Hidden Churn Indicators for SaaS
Customers are complicated, but churn is simple.
Churn happens when the customer's perception of value received does not exceed their perception of the investment they are making in the service. There are myriad variations of this. From canceling because "the price is too high" to "we are not using it enough," the core of the matter is the same: the value received does not exceed the investment made.
Some simple awareness and best practices early on can reduce, or even eliminate, churn that comes as a result of value misalignment. Even with those best practices in place, however, churn can still happen. This post will explore the nature of churn and why it happens. Further, we will cover some hidden churn indicators and how to identify them.
Understanding the Nature of Churn
Discovering indicators of churn in the early days of a customer's journey with your software most often comes down to three things:
- Your customer can't articulate why they chose your platform and what value it brings them.
- Your customer has trouble with the product or service but doesn't bring this up during onboarding.
- The actions your customer takes after purchase don't align with their original intent for choosing you (e.g., canceling a project halfway through).
It's only when we examine failure modes at each stage in the customer lifecycle do we see the hidden early churn indicators.
Three Stages of SaaS Customer Lifecycle
There are three stages of every customer's journey with your software company. Fortuitously, each of these stages has indicators that correlate with increased churn: sign-up, onboarding, and usage.
The first stage to address to reduce churn is the sign-up process. If the experience of signing up for your service is difficult, customers may churn before they're able to realize any value. This is because you've failed to create a product that's simple and easy to adopt.
The second stage to address is the onboarding process. Account creation, adding users, connecting data sources and APIs...all of these steps must be simple and straightforward. Otherwise, customers may never recognize full value from their investment in your service. In some cases, a complicated onboarding process will preclue them from using your service at all. Your software should be designed to make onboarding straightforward and intuitive. Any area of potential friction should be addressed with documentation, instructions, and even how-to videos for the customer to review.
The third stage of the customer lifecycle is their actual usage of the product itself. Are they logging in and using the product? Is it integrated with mission-critical tasks and workflows? Is your success or account management team actively communicating new features and updates to customers? Are they checking in regularly to make sure that the value alignment remains in sync?
Onboarding Best Practices for Customer Success
It might seem obvious, but you have to make it simple for your customers to get started. If your onboarding process is too complicated, customers may never activate their accounts. Make sure that during initial training, you are able to guide them through the software so they feel confident using the product on their own moving forward.
Your customer success team should be available at this critical moment when customers are getting started. They can see indicators of trouble before it becomes a bigger issue down the road and save the day with support calls or emails during these early days.
Once your customers are up and running, it's time for customer success managers to collect feedback. This feedback should be about their experience transitioning from onboarding into daily usage. Customer profiles should include details about their workflows, pain points, and challenges. These details help customer success managers be prepared to answer any questions that might arise once customers are on their own.
Hidden Indicators of Churn
Even with a simple signup process, well-structured and intuitive onboarding, and a strong customer success team highly engaged with the customer, churn can still occur. Most often this churn happens because of a value misalignment that can be detected...if we only know what signs to watch for. Here are three hidden churn indicators and how to spot them in your SaaS business.
When Customers Sign Up but Never Use Your Software
Customer success managers often neglect to proactively engage with churning customers. Often they aren't aware that this is a leading indicator of overall churn. The only way to prevent this from causing problems down the road is to proactively work with these customers at the sign-up and onboarding stages.
Customer success managers should contact early churners before their subscriptions expire. Upon doing so they should ask if there's anything blocking them from using your software as expected.
Learn why customers signed up but never activated, whether it's lack of resources or lack of knowledge. If the problem is with the product itself, make sure that your team provides all necessary resources to help customers get started before their subscriptions expire. This may include additional training or an extension of the onboarding timeline so that the customer can be properly set for success with your solution.
You'll also want to learn if they found alternative software that better suits their needs. If this is the case, find out what features were lacking from your platform that caused them to look elsewhere for solutions. Sometimes another product has a key feature that you are missing. This can be useful feedback for your product roadmap. At other times, you have feature parity but the customer is not aware of the extent of your capabilities. This can indicate that more training or a reevaluation of customer needs is in order.
Customers Staying with Your Platform but Not Using It
Customer success managers can also learn about unmet expectations by talking to customers who are still active on your platform but not using it as expected. These customers might complain of their own accord or more likely wait for customer success teams to reach out.
When you identify these early churners, spend time learning more about why they aren't engaged and determine whether there's anything your company can do to keep them as a customer. Find out what functionality they're missing that would lead them to engage with the product fully. If you fail to help provide access to features that will close the gap, they will naturally look elsewhere for solutions.
For example, many organizations are hesitant to introduce a new solution or piece of software to their team. However, if your product integrates with a tool they already use then they may be excited to use it. Consider the ecosystem of Chrome extensions, Salesforce add-ons, or WordPress plugins. Making your software integrate easily with a piece of software already entrenched in the organization can lead to increase usage.
Customer Success Managers Avoiding the Customer
Although it may sound counterintuitive, if your customer success managers are not engaged with customers until they're close to canceling, then they will miss opportunities to prevent churn. It's best if customer success teams proactively reach out and stay top of mind so that customers don't cancel.
Even the best customer success team members have customers that are challenging to speak to. It is crucial that these customers continue to receive attention. If you have a customer and assigned success agent that are having trouble connecting and collaborating, consider moving the account to someone else. A different perspective, voice, or communication style is sometimes all that is needed to reduce the friction in a relationship and get things back on track.
Improper Tool Usage or Contact
When a customer success manager uses the wrong tool for the wrong purpose, then the team misses opportunities to engage with customers. At worst, they end up annoying their customers rather than engaging them. Customer success management tools should be used in a proactive manner, not a reactive one.
One leading SaaS company discovered that when managers used its platform to check on license usage and spend levels, it made customers feel like they were being watched or micromanaged. For example, if someone's account shows low usage because they're preparing for an upcoming event or waiting until after training is complete to onboard, then checking in could annoy them. This results in unnecessary friction within the relationship because the manager is not using the tool to its best advantage.
In contrast, a customer success manager who uses their customer engagement software for proactive outreach and educational content finds that customers don't even notice when it's time to renew or reengage with their subscription. Everyone wins!
Finding Hidden Churn Indicators for your Business
For SaaS providers, churn is a constant concern. Although customer success managers often recognize the most common indicators of churn and act accordingly, there are also hidden and less visible signs that customers may be about to cancel their subscriptions or leave your platform. The best way to proactively prevent this from happening is by staying in touch with these early-stage churners, gathering more information on what they find lacking in your product or service, and providing them access to features that will keep them engaged long-term.
Our team at Lantern has developed a platform to help SaaS companies discover hidden churn indicators. Even better, Lantern details exactly what to do in each instance and for each customer to turn your biggest churn risks into your greatest advocates and power users. To learn more about how Lantern can reduce churn and foster growth for your organization, contact us here.