11 Proven Strategies to Reduce Customer Churn Rate

Intro

The number of users subscribed to your SaaS is an important indicator of its efficiency and overall business success. However, this measure isn’t always straightforward — not all subscribers are active paying customers fully engaged with your product.

These “lost souls” who abandoned your platform by either unsubscribing formally or keeping their subscribed status as dead weight are categorized as customer churn or customer attrition.

Although you, as a business owner, have nothing to enjoy, there’s no need to make a tragedy out of this problem. It just needs your attention and effective, surgically precise actions to reduce customer churn rate. The following article shows how this is best done in the SaaS industry.

What Is the Customer Churn Rate?

So, in other words, the customer churn rate is a metric helping to identify and measure the scope of the outflow of your service consumers in concrete quantitative terms.

Why Is Customer Churn Rate Important?

Customer churn rate is connected to the other quintessential business metrics, such as customer lifetime value (LTV) and customer acquisition cost (CAC).

LTV is an anticipated total measure of the profitability of a typical user of your product as long as they use it. As it works with averages, lifetime value directly depends on the churn rate. The more inactive users you have, the lower CLV you will inevitably have.

By comparing these two metrics, a business owner can clearly see the real value of every new customer. By looking at the ratio on this chart, you can also anticipate when exactly a customer will become profitable and how much cash you are to spend until that point.

But if a customer becomes inactive before that long-awaited moment, all your acquisition efforts and spendings will be in vain. And as a result, the more inactive users you have, the lower your CLV is.

In this way, customer churn equals revenue churn, and therefore, keeping an eye on the number of dissatisfied customers leaving your platform is vitally important for the very survival of your company.

In some sense, customer churn and retention are mirror concepts. The latter identifies the percentage of those users who did not churn and continued to use your awesome product. For instance, if your churn rate is 5%, then your customer retention rate is 95%.

What Is a Normal Customer Churn Rate?

A certain degree of customer churn is a normal and inevitable process. We already noted this fact in our main guide on increasing SaaS revenues.

Some first-time subscribers will fall off for personal reasons, such as:

• Subscription by mistake;

• Personal dislike of a particular UI design;

• Subjective preference for another product;

• Mismatch with your target audience segment;

• A zero willingness to pay for anything per se.

You can say farewell to such consumers with a light heart and even be glad you need not deal with them anymore. It is not worth your time and resources.

At the same time, not all churned users belong to the above category. On the contrary, a big percentage of customers leave a platform after having bad experiences with a product.

Therefore, if to find ways to detect and eliminate such omissions, you can learn how to reduce customer churn rate and receive dozens to thousands of your old users. This is, by the way, five times cheaper compared to acquiring new ones.

How to Identify Customer Churn

The challenge is that these reasons are not general and universally applicable to any SaaS case. They are always specific and rooted in the context of your product development and marketing strategy:

• Unwillingness to pay for your product by the freemium users. The study shows that the average purchase rate for this group is just 3.7%;

• Sub-optimal features distribution between different packages;

• Negative customer experience caused by poor user onboarding or the lack of communication.

Of course, there are also universal reasons that take their place in any company, including non-qualified users or personal issues originating in a client’s mindset or pocket.

But the trick is that universal reasons usually belong to the realm of inevitable, while exactly the specific reasons make the area where you can improve the situation.

Obviously, you cannot accurately discover these reasons with a wild guess. Only thoroughly planned research, using product analytics tools, user surveys, user testing, and other analytical techniques, can give a clear panoramic picture of the problem.

And just with this picture at hand, it makes perfect sense to proceed with proven churn reduction techniques and strategies aimed at bringing back only those inactive customers who deserve this for your mutual interest.

11 Strategies to Reduce Customer Churn Rate Immediately

Here are the most meaningful ways to tackle the crisis of high customer churn by ensuring that customer experience is up to the mark. They are suggested by UX designers as the most saving in terms of financial resources, on account of higher contributions of creativity and intelligence.

I. Take measures for customer churn prevention.

In application to customer reactivation, this means that instead of waiting until the customer attrition rate grows to a dangerous scale and then figuring out what to do, you take measures. This may take one of the following forms:

While not expressly critical alone, taken together, these indicators are high-probability predictors of consumer churn.

3) Learning from the churns of the competitors and your own past experience. Take lessons from both your own churn rates (in case your company has a long history with different products launched) and those of other industry players to eliminate possible pretexts for user abandonment in advance.

For example, based on customer reviews, you see that your rival has lost most of its users because of the absence of integration tools with other platforms. In that case, you will exclude this risk by adding such tools to the product development strategy.

II. Track the key user behavioral data.

If it is too late for purely preventive measures, and the churn already showed an unpleasantly high score, you need instruments for: 

1) segmenting the churned users into “irrevocable” and “retrievable” groups, and

2) figuring out the particular reasons that could drive the latter group so far away from your services.

While both tasks are the job of your analytics, they will need basic technical data to proceed. Therefore, it is strongly advised to use analytical integrations (e.g., Google Analytics) to fix and record important business metrics on the customer behavior within its space.

This can be the duration of their sessions, mapping of their journey between pages and CTAs, response time to notifications and messages, failed and successful transactions, purchase history, etc. By relying on this knowledge, an analyst will be able to ask more precise questions about challenges of a user’s onboarding, such as:

• Where exactly a customer was stuck;
• What questions/complaints they might have probably had at each segment of a sales funnel;
• What stage of a customer journey coincides with the clear decline of a client’s interest/activity on a platform.

Further, depending on the answers and hypotheses received, you will receive quite an accurate and statistically meaningful answer as to whether the key factor of your customer churn is rooted in financial, technical, communicational, or user experience areas.

A good example of comprehensive customer attrition analysis is demonstrated by HubSpot, which implemented the so-called Customer Happiness Index. This metric is calculated based on several indicators relevant to customer satisfaction, including the frequency and scope of their business clients’ blogging, lead and remarketing tracking, running email campaigns, using social media, and other platform actions illustrating high user engagement.

Such cases prove that keeping track provides you with the needed intelligence and clarifies ways to reduce customer churn rate with a surgically accurate approach, allocating your limited resources selectively and wisely.

You will hence know whether to send more educational content, revise the onboarding process for friction points, or eliminate obvious communication gaps with your users.

III. Show care towards your clients.

When the target is clear, mildly renew contact with a client, asking in a friendly manner what exactly distracted them from a product and what service issues, challenges, or scarcities they faced.

Even if you already know the factual reasons better than the customers themselves (if advice #2 was fully implemented), this step establishes a proper atmosphere of trustworthy communication.

It can (and should) be taken along with subtle churn management strategies that reinvigorate a user’s interest more implicitly. And still, many customers would appreciate your frankness and sincerity as a big gesture. The capacity to acknowledge one’s limitations means a lot in the modern world.

To put it simply, your rhetoric of concern and care has to show that you do not simply want their credit card to get back to your command but are really and wholeheartedly worried about their interests. Use intimacy and friendliness in your discourse. Show in every way that you still care for their well-being and really want to help.

For example, you can ask a client directly on the phone call how this can be done in their particular situation. You already know from our guide that 68% of clients quit because of “perceived indifference” from companies. And on the contrary, warm and nurturing treatment is what makes customers happy and increases a customer’s lifecycle.

Wrapped in a blanket of goodwill and courtesy, a clear and customized offer developed by your business analysts will appear in a different, much more pleasing light to a disappointed or indifferent user.

IV. Customize user experience and personalize communication.

Going beyond impersonal warmth and kindness, this customer churn reduction tip emphasizes the necessity of focusing on the personality of a particular client. Even the most sincerely sounding letter can convey the air of an automated “bulk mail” message. According to recent data, 76% of customers strongly dislike interactions that are not personalized.

But if it comprises details related exclusively to particular individuality (or at least creates such an impression), its authenticity is irrefutable. We, humans, are such beings who love ourselves very much: nothing to be done here. That is why almost no one can resist direct attention to their humble self.

There can be different ways to be personal enough to break that wall of alienation:

1) Most simply, address a client by name. It is easy to implement by automating the process with its inclusion in mailing templates. The effect of this approach will be strong because a client sees their name already on the first line.

2) Discover and use personal details about the client in your communication. Importantly, this is not about details related to interaction with your product (features, business needs, etc.) but some intimate issues that speak of a user’s life while respecting their privacy.

This data can be retrieved from:

• The customer profile. This can be something as simple as their birthday, which can be further used as a pretext to send them a warm “hi” and a symbolic present to reignite the connection;

• Analysis of their in-app operations. Suppose your platform is a booking app that keeps a record of hotels and restaurants visited by each client. This data can be effectively used to create a user’s cultural profile and adjust the tone and content of communication accordingly.

3) Use a personalized video. Don’t worry, you need not produce hundreds of unique recordings for every churned customer. One video that is processed with software generating personalized thumbnails will be quite enough.

This creates a more powerful effect of personal engagement compared to other forms of communication. When a user sees a real person making eye contact and talking in the second-person narrative out of the screen, it gives an impression of real face-to-face interaction.

V. Be timely and relevant in your reactivation efforts.

The earlier you react to a consumer churn, the more chances you have to reactivate customers. The best option is to contact a client within 24 hours. However, later addresses also make sense, while they require different rhetorical and marketing approaches.

One more important reason to contact risk customers as soon as possible is a chance to get valuable information and reduce customer attrition rate in the future.

Indeed, if it is a serious shortcoming related to a product, the number of customers may grow further as a snowball. For example, when a new user withdraws because a complicated technology lacks digestible educational content along with poor customer support, it is 1000% that many others will do the same. Timely awareness of the underlying factors gives you a chance to fix the problem before losses to your brand reputation become irreparable.

There are a lot of technical ways to establish such an immediate connection. This includes:

1) Real-time triggered emails that are sent automatically when fixing signs of potential churn of a subscriber. For this purpose, you may use analytical tools like Kissmetrics or Intercom. The content of such a letter should include general but substantial issues, e.g.:

• Asking about the reasons for unsubscription/low activity; 

• Reminding about valuable product features or substantial onboarding stages that a customer might have missed; 

3) Interviewing. Although it is a bit more costly, perhaps the most effective way to intercept a falling-off user is to call them on the phone or, at the very least, to chat via messenger. This increases the chances to reach and clarify the factors of customer dissatisfaction almost immediately.

VI. Incentivize inactive customers to get back on board.

Depending on particular reasons for withdrawal, encouraging a distracted user with some form of incentive has limited yet valid effectiveness.

Primarily, a financial reward may motivate a customer to reactivate — but only in some cases and under certain conditions. In particular, you may offer a more reasonably priced subscription plan (maybe it was not noticed!) or a more budgetary product of the same line.

However, it is advisable to be careful while offering a discount for your established price plans. Such a step may create an image of low product quality that you desperately try to sell at any cost while encouraging low-budget users to require similar concessions all the way. Additionally, the broad implementation of discount programs badly impacts the revenues of your SaaS, with their cost outweighing prospective advantages for reactivating some users.

In any case of monetary incentivizing, the rule of thumb is to use them only for the churned commercial clients and never for free trial users.

This includes giving your inactive users access to a product demo or some bonus services, engaging them in educational programs, adding unique features to their user interface, or inviting them as beta-testers of your new products.

For the latter feature, this is purely a marketing move aimed at increasing the return rate: for real beta testing, you should, of course, choose your best and most reliable users.

VII. Adjust your reactivation proposals to the individual needs of a user.

Insufficient customization is one of the critical factors discouraging customer loyalty, even among your most sincere sympathizers.

Try to effectively use all the available personal information to produce offers that match a client’s needs instead of “shooting in the dark” with general suggestions. Along with monitoring and analyzing their in-app performance, a phone call is rather risky but perhaps the most effective way to receive and use such data.

In addition, changes in the social, economic, and political environment in a client’s area of residence may induce new interests and demands closely related to your product.

For example, your yoga/meditation app that was massively abandoned can become extremely popular after the outbreak of the COVID-19 pandemic, when hundreds of your former users got locked in their homes, distressed and frustrated. But they can remain oblivious about the renewed value of your app if you don’t remind them in a customized manner.

Once you get some insights on what may be interesting exactly to a particular person, you can:

1) Recommend relevant offers and features that they might need or like the most.

2) Explain how exactly you are going to resolve the problems or rise to the challenges that supposedly made them stop using your platform.

3) Emphasize new opportunities for your product that emerged since their departure, as matching their needs and concerns.

4) Personalize the content of your messages to users depending on the time of their churn. For example, if only a couple of days have passed since unsubscription, you may ask for particular details of their onboarding experience, as well as request a brief chat or a Zoom meeting.

Yet, if a client is absent for weeks already, such a tone will obviously look irrelevant. In this case, you should rather mention that a client used your service previously (without going into detail) and introduce new features that may interest them today.

Similarly, a message to a user who has quit after a few days will radically differ from that addressed to a long-term customer who had unsubscribed after months of interaction with your product.

VIII. Select and diversify the channels of communication.

Although an email looks like the most classical and first-priority way to reconnect to a churned user, your reactivation strategy should never be limited to this one channel. Often, it is not even the most effective solution.

This is especially true considering current tendencies in communication technologies towards the predominance of messengers, Android/IOS notifications, and other mobile-tuned solutions. Statistically, the response rate to SMS is nearly 8 times higher compared to that of email letters.

On the whole, email is better suited for large-scale automated dispatch when you have to reach a mass audience cost-effectively or in case you need more space to introduce your offer in greater detail.

At the same time, smartphone channels such as a push notification, SMS/MMS, communication in messengers, or a phone call are greater when you are pressed in time and need to reach a customer ASAP.

In addition, from a long-lasting perspective, it may be effective to try reaching your users within social networks and by placing targeted advertising with Google ads. Yet, in this case, it is a fishing net with a big cell size where quick and pointed results are impossible.

XI.Include actionable elements.

Effective communication may work only if you make the process of reactivation frictionless. The most striking and compelling message will be useless if a customer cannot immediately see what is to be done next.

It is very unlikely that most of your churned users will write a letter in response to your email or type an SMS on their smartphone. They need to have more direct, convenient, and fuel-efficient ways to come forward.

Specifically, a link may lead to a page with a product/update capable of renewing a user’s interest, some important educational content, a scheduled meeting if this is what you offer, etc. If you make a phone call, inform a customer you will send further instructions in a separate message, and then do it immediately.

X.Use psychological techniques.

If you were careful and personal, this would already make a profound positive impact on a user’s mind. However, here are some additional methods that may subtly hit their emotions in the desired direction — into your arms:

As an option, you can provide easy-to-google promo codes on your product platform, as ClickUp does. Pay attention that the time limit is eloquently indicated in the call-to-action phrase at the very beginning and in large type.

2) Sentiments. Use a subject line conveying an emotion of loss and nostalgia. You may often come through a standard “we miss you.” But exactly due to the frequency of implementation of this method, it became too formal and empty in the customer’s eyes. Therefore, it is better to redo such an appeal more creatively, supplement it with specific details “why” and “how” you miss your user, or offer something valuable as proof that your feeling is sincere.

3) Visuals. Implementation of emotionally charged or personalized illustrations in your reactivation message may speak stronger than a dozen pathetic words, directly to the user’s heart.

XI.Keep in touch even if a user remains silent.

If a churned or passive client does not respond shortly, this does not mean they will never do. To be realistic, in the large majority of cases, they won’t. But there is always a chance... So, what are you losing?

Use cost-free ways to visit them from time to time with email marketing campaigns, messenger notifications, SMS bulk delivery, and social networks. With this:

1) Inform a user of any updates, features, limited-time offers, and discounts on your product.

3) Don’t be too boring, long-winded, and obsessive not to get into the spam or complaint list. Reminding about your existence once a week or even biweekly will be more than enough.

Conclusion

This article aspired to show you that customer churn is not a pleasant thing but also not a disaster when you clearly understand the mood of your inactive users and know precisely what can — and what cannot — be done to bring back those of them who are worth it.

Now you know how to reduce churn rate and implement specific solutions for bringing your valuable users back.

Take measures to decrease churn rate and keep track of user activity to pre-empt their falling off at the early stages of decay.

Be careful, personal, timely, and relevant when sending targeted, customized content via a broad spectrum of communication channels.

Don’t forget about incentives and emotional triggers.

Finally, when it does not require additional spending, stay connected with all your inactive users for years, even if they are as quiet as ants. For some people, it may take a long time to realize the value of your product for their needs. So play long and don’t lose patience.

The most important thing is to distinguish between the natural, inevitable churn and the churn induced by shortcomings of your sales process. In customer reactivation, quality is more important than quantity; keeping any user despite the costs would only burn your resources and give you a headache in the future.