Dear SaaStr: How Can I Reduce Our Churn Rate in SaaS?
You’ll get a ton of advice, but two high-level efforts always work to ground your efforts here:
- Measure it, segment it — and make it a core goal to drive it down. I’ve yet to work with a SaaS company that made driving down churn a Top 3 goal … that didn’t go on to drive down churn. Segment it by a few segments (small, medium and large customers, for example). Put someone 100% in charge of it (i.e., your head of customer success). And make it a Top 3 goal for everyone in the company. In a quarter or so … it will go down. Not overnight, but within an quarter; and
- Measure your NPS, segment it, and set goals to drive NPS up. Again, magic happens if this is a Top 3 goal for the company. If it isn’t, nothing sort of happens.
The first goal (e.g., driving churn down from 2% a month to 1.5%) makes sure everyone has a direct financial metric to be responsible for.
The second goal (e.g., drive NPS from 20 to 30 this quarter) aligns everyone around the strategic upgrades they can make.
Without segmenting and grounding your churn goals, it’s hard to make much progress.
Once you’ve done that, what are some things that generally work:
#1. Add a Team and Maybe an Enterprise Edition. Team editions with functionality across an org are almost always much, much stickier. And they give you a chance to add more seats and usage. More here.
#2. Drive Up Your Activation Rates. Try and Onboard New Customers as Close to Instantly as Possible. This also almost works. Any customer you don’t onboard almost immediately after signing up, and especially after paying, is almost immediately at risk. Way too many startups only see 80% of their paying customers even go live in the first 30 days. More here.
#3. Do 30-60-90 Day Check-Ins. For Real. Too many folks don’t really check in with every customer after they do onboard. Set up a cadence to check in 3 times in the first few months. Yes, this may lead to you having to do more work 🙂
#4. Visit More Customers in Person. We’ve written this many times, but customers churn at a much lower rate if you visit them in person. More here.
More here:
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Jason Lemkin, Khareem Sudlow
