Understanding Churn Reasons from a Product-Led Standpoint

Churn rate can increase for several reasons, but it all comes down to customer experience being product-led. PWC concluded in a survey 32% of people ditch a company after only one bad experience. 

Mid-size Saas companies lose 5-7% of their annual revenue to churn. It includes 30% of SaaS companies who reported an increase in churn rate in 2020-2021. 

Getting new customers is a good metric but focusing on your existing customers also needs your attention. In this blog, you’ll learn how to interpret customer feedback and implement it into your system to reduce churn. 

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What is Churn in SaaS? 

Churn is every SaaS founder’s worst nightmare. Churn happens when customers stop using your product after trying it for a while. It indicates your product didn’t work for them. The average churn rate is 20% for a company earning $10 million annually. 

Analyzing churn rates is crucial, but companies still try to present sugar-coated values to stakeholders, only to suffer in the long run. But you can fix it. 

Asking the right questions and implementing feedback reduces churn in the long run. Focusing on customer happiness leads to higher retention as your present customers are happy with the product.

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Top Reasons for Customer Churn

SaaS companies begin with a groundbreaking product and start bringing customers in. As the product grows, the number of users increases. Blinded by revenue, companies often focus on customer acquisition rather than customer retention. 

Before they know it, their funnel begins leaking customers, and the churn rate goes off the charts. Only then do they start backtracking their strategies to find where they went wrong. 

You must spend time understanding how customers adopt your product. Keep an eye on what problems they face and take feedback every step of the way. It’s the key to high customer retention, and missing this point leads to churn. 

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Common reasons for Churn in SaaS: 

• Your product is too expensive 
• Your product lacks some features
• It has bugs 
• Your competitor has better offers.
• Inactive customer support 

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Understanding Customer Feedback

Customers give all kinds of reasons while ditching your product. But the bottom line is, they were unsatisfied. Your product failed them in terms of experience, performance, or pricing. 

But what’s gone is gone, now you must interpret customer feedback accurately to improve your product so next customers don’t face similar issues.

Begin with repetitive complaints, prioritize urgent queries, and work your way to create a perfect product. 

Interpreting Reasons for Churn

1. Too expensive = NO ROI for the Customer 

Customer success is the backbone of SaaS. Here, value equals retention, and customers must get what they pay for. If not, customers of all kinds — evaluators, beginners, regulars, or champions — ditch your product sooner than you realize. 

To ensure maximum ROI, start analyzing customer usage data and quantify how your customers drive value from your products. Data helps to create measurable goals for customer ROI. 

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It’s equally important to reinforce the ROI constantly to increase the customer lifeline. Tell them how much money you're putting back into their pockets through outcome-based copies.  

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What to do when ROI is less for customers?

• Define Goals

Understand what’s a good ROI for your client. It can be increased profits, decreased costs, or speedy workflow. Either way, your customer success team must be on the same page with customers to provide maximum results.

• Meet Goals

Knowing the objective criteria users need to follow to achieve their targeted ROI is also crucial. It helps you suggest better features or plans to make your product the best possible fit for the user’s workflow.

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• Report Value Delivery

Traditional SaaS metrics are focused on revenue, but in the product-led model, you must focus on value delivery. Tilt your focus from net new customers to present customers paying subscription fees each month. Otherwise, your regular paying customers will keep on leaking and thus, increasing churn.  

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2. Switching to Another Product = Low Product Adoption 

Sometimes your customer acquisition rate is off the charts, but none of them buy subscriptions. Customers leave after trying your product for a while. These are telltale signs of a low product adoption rate. 

Good product adoption is when customers constantly use your product and are in contact with the support team when an issue occurs. It’s what differentiates loyal customers from window shoppers. 

Often, customers forget about the software after signing up. In this case, you must teach them why they need your product, how it solves their problems and how to use it. You can do this via e-mail marketing or personalized onboarding. 

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How to increase your product Adoption?

• Contextual Onboarding

Kolsky, the founder of thinkJar, concluded that companies could reduce churn by 67% by solving queries in the first interaction. With contextual onboarding, the product itself guides the user in each step of the onboarding process. Users receive tooltips on improving or speeding up a process they’re working on. 

SaaS leaders like Slack use an AI bot called Slackbot that guides users through the product, increasing user experience. Tooltips rely on triggers to appear on the screen; they can be scrolling a designated section on a page or clicking an icon. 

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• Analyze Feedback 

You might think you tick all the pain points, but you can never be sure until you ask them. As per Huffpost, only one in 29 unhappy customers file a complaint. 

Moreover, gathering user feedback is only half the job done. You must sort through positive, negative, and neutral feedback to focus on what improves your product. 

Try feature surveys. One or two question surveys pop up after a user completes an action like trying a new feature. Pop such micro surveys at the welcome screen or when a trial expires to get a fresh user opinion. 

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• Track account-based usage to understand the bigger picture

Product adoption looks different for different users. Successeve segments users based on their usage stage so you can provide personalized support. It collects user information from billing, NPS, CRM and unites them under a single profile. 

Support tickets, product usage, and active users for each customer profile are seen. Use this data to analyze which customer is facing friction and help them out. 

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3. Missing Features = Product Gaps 

If your sales and marketing are efficient, but the churn rate is high, your product lacks value. Understanding your product’s shortcomings early on can prevent you from burning cash and resources. 

Product gap is the difference between customers’ expected and experienced value from your product. Common reasons for this include misleading copy, underselling your product, or overselling your product. 

Your positioning might be unclear in the market. Customers buy with certain expectations and receive a different outcome. 

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How do we close product gaps?

• Conduct an Elaborate Gap Analysis 

Gap Analysis is good for market research and your product. You need to analyze gaps between fresh users and power users. New users have little experience with your product, while power users have implemented it in their workflow. 

Let's take Slack, for example. It’s a community-building platform, but if a normal employee joins Slack, he might use it for interacting with his co-workers. It proves expectations differ for each user. 

See what new and old users have expectations from your product and find out whether they’re getting what they want. 

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• Communicate with Product Managers

Product managers are always sitting in the information silo. They gather data and tell you how it fits the bigger picture. Talk to your product managers if you need to analyze all factors leading to low product adoption. 

Ask them to create digestible charts or graphs to understand where customer interest dips or what features they rarely or mostly use. They need to collaborate with all teams like billing or sales to find low points of the product. 

• Know Your Product Roadmap 

Product roadmaps are never finalized. They change as the product grows and customers evolve. All teams must be on the same page to provide a uniform direction for product growth. 

Revisiting your product roadmap helps you centralize the idea of ‘what the product delivers.’ You’ll be able to look at different areas of the product journey to pinpoint gaps. 

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4. A Lot of Bugs = Performance Issue 

A churn rate higher than 2% directly points toward the company’s inefficient performance. There’s no point beating around the bush when performance is the problem. A telltale sign is piling up of support tickets. 

Too many tickets or too few solutions point towards underdelivering from your side. Inefficient performance is sometimes difficult to identify as a certain number of tickets indicate customer health. It means customers are engaging with your product which raises tickets. 

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How to handle performance issues?

• Segment Bugs

Bugs arise in SaaS all the time, but you don’t have to jump at the first bug you see. Segment your bugs based on urgency. You can color-code them as red, green, and yellow where red needs immediate attention, and green doesn’t impact the software’s functionality. Yellow resides in the middle.

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• Offer Workarounds

Sometimes all you can do is minimize the impact on users. Be upfront with your users about bugs you cannot get through and help them control the disruption. 

You can also provide a temporary solution while you work to fix the whole problem. Start with your core users to see how bugs have impacted their workflow and create tutorials to guide them to a solution. 

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• Review Cross-Border Performance

Your SaaS business will scale with time when you acquire new customers from different time zones. Your product experience must be smooth for all customers, no matter where they operate. 

Sometimes, on-site users enjoy smooth operation and high-speed functionality, which is not the case with customers from different countries. Check for bugs and glitches with offshore customers regularly for maximum customer retention. 

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Know the Truth to Reduce churn

Customer retention is the opposite of churn. It seems pretty straightforward on the surface, but it's a mix of countless metrics. Rather than playing with numbers, you should analyze customer usage with Successeve to better understand their behavior. 

You receive all customer information under a designated profile where you easily track product adoption and usage. Get a bird’s eye view of customer behavior with Successeve. 

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