How to reduce customer churn rate: 11 proven strategies in 2024

The number of users subscribed to your SaaS is an important indicator of its efficiency and overall business success. However, this measure is not always as straightforward as it is expected to be. Not all your registered subscribers are active customers fully engaged with your product and regularly paying for it.  

These “lost souls” that abandoned your platform, by either unsubscribing formally or having kept subscribed status as dead weight without any actions, are categorized as customer churn or customer attrition.

And although there is nothing to enjoy for you as a business owner, no need to make a tragedy out of this problem either. It just needs your attention and effective, surgically precise actions - in areas where they are justified. The following article shows how this is best done in the SaaS industry.

The customer churn rate is a percentage of your subscribers that either canceled their subscription or took no action to extend it (or did not enable it in the case of a free-trial period) over a certain period of time. 

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. 

Customer churn rate is intimately 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 depends on the churn rate directly. The more inactive user you have, the lower CLV you will inevitably have.

CAC is a total measure of all costs a company spends to acquire a new customer. The connection with the churn rate is subtle but significant because with the growing number of dissatisfied users you will have to invest more resources in getting new clients, to keep your business afloat. 

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. 

Moreover, many of the inactive users are potentially your most valuable customers. In this respect, the customer churn rate also gets related to the customer retention rate. This subject is explored in great detail in the next article of this guide.

In some sense, the retention rate is a mirror concept for the churn rate. It 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%. 

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. 

In reality, in quite a few cases the blame for high customer churn rates lies on companies and their oversights regarding customer service. When this indicator exceeds an average of 5-6% annually, it is most probably exactly such a situation. 

For example, this is what the team of Sidekick (later absorbed by HubSpot Sales) discovered when figuring out the reasons for discouraging churn metrics on its platform. The research revealed that most of them did not unsubscribe intentionally but just forgot about their subscription due to the dormant onboarding experience.

Source: https://www.appcues.com/ 

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

The first step in reactivation of your customers is a clear understanding of the reasons leading to the excessive churn rate. When you know exactly what made your customers quit, you can distinguish areas where the process is natural, on the one hand, and “unhealthy” trends where the action is required, on the other hand.  

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 an average purchase rate for this group is just 4%;
• sub-optimal features distribution between different packages;
• negative customer experience caused by poor user onboarding experience 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 with the use of 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 specific approaches and strategies aimed to bring back only those inactive customers who deserve this, for your mutual interest.  

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. 

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:

1) Asking clients to give feedback in advance, from the first steps of the actual onboarding process. In this way, you have an opportunity to save many potentially good customers from being at risk of churn for trivial misunderstandings or interaction concerns.

Source: https://maestrasuite.com/ 

2) Looking at the early warning signs of passive user engagement with your platform such as a long standstill with the end of a free-trial period, decreased duration of login sessions as well as longer breaks between them, low onsite activity, skipping messages suggesting support or educational content, etc.

Source: https://popupsmart.com/ 

While not expressly critical alone, taken together these indicators are high-probability predictors of the consumer churn. This is reaffirmed by 35% of B2B SaaS companies saying that early-stage diagnostics of passive customers help to reduce churn and keep the retention rate high by taking appropriate timely actions.

 
3) Learning from 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, if by looking through the customer reviews you find out that your rival has lost most of its users because of the absence of integration tools with other platforms, you will exclude this risk by envisaging a desktop version of your app in the product development strategy.

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 from. 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 whether the key factor of your customer churn is rooted in financial, technical, communicational, or user experience areas. 

A good example of comprehensive anti-churn tracking 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 of further reaction to the problem 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. 

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 customer themselves (if advice #2 was fully implemented), this step establishes a proper atmosphere of open trustworthy communication. 

It can (and should) be taken along with subtle strategies reinvigorating 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 analysts will appear in a different, much more pleasing light to a disappointed or indifferent user. 

Going beyond impersonal warmth and kindness, this tip emphasizes the necessity to focus on the personality of a particular client. Even the most sincerely sounding letter can convey an air of an automated “bulk mail” message. According to recent sociological data, 42% of users strongly dislike content that is not personalized. 

But if it will comprise details related exclusively to particular individuality (or at least creates such an impression), its authenticity is irrefutable. We, humans, are such beings that 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, that can be further used as a pretext to send them a warm “hi” and a symbolic present to reignite the connection;
• entertaining quizzes that you suggest to your users in exchange for some symbolical rewards, as a popular user testing platform Enroll does;

Source: https://enrollapp.com/ 

• 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. 

As an example of effective personalization of form rather than content, a graphic design platform Canva determines the color preferences of every user based on their workflow and then creates unique visual layouts for their messages.

Source: https://assets-global.website-files.com 


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 device 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.

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 to prevent aggravation of the churn trend 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; 
• expressing willingness to provide full support and assistance with respective links and contacts.

Source: https://tldv.io/ 


2) Offboarding feedback. You may incorporate a brief questionnaire as a part of the unsubscription process as, for example, Wall Street Journal does. A customer will have to explain why they withdraw in either obligatory or voluntary form before saying good buy to your service.

Source: https://wsj.com/


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 phone or, at the very least, to chat via a messenger. This increases the chances to reach and clarify the factors of customer dissatisfaction almost immediately. 

Depending on particular reasons for withdrawal, encouraging a distracted user with some form of incentive has its 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. 

Source: https://www.hulu.com/ 

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, broad implementation of discount programs badly impacts the revenues of your SaaS with their cost outweighing prospective advantage 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 to free trial users. 

Certainly, reactivation incentives are not limited only to financial benefits. If your customer success team gets creative enough, they can find a lot of ways to reward loyal customers in other ways. 

Source: https://www.dropbox.com 

This includes giving your inactive users access to a product demo or some bonus services, their engagement 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 to increase the return rate: for real beta-testing, you should of course choose your best and most reliable users.

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 will match a client's needs, instead of “shooting in the dark” with general suggestions. Along with monitoring and analysis of their in-app performance, a phone call is rather risky but perhaps the most effective way to receive and make use of 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 COVID-19 pandemics, 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.

Source: https://www.business2community.com 

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