An average company loses between 10 – 30% of its customers annually – McKinsey.
Churn is the enemy of sustainable SaaS business growth. Churn seeds are planted early – before the customer even steps his/her foot in your company. The kind of customers you target with your marketing messaging and outreach, and what you say and do during the sales process determines if you’re acquiring customers that will stay or customers with one foot already out the door. As a SaaS vendor, there are 4 main mistakes to avoid that cause customers to ditch you. They are:
1. Selling to Customers that Are Not Truly Qualified Prospects
In the process of rushing to close as many deals as possible, your sales team may end up selling to customers that should never have bought your product. This is because your product, however amazing, may not be relevant to them. Not a great fit. Unlike traditional brick and mortar businesses, selling to the wrong customer in SaaS can kill your company. You will receive feedback from the wrong people and act on the wrong information. You can resolve this issue by focusing on the right customers to close better deals. This should be after considering the industry they are in, their needs, size of business, key decision makers, budget size, and user type.
2. Overpromising and Under Delivering
Startup businesses have great vision of where they want their product to be in the future. This vision however can tempt companies to sell an improved future version of their current product in the hopes that their customers will be loyal and stay long enough to experience future benefits. If you announce that a feature will be released in 4 weeks, then that is your timeline. If you come to a point four months down the line where you are still telling the same story your credibility will be gone. If there is one thing we know it is how difficult it is to deal with unsatisfied customers. Many potentially great customers will cancel and forget about you and your product. It is better to set expectations properly by telling your customers the product will be ready in 4 weeks even if you are sure it will actually be ready in a week or two.
3. Selling on Low Price Rather than Value
Prospects are quick to complain about high prices early in the sales process. Often they will complain before you even have the chance to demonstrate the value your product will bring. They may turn the conversation toward pricing and immediately request a discount. The problem is that such customers, who buy only because of low prices, are normally troublemakers. They oftentimes demand the most support and keep complaining when your product doesn’t do what they expect. So instead of focusing on cost, focus on your product and the value it brings. Take the time to demonstrate the value your product will bring to the customer before you talk about pricing.
In addition, once the prospect becomes a customer, price has been shown to not be a significant factor in churn. According to the Accenture Global Customer Satisfaction Report, price is not the main reason for customer churn; but rather, churn is usually due to the overall poor quality of customer service. According to Bain & Company, a customer is 4 times more likely to defect to a competitor if the problem is service-related than price- or product-related.
4. Making it Easy for Customers to Cancel
Even before a customer cancels, there are warning signs that he/she will cancel in the near future because he/she appears disengaged with your app. Familiarize yourself with the warning signs and put alerts in place for your Customer Support representatives so that customers are contacted whenever one of these warning signs goes off. Why is this so important? Because, according to Marketing Metrics, the probability of selling to an existing customer is 60 – 70% while the probability of selling to a new prospect is 5-20%. It makes financial sense to invest more in retaining existing customers.
Prevent churn by proactively putting measures in place to strengthen your sales and marketing strategies, and learn how to recognize the warning signs before customers leave so that you don’t get caught off guard again by fleeing customers.