10 Ways for Software Companies to Keep Customers Around Take these proactive measures to reduce your churn rate.
By Ron Yekutiel Edited by Dan Bova
Opinions expressed by Entrepreneur contributors are their own.
Customer churn is a key performance indicator software-as-a-service (SaaS) firms need to track and control. When churn happens, clients stop using the product or service, switch to a competitor, or move to an in-house alternative.
As companies grow, customer churn has an increasingly negative impact because churn is usually a percentage of revenue, not a fixed number of clients.
Customers tend to leave for three major reasons:
- They don't use the product. Clients may stop using the product if they don't understand how it works, don't need it, are missing a key functionality to use it, or have an alternative in-house option.
- They aren't happy with the product or service. A product that is missing features, runs slowly, or is full of bugs will turn customers away, especially if it is more expensive than other options.
- They are out of business or out of budget.
Related: A High Churn Can Cause Your Business to Crash and Burn
Reduce churn and keep customers coming back with these 10 tips:
1. Rebrand account managers as customer-success managers
Account managers need to transcend beyond reactive customer support and ensure and maximize the customer's success. This includes taking into consideration their goals and KPIs for success, their internal stakeholders and blockers for success, and other factors.
2. Focus the group on upselling services
Offense is the best defense and causes customer-success teams to focus less on how to mend problems and more on how to understand customer pains and unmet desires, as well as how those needs can be addressed. This will both reduce churn and increase upsells.
3. Gather and analyze data
Measure how and when the product is used, and put in place alerts for when things go south. It is recommended to have an overarching "customer health" scorecard that would take into consideration data points such as amount and frequency of usage (both absolute numbers and rates of change/trend), number of support tickets by severity and how many are opened, frequency of interaction with the customer, known complaints and dissatisfaction, history of payments or non-payments, etc.
4. Closely monitor customer onboarding
Most problems start at the beginning of onboarding, when a deployment project ends and usage hasn't yet started. Some customers get stuck there and fail to launch. It's important to define internally that the deployment-project phase ends when people actually start using the system, not just when the system is installed. It is recommended to conduct a review with the customer at 30 days and 90 days after usage began to make sure things are on track.
5. Define frequency of engagements
It is important to define an internal rule as to how often customers of each size and importance level need to be touched on a personal level (outside of customer-wide email blasts). Even for the smallest customers, touching base should not only occur upon customer renewal, even if everything goes well. It's paramount to gauge feedback and to provide customers visibility on a development roadmap.
Related: This Software Company Can Boost Your Retention Rate
6. Gather customers into a community
Customers learn most from each other, and letting them connect with each other increases stickiness and creates further emotional ties with you as a vendor. Share with all customers case studies and white papers that survey customer usage and needs. If possible, have physical customer summits, or at least do them virtually. Establish a formal customer-advisory board for important customers and share information with all customers.
7. Invest heavily in customer care
When problems happen, they need to be resolved quickly. Put in place a strong ticketing system and monitor queues. Dedicate second-tier support people to address ongoing debugging and maintenance problems while others focus on a next version.
8. Keep an eye on competition
Continuously monitor competitors' features, pricing, etc. Remember however not to run after them but to "skate where the puck is going" -- ask what customers are most interested in and how that fits into the company's competitive advantages. Eventually the company doesn't need to be better than its competitors on all accounts, but rather have a better "weighted average" score.
9. Increase switching costs
Don't increase switching costs artificially by locking customers in without reason, rather do so with features and services that are better for the customer. Provide customizations (tailored suits are harder to replace). Wherever possible strive to have a "network effect" where customers gain value from other customers' data or metadata (sharing content).
10. Calculate and analyze churn continuously
To reduce churn, measure it. Identify if the problem is in the customer segment, the product or the people. Be sure to motivate and compensate against churn as a KPI among customer success and customer-care teams, senior sales execs (to make sure the right products are sold to the right customers) and professional services execs (to make sure onboarding is successful).
Related: 8 Ingredients Every App and Software Business Plan Needs
