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5 Key Indicators of Churn

February 7, 2022
Lantern

Churn can kill a SaaS business. Losing too many customers too fast can take even the most promising software company to the edge. If you are not thinking about how to reduce churn, then it is time to start. Adding new customers is awesome, but if you are simply replacing canceled customers with new accounts then you are merely running in place - if you are lucky.

To understand how to minimize churn and keep your SaaS on the right path, it is important to know what to look for. Churn can be predicted. At-risk accounts can be identified. Through some straightforward signals detailed below, you can identify when an account may be at risk and take proactive measures to keep accounts from canceling. This post will explore exactly what to be on the lookout for to prevent churn in your software business.

Five Key Churn Indicators for SaaS Businesses

Daily Usage

One of the clearest indicators of churn is a decline in daily logins. If you see a sudden dropoff in users logging into your software, it's a sign that they're losing interest and maybe close to churning.

Daily active users (DAU) is a metric that is often closely watched by SaaS companies. It can be a good indicator of customer engagement and health. As you might expect, the more active users you have, the more likely it is that they will stick around (and hopefully evangelize your product to their friends).

There are a number of ways to increase DAU, but if you see a sudden dropoff it could be a sign that something is wrong. If you can't immediately identify the reason for the decline, reach out to those affected customers to see what's going on.

Usage Patterns

Another key indicator of churn are changes in usage patterns. If you see a customer who was previously using your product multiple times a day suddenly only logging in once a week, it could be a sign that they're losing interest.

One way to evaluate usage patterns is to track changes over time.  This data can be extremely valuable in detecting churn. If users are spending less time logged into your application or using fewer and fewer features, then the value you provide may not be significant enough to keep the account from churning.

Another key indicator of churn is an increase in canceled trials. If you see more people signing up for trials and then canceling them, it's a sign that they're not seeing value in your product.

Of course, usage patterns can change for many reasons. Maybe the customer no longer needs to use your product as much because they've completed their project. Or maybe they're using a different product that does the same thing as yours. But if you can't identify a good reason for the change, it's worth reaching out to see what's going on.

Support Ticket Volume

A third signal of churn is an increase in support ticket volume. If you start seeing more and more tickets coming in from a certain customer, it could be a sign that they're not happy and are looking for help.

It's important to note that an increase in support ticket volume can be caused by many things, not just churn. Maybe the customer is having a problem with your product and is looking for help. Or maybe they're trying to cancel their account and are having trouble. Whatever the reason, if you see an increase in support ticket volume it's worth reaching out to the customer to see what's going on.

A Change in Leadership and Personnel

If your champions and power users have moved into new roles, then churn may be right around the corner.

Every customer account will have a person that helped advocate for the original engagement. This is your "champion." If your champion has moved on to another role or company then their ability to impact the relationship between both companies will be minimal. In some cases, their continued impact will be non-existent.

Additionally, if your power users are no longer part of the organization then the value you are providing may no longer be clear.

It is imperative that you identify, support, and communicate with active users. They are the people that will tell management, "No, we need to keep that tool!"  If you do not have someone speaking on your behalf inside the building, the account may be a churn risk.

Lack of Response or Engagement

Most SaaS companies provide some level of account management for customers. From holding weekly meetings to regular scheduled check-ins, keeping in contact with accounts is critical for preventing churn.

These interactions help solve problems your customers are having. If they have feature requests or want to grow their account, communication between Account Management and the customer is key.

If a customer account stops replying to your emails or phone calls, the client could be at risk to churn. Customers in every sector invest their time, energy, and money in relationships, services, and products that they find valuable. If no one if taking your call or replying to your emails then that may be a sign that the customer no longer finds your service valuable.

Stopping Churn Before It Starts

To prevent churn, it's important to keep an eye out for these indicators and take action to address them. Keep users engaged by regularly releasing new features and improving the user experience. Offer support that is easy to access and resolves issues fast. And most importantly, keep track of your churn rate and take action to reduce it. By monitoring these signals, you can prevent churn in your SaaS business and keep your customers coming back for more.

Lantern is a platform that surfaces these churn indicators and others, putting client retention on autopilot. From identifying power-users an