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The 5 Reasons SaaS (Software-as-a-Service) Customers Churn - YouTube
Channel: Dan Martell
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Tagum monitor them the admin log did
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they haven't deployed they haven't
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responded remember at risk Gerry
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remember at five reasons you have high
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churn in your product now if you're not
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a SAS business founder churn is the
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amount of people cancel every month you
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know I have entrepreneurs reach out to
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me when they have like a $200 lifetime
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value of a customer and if they're
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charging a hundred bucks a month and
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that means it's two months and the
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person leaves I also get people that
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have a 10 month lifetime value where
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essentially if they're at a 10 or 12
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percent turn every month the customers
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imagine that every 10 months they got to
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go find a hundred percent new customers
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just to even keep even-keel it's crazy
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in the best products I want to share a
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strategy when talk to you the five
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reasons that customers are turning but
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if you do it right you literally can
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have a product has an eight percent
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annualized churn most people are at 8
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percent per month and I'm like hey we're
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yet and they're like oh and I'm like man
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that's crazy
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now I know this firsthand because a lot
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of the building my company flowtown it
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was an email marketing SAS product the
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integrated social data and emails and I
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remember six months into the product we
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were starting to run a reports in the
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early days you don't have a lot of data
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and when I pulled the report to share
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with my co-founder Ethan we literally
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had a 12% per month churn so the
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scenario I just share with you a nine
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month lifetime value did not create an
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incredible company now the good news is
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we actually built a marketing channel to
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support that so we were growing every
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month 20 30 % but if you kind of looked
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at the top-line growth and the churn you
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would have seen a huge fall off on the
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other side of that chart so we sat down
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we started looking through this and it
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was through the actions I'm going to
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share with you today that we really
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dialed in what was missing what was
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broken in our product to turn things
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around where we eventually got it to
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about 15 percent annualized sure not
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great not the eight but definitely a
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huge difference from where we started to
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where we ended up so the first thing you
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need to understand is you got to have
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great customer service I know a lot of
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you guys like that sounds so trivial Dan
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of course great customer service here's
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what I want to say
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it's about responsiveness you know one
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of the things we did is every time
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somebody would sign up for the product
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we would literally we'd ask made a
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little checkbox and it said click here
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for free phone support because in that
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signup form they would give us their
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number and we had two people technically
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they were sales they didn't have quotas
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but they had a certain level of
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expectations that were competing against
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each other and their whole job was just
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to call customers and make sure that
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they understood the product they
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understood how to get deployed and they
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had a great customer experience level
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and I think that is just responsiveness
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have you ever emailed a company with the
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challenge and nobody replied or two days
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later I recently signed up for this like
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obscure domain you know like those weird
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dot whatever's and it was like this
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company in probably Europe or whatever
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cuz one of those small countries and it
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was three-day back-and-forth
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interactions I've emailed them I'd wait
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for three days those come I ended up
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canceling the domain I was like I'd
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rather find somebody else that I can
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feel comfortable with then continue to
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deal with it and they could have had me
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for a customer for decades if they had
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better customer service so that's number
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one make sure that's doubted too isn't
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sure that you're onboarding experience
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especially if you do a free trial two
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paid conversion like a 14-day free trial
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you need to make sure that you're
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onboarding experience gives the customer
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exactly what they expect and need the
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dalles them rate into what I call the
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core value of your product so that they
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get activated but they don't get
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activated they're literally they might
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stick around for for a few months many
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people when they sign up for product
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they have the need today but they're
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working on solving it over a few months
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and they're willing to wait and pay what
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I call the pack of a monthly fee knowing
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that they're going to jump back in but
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as soon as they realize that the product
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isn't as good as they thought it was or
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they find alternative they'll just
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cancel it so if you can get somebody
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deployed and activated in that first
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trial you're going to have an incredible
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reduced churn on your hand so number two
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is just make sure that people get on
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boarded three is recurring value as much
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as you want people to pay every month
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recur every month you're like every
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month I want you to pay me money pay me
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money pay me money the onus is on you as
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the company founder to make sure that
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that product delivers value recurring
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value every month that was a huge
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problem in our company flow
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town is that we had this great product
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cook we got the man with the social data
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on the email addresses we even had a few
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templates that we gave them but we
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didn't give them a reason to continue
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setting up and automating they're
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essentially outreach on social media for
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their customers in their marketing so we
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had to look at the product make sure
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that the the product delivered
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reoccurring value so if you're having
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that issue if you have like a two-month
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kind of valuing people term because they
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kind of get the need they solve it and
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then they move on you got to look at
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what other features can you create to
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really build that kind of value here's a
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great question to ask yourself and your
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team especially for your customers is
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what do you so I'm asking a customer
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what do you do three minutes before and
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after you use our product because what
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they do those actions will help me build
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a more broad and attractive and ongoing
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value stream to my customers number four
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it's just a lack of customer success you
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know I really think that there's kind of
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three core phases to the product there's
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attract convert and then expand attract
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is just getting them to the site in the
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first place convert is making sure that
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the free trial' we're going to your
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product or the demo does really well to
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get them as a customer and then expand
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is not even just retain them it's
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literally look at opportunities to
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expand their product usage maybe there
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are certain features that you guys have
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that they don't even know about they're
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not using so your job is actually to map
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out all your customers and ensure that
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they deploy an ingrained and leverage
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the features you've built to get more
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value from the product okay
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now the fifth reason people are churning
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is for natural causes and you need to
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understand that these are real things
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number one is just credit card details
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you know expiring I don't know if you've
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ever dealt with that but is literally
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for most companies it could be like four
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or five percent your customer base every
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month that it's just their credit card
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details expire and you got to get them
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to update it so that's normal
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the other one is they're downgrading so
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they might have been using a lot of
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features that had a big company maybe
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their company kind of downsized or they
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kind of found another way to solve the
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problem so they've downgraded their
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feature set so that's you know negative
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turn on the revenue side and then
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finally just businesses die you know I
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remember talking to the CEO of Constant
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Contact Gail and she was like you know
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the challenge for us being in the SMB
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space or what she called the the very
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small business VSDs
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is that you know there's a huge eight
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10% a year kind of death rate of just
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small businesses so if you're in that
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market you've got a combat if you're
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trying to get 8% churn per year it's
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going to be tough because you're going
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to get just companies you know going out
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of business so those are the five
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reasons I want to give you a tip okay
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this is huge
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the way to kind of protect yourself is
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actually to tag customers asmar okay and
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Mar is member at risk so it's very
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simple for you understand what an
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engaged customer looks like these are
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your best customers how to use the
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product often they login what features
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they use you can literally just write
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some simple code to monitor that and if
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somebody doesn't log in for two weeks if
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somebody is not deploying the features
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if they signed up and they haven't used
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the product a whole lot you can flag
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them as Mar and then have your customer
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success team reach out to them to make
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sure they go from a member at risk to a
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high retained customer that is your
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opportunity number one make sure your
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customer service is rockin to your
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onboarding delivers the core value your
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product promises three make sure that
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your reoccurring value actually is
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delivered and perceived from your
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customer on a monthly basis that's a
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product issue four make sure that you
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have a great customer success team so
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that people not only retain but expand
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in their usage and five just understand
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there's natural causes you can do your
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best to improve them but at the end of
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the day there are going to be companies
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that go out of business and downsize and
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that's part of building a SAS business
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so as per usual I hope this video finds
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you well I also want to challenge you to
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live a bigger life and a bigger business
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and I'll see you next Monday if you like
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this video be sure to subscribe to my
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channel for other tips and strategies on
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how to start and grow your business I'd
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also encourage you to join my newsletter
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where I share community contests
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exclusive invites and other free
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entrepreneur training and if you're
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