Why SaaS customers churn

This post is a summary of a presentation- curious to know what you think of this alternative format.

What is churn?

Churn fundamentally represents a failure to meet a customer’s goals and expectations for a product or service.

How to classify churn

Customer churn

• Number of customers that cancelled their subscription in the defined time period

Revenue churn

• Amount of money not earned (lost) due to customers cancelling their subscription in the defined time period

Net churn

• Amount of money not earned (lost) due to customers cancelling their subscription plus additional revenue gained from current customers in the defined time period

Logo churn

• Number of logo customers that cancelled their subscription in the defined time period

Link to full definitions and more real-life examples

Reasons customers churn

Onboarding churn

Definition: Customer cancels at end of onboarding period

Possible reasons

• Lack of internal alignment and prioritization
• Unfinished implementation
• Insufficient value

Indicators of dissatisfaction

• High number of support requests
• Low product usage and feature adoption

Suggested tactics

Build progress through strong alignment and prioritization

• Highlight customer’s original buying reason
• Assign tasks and hold people accountable
• Bring issue to the attention of Management/ Executive teams

Complete implementation

• Confirm appropriate resources have been allocated within both organizations
• If customer is unable to commit the required resources, they may be not be a good fit for your solution

Demonstrate value

• Work with the customer to establish and agree on a success plan within the first 30 days
• Decrease time to first value by identifying ’quick wins’ for end-users
• Collaborate with Support to quickly close tickets and ensure serious issues are resolved

Product churn

Definition: Customer cancels because product doesn’t deliver enough value

Possible reasons

• Incomplete onboarding
• Misalignment with customer’s current or future needs
• Issues with product quality

Indicators of dissatisfaction

• Low usage and feature adoption
• High number of feature requests or requested bug fixes

Suggested tactics

Establish a success plan

• Work with the customer to establish and agree upon a success plan within the first 30 days
• Collaborate with point of contact to create and enforce processes that build long-term engagement

Align customer goals and objectives with product usage and features

• Identify behaviors that lead to successful end-users and customers
• Encourage these behaviors during onboarding and trainings
• Envision how the product might evolve over time
• Synthesize customer feedback and feature requests and work with internal teams to respond to customer needs

Address issues with product quality

• Provide feedback to Product around high-priority bugs or features customers find it difficult to use
• Work with Support to address any outstanding issues

Relationship churn

Definition: Customer cancels because of a weak or strained relationship

Possible reasons

• Main point of contact leaves
• Poor relationship with CSM
• Weak relationship with Management/ Executive teams

Indicators of dissatisfaction

• Disengaged point of contact
• Unpaid or past due invoices

Suggested tactics

Build relationships with multiple contacts

• Monitor LinkedIn and social networks to identify role changes and job moves
• Reach out to active end-users across multiple channels

Reset relationship

• Restate roles and responsibilities and re-establish a mutually agreed upon success plan
• Ensure every interaction provides value

Engage Management/ Executive teams

• Share succinct updates on progress of success plan
• Connect success plan to higher-level company goals
• Provide materials that support advocacy and budget approval

Renewal churn

Definition: Customer uses the renewal event to cancel

Possible reasons

• Insufficient value
• General dissatisfaction

Indicators of dissatisfaction

• Customer asks for a copy of their contract
• Unwillingness to plan further than a few months in advance
• While renewal is the triggering event the underlying cause may be a combination of reasons

Suggested tactics

Demonstrate value

• Define value and illustrate with data
• Review success plan deliverables, feature usage, engagement data from onboarding, QBRs, etc. to demonstrate value over time

Address pain points

• Provide materials that allows point of contact to make a strong case for renewal
• Create evangelists across userbase to assist with renewal and expansion conversations
• Explore recovery options to ‘reset’ the relationship