
From the results of your study you can start tweaking your marketing to attract more of your power users. There are different ways to segment, you can segment by subscriptions, you can segment by active or inactive users.
Designate an hour weekly to your founder, CEO, product manager or another member of your team to talk to your customers.
Ask your power users questions such as if you didn’t have our product what would you be doing instead. This question is powerful because it gives you an idea of how sticky your product is for them. You can also ask them what made you decide to try us?
The best time to ask these questions is right when you are onboarding your customers, if you ask them about 6-8 months down the line, they might not remember why they chose your particular platform.
You can ask the questions via email or in app pop up surveys. Collect the feedback, analyze it and look for patterns.
If you are calling customers, a small mindset switch that you can apply to prevent you from taking their answers so personally is to think like a doctor. A doctor asks questions but does not take the answer personally so you need to look at this exercise as fact finding.
Resources
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