SaaS churn rate has become a big problem for companies as a large number of customers often disassociate from the services provided.
SaaS is a model of software distribution in which computer applications are hosted by a service provider or a vendor.
The applications are hosted over a network, and made available to the customers who need to use the application. The maturity of Web services and Service Oriented Architecture (SOA) as underlying technologies has made SaaS an increasingly prevalent delivery model.
As a result of new developmental approaches, AJAX is also gaining popularity. The delivery model of SaaS has close relation to the software delivery models of on demand computing and Application Service Provider (ASP).
The reason behind the popularity of SaaS is the benefits; easy administration, global accessibility, compatibility, automatic updates and patch management and easier collaboration.
Problems Caused by High SaaS Churn Rate
SaaS churn rate is the rate at which customers or subscribers leave a business enterprise. A lot of emphasis is made upon the sales of companies. Most companies put in a lot of effort to acquire new customers that would purchase their products or services. However, very little emphasis is put on retaining those customers.
A company should take serious steps to ensure that their customers remain their customers. Ideally, a company should have 0% churn rate, but the reality is that it is not possible.
Every company has customers that have stopped using their services or buying their products.
Although the SaaS churn rate cannot be reduced to 0%, efforts can be made to pull it down to the lowest level. There are various problems attached to churn rate as it can cause damages to the companies. The high levels of customer churn can damage a business in the following ways,
1. If a business is getting new customers but simultaneously losing their older customers, then the success rate of the business will not change. If the number of new subscribers is higher than the number of customers leaving the company, then there will be no negative effect on the sales. However, if a large number of subscribers stop buying products or taking services from a business, then the SaaS churn rate will increase and the profit rate will drop. Therefore, a higher churn rate means loss for the business on a long term basis.
2. When the churn rates are high, it creates a negative impact on the general public. When a large number of existing customers of a business stop using their services or buying their products, the consumers will have a bad impression about the company. They will naturally think the reason why customers have left was caused by a problem within the company itself
3. Higher SaaS churn rate also means insecurity for employees of the company. When the employees of a business enterprise notice that the churn rate is rising, then many start to leave the company too. This results in even more loss for the company as the overall productivity of the company drops due to the departure of its work force.
5 Saas Churn Rate Reduction Methods
Method 1 – Talk to Your Customers
When an enterprise notices that the churn rate is rising, they should communicate with their customers. It should be figured out why customers are leaving the business and going for other competitors. It’s important to get feedback from customers in order to gain an understanding of their mindset.. The feedback report will help the business understand the reasons why clients may be unhappy.
Method 2 – Improve the products and services
It is very important for businesses and service providers to improve their products and services in order to reduce SaaS churn rate. This can be made possible after knowing what the current customers have to say about the business offerings. It is important to read customer testimonials and act accordingly to improve the SaaS services.
Method 3 – Identify customers at risk
Companies can identify the customers that are at risk by checking in with the usability of their services. If a user has not logged into the system for a long time, then the company should follow up. The customer should be sent an email encouraging them to continue using the services. It is also a good idea to ask customers to take a survey where they can express their opinions.
Method 4 – Do not bombard customers
When companies offer services to customers, then they naturally send emails containing the latest news and updates. Customers often complain that companies bombard them with a lot of emails. It can be very annoying to constantly receive updates from any business enterprise. Therefore it’s important that emails only be sent when necessary and an option should be included for the customer to opt out of the email marketing service.
Method 5 – Conduct a cohort analysis
To examine the segmented user behavior over a particular period of time. Cohort analysis is helpful in marketing and helps a business to reduce their SaaS churn rate. It is important to keep things simple when identifying the cohort; gather data and then do some visualization.
3 Solutions to Reduce SaaS Churn Rate
1. Viralheat- If you want to reduce your churn rate and increase retention then you should consider Viralheat. It is a social management platform that empowers business enterprises to learn about customers using the social web.
2. Kera- This is a solution that helps to reduce the churn rate of a company through interactive tutorials.
3. WalkMe- WalkMe is by far the best solution for reducing SaaS churn rate. It provides various solutions to enterprises that suffer from high churn rates. They help to onboard new customers, increase conversion rates and promote new features.
High SaaS churn rate is a problem for many business enterprises. Therefore, every business should take serious steps to lower the rate by taking necessary actions.
