Top 5 Reasons for Customer Churn (and How to Fix It!)

Customer churn can be a pain to deal with, but it doesn’t have to stop you from achieving your product revenue goals. Here’s how.

So your team of marketers, developers, and salespeople worked hard to launch your product, and you’re starting to see the results. Your list of subscribers is exploding, you’re bringing in new revenue, and users are upgrading their memberships.

So far, so good, right? However, after looking at the long-term data, you realize there’s a big elephant in the room: many of the users you worked hard to acquire are now leaving your platform.

Customer churn is part and parcel of managing a SaaS product. But too much churn can put your long-term product growth in jeopardy.

To reduce your churn rate, you must understand why customers are leaving in the first place. From there, you can start looking for solutions to overcome these issues and retain more users.

Reason #1: Poor Onboarding

The onboarding process is the first stage of the product experience. If the first steps of onboarding are too confusing for the user or don't properly communicate the benefits of your product, you’re starting the user relationship on a bad foot.

According to Len Markidan, former head of marketing at Groove, there are two important milestones in a customer relationship:

  1. The moment they sign up for your solution.
  2. The moment they achieve their first success because of it.

“A disproportionate amount of your customer churn will take place between (1) and (2),” says Markidan. “Bad onboarding — the process by which you help a customer go from (1) to (2) — can crush your retention rate, and undo all of that hard work you did to get your customers to convert in the first place.”

The Solution:

For successful onboarding, you must lead the user to their “aha” moment as quickly as possible. The “aha” moment is when the user discovers the value of your product and experiences a breakthrough.

Once they reach this stage, there’s no going back. To better understand the “aha” moment, let’s take a look at an example from Wishpond, a landing page marketing tool.

Image Source: Encharge

“Our product’s Aha! Moment is when a user designs their Campaign, such as a landing page, contest, or popup, then clicks Publish, and they see that they’ve immediately published a live campaign that they can share with their audience,” says Nick Steeves, Chief Product Officer at Wishpond.

“Most users think that there’s a lot of technical work required when it comes to publishing pages online,” continues Steeves. “But when they see that it just takes a few minutes to go from a starting template to a live landing page without any code, the immediate, tangible value.”

To help users reach their “aha” moment quicker during onboarding, Wishpond decreases the number of steps to finish tasks and provides them with pre-made templates they can use. Wishpond also uses live chat to answer questions the customer may have in their journey.

To learn more about preventing churn at the beginning of a user’s product experience, you can read our blog post on how to optimize user onboarding.

Reason #2: You’re Attracting the Wrong Customers

Your goal shouldn’t be to acquire as many users as possible — it should be to attract the right ones. So, if you’re generating many signups but your churn rate remains high, it could be you’re not attracting the ideal user to your platform. Users who aren’t the right fit hurt your company’s growth since they will probably not stick around and upgrade their subscriptions.

There are many reasons why you could be attracting too many of the wrong users. Maybe you don’t have a clear idea of your user’s needs, or you’re using too much unclear messaging in your website and marketing campaigns.

For example, you’re targeting early-stage startups who ultimately can't afford your product when you should be going after more established companies.

The Solution:

Attracting the right users comes down to understanding the needs and expectations of your target audience. From there, you can use this information to improve the strategy of your marketing efforts and product experience.

“Customer churn isn’t just an outcome of lack of features or development,” says Johnathan Herrick, CEO at email marketing platform Benchmark. “Addressing churn involves having a hyper-focus on your ideal customer throughout the entire customer lifecycle.”

A great tactic is to create clear buyer personas for your ideal user. Make sure to write down key factors such as age, interests, challenges, and the goals they’re trying to achieve.

Once you understand who your target customer is, you can use the data for your content marketing campaigns and attract qualified leads. HubSpot, for example, is a CRM company that leveraged content marketing to turn themselves into one of the most respected brands in the SaaS space:

Image Source: Hubspot

They include various forms of content for their target audiences, such as webinars, blog posts, and case studies. They also segment their content for their different buyer personas, which include salespeople, markets, and customer service providers.

Reason #3: Poor Customer Support

There’s nothing more frustrating for users than having a problem with a company and being unable to get help quickly and conveniently. Lack of good customer support during the user’s product experience reflects poorly on your company and can lead to churn.

According to a Microsoft report,90% of Americans believe customer support quality influences their choice of brands and loyalty. Another 58% of customers in the report mentioned they’d switch to a competitor due to poor customer service.

The Solution:

The best way to provide world-class customer support is to adopt an omnichannel service strategy so you can be there for customers whenever and however they need it. That can include self-service resources, chatbots, and live representatives.

You can set up a knowledge base users can access and find solutions to their problems. After all,70% of customers prefer to answer their own questions through self-service documentation when they face a challenge in the product experience.

Here’s how Asana provides support for users during the product experience with their knowledge base:

Whether it’s to invite more team members or learn more about Asana’s automation capabilities, users can get all the information they need with the knowledge base. That way, users can find answers to their questions without going to support.

For issues users can’t solve themselves, you can include a live chatbot feature on your website that can answer user questions at any time of the day. Even if your agents aren’t physically there, users will still have access to support 24/7.

Reason #4: The Price is Wrong

When customers look at their budgets searching for an overpriced item to get rid of, you don't want your product to jump out. However, if they feel like your pricing is too high for their budget, they’ll look for a lower-cost solution.

The Solution:

To stop losing customers to overpricing, you must adopt a pricing strategy that aligns with their expectations. For example, the solution could be as simple as comparing your rates to competitors and adjusting your pricing accordingly.

If you’re planning to set your pricing higher than the competition, there needs to be justification for it. In addition, you’ll have to include new features and updates that others in your industry don’t have within their products.

Another tactic is to offer customers who are about to churn a discount on their membership if they don’t unsubscribe. It gives them an extra reason to stay and continue using your platform.

Also, don’t be afraid to experiment with pricing to see which works best for your audience. “Don't be afraid to try new price points,” says Wade Foster, CEO at Zapier. “You'll learn how the conversion rates change and get a feel for the price elasticity of your product. You can always grandfather customers too, to make sure the price changes don't accidentally upset current happy customers."

Reason #5: Users Are Going to the Competition

Don’t forget you’re not the only SaaS product company in your industry that’s trying to get users' attention. Another common reason for churn is users lose interest in your software and see more value from your competition’s product.

Many factors could explain why you’re losing customers to the competition. It could be because your product doesn’t include the right features or that you have pricing issues.

The Solution:

Run competitor research to get an idea of why users are choosing other platforms over yours. Try to understand the strengths and weaknesses of their product, its features, the way they market their product, the pricing, etc.

Also, take a look at what customers are saying about their product online. You can find this information on websites such as G2 Crowd, Capterra, and SoftwareWorld.

After researching, define and create your unique value proposition: what makes your product stand out from the rest? For example, do you have features the competition doesn’t have?

The next step will be to incorporate that unique value proposition into your positioning and marketing strategy, like in this example from Revolut:

Image Source: Revolut

One aspect that makes Revolut stand out from its bigger competitor PayPal is that it allows users to exchange and transfer money with no fees. Revolut highlights this difference in its messaging and product experience to stand out to budget-conscious consumers.

Prevent Customer Churn Before It Hurts Your Bottom Line

Focusing on user acquisition and ignoring churn is like building a house with no foundation: eventually it will catch up to you. So, it’s crucial to focus on minimizing churn and making that goal inform every part of your product experience, from marketing to onboarding to support.

By reducing your customer churn, you’ll naturally see an increase in customer lifetime value, user satisfaction, and revenue for your company.