How Customer Success Is A Key Factor To Reduce Churn

Subscriptions are the bread and butter of SaaS businesses. Which is why they benefit the most from employing customer success strategies to reduce churn. 

Of course, reducing churn should be a priority for all companies, no matter their business model. But when your only source of revenue is the subscription customers pay, a lost customer is all the more painful.

Why reducing churn is crucial for SaaS businesses

If you are a recurring revenue business, most of your revenue comes after the initial sale. To highlight the importance of reducing customer churn, let’s consider the following example:

Company A has $10 million of recurring revenue to renew. Company B has $100 million of recurring revenue to renew. If we apply a 2.5% monthly revenue churn rate, that amounts to a loss of 30% annually. (If you want to determine your own churn rate, check out this churn calculator).

This means Company A only loses $3 million due to churn. That’s fairly easy to make up for. But for Company B, that means $30 million. That’s a substantial sum to replace just to stay at the same revenue level as the previous year. So the larger a business gets, the more stringent the need to reduce customer churn. 

There are two ways you can solve this problem: you either reduce churn or aim to achieve a negative revenue churn. 

Negative revenue churn can be obtained when the expansion revenue (earned from upsells and cross-sells) from the customers that don’t churn exceeds the revenue lost from the customers that do churn.

How customer success helps you reduce churn

If you want to prevent your customers from churning, you need to delight them. But what does that mean?

Most companies think that engaged customers, those who continue to use their product regularly, are happy customers. But that’s not necessarily true. Customers can continue to use your product even if they’re not happy with it. Then, one day, when they had enough, they will just leave. 

Churn often comes as a surprise to businesses. But employing customer success strategies enables you to prevent that. Because you learn a customer is not happy with your product before they have a chance to leave you. 

Another reason to keep your customers happy is that happy customers bring in new customers through referrals. Cold leads are costly, have a low conversion rate, and take a long time to acquire. In contrast, referred customers cost you nothing and have a high conversion rate.

How to use customer success to reduce churn

As customers become long-term users, this will give you more opportunities to expand your revenue through upsells and cross-sells. Long-term users are also much more likely to become product advocates and bring in more users via word-of-mouth.

So here are 4 customer success strategies that can help you reduce churn and turn customers into long-term users:

1. Keeping customers engaged

Set up automated emails that get triggered when a user performs a specific action to engage them further. 

For example, if you have a platform that manages pop-ups for websites, you can tell your customers how implementing an exit pop-up can help them reduce bounce rate, and then direct them to the pop-up designer on your platform. Help like this adds value to the customers’ efforts and makes them stay.

2. Interact with your customers regularly

If you only reach out to your customers when it’s time for them to pay, that doesn’t make for a great experience. Your interactions should be meaningful so the customer can see he’s not just wasting money. 

This is why regularly interacting with customers is crucial. You don’t always have to give them something. Sometimes, simply reaching out to see how they’re doing is enough. It shows that you care about them, and you’re interested in helping them use your product successfully.

3. Ask customers for feedback on how you can improve your product

How does seeing a feature you proposed implemented? It feels good, right?

This is another way you can help your customers achieve their goals. Encourage them to suggest improvements for your product, upgrades, and new features. 

As users see more value over time, customer retention rates will keep increasing. Boredom is a common reason for churn, so regularly updating your product can help you increase the perceived value and engagement.

4. Start a reward program

It doesn’t have to be something complicated, but you should reward users who stay with you for a long time. A simple discount or upgrade can work wonders to invoke further loyalty.

People will always be happy to pay someone who understands them. So the better you understand them, the longer you can get them to stay.

Related article: Boost Customer Success With User Onboarding