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

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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

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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

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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

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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