Where Are Customer Breaking Points | 7 Reasons for Customer Churn in SaaS

What are Customer Breaking Points?

customer breaking points

Customer breaking points are moments in a customer’s experience that drive them away. You can use customer churn rate to measure the percentage of the customers you lose over a period of time. Here is the formula:

customer churn equation

The customer churn could result from both avoidable and unavoidable reasons. SaaS providers can take actionable steps to prevent avoidable churn. But a certain level of churn is unavoidable — like when a user has to stop SaaS subscription services due to dramatic industry shifts or trends, or organizational changes within a company, or changes to the business/economic model of a company. However, it is still important to keep customer churn under control because a high churn can kill your business. This tutorial will explain the reasons for customer churn in SaaS business and offer solutions.

Where are Customer Breaking Points?

One way to find out where customers stop is via customer lifecycle:

customer lifecycle
In general, by calculating conversion rates from stage to stage and comparing them with each other, and with other SaaS companies, will indicate which phase is weak at retaining customers over time.

For a specific customer case, you can see where they drop out of your service. However, conversion rates only give you a general idea of where they stop using your product/service within the customer lifecycle. They can’t help you pinpoint the particular reason for customer churn because in each phase of the lifecycle, there are many activities going on. Some activities are identifiable through metrics (e.g. logins, views), but others are heavily qualitative (general dissatisfaction, champion change). These will need a more personal touch and direct customer interaction. You will need to send out a survey or talk to your customer to figure out the specific reasons.

Avoidable churn

Avoidable churn happens when your customers fail to hit their goals with your product. It’s important to know these reasons because you are able to directly influence and improve.

  • Poor onboarding experience: Customers aren’t enticed and/or don’t know how to use your product/service. Onboarding helps to introduce new customers to your product/service. Depending on the complexity of your offering, an onboarding can last for up to three months
  • Solution:
    • Send your customers a welcome email when they sign up for your trial for the first time.
    • Follow up by sending relevant educational emails, walkthrough tutorials, or notifications based on their needs.
    • Give your customer a clear path to success. If it’s simple, this might be tips and guides that other customers used to become successful. If it’s complex, this may include in-person trainings and working sessions scheduled out over the next few weeks.
    • Provide onboarding early. Success doesn’t start post sale, so involve the sales team! Have them talk up the onboarding experience and how the CS team will be there to help them through. Give them a picture of what onboarding will look like before they even make the purchase. Even a simple powerpoint gives potential customers peace of mind when they know they’re not alone.
    • Most importantly, lead them to the “Aha!” moment i.e. the first user interaction that delivers clarity on your product’s unique value proposition and gets them hooked. For example, the “Aha!” moment for Chartio, a smart BI (Business Intelligence) tool that empowers every business user to use and share data without requiring SQL knowledge, is getting users to create a chart or dashboard.

 

  • Ineffective customer support: Failure to resolve tickets from customers or it taking too long to deliver your help. These problems can be reflected on the CSAT score (Customer Satisfaction where customers respond to the question: “How would you rate your overall satisfaction with the product or service you received?” on a scale of 1-5), and the number of support tickets that are fulfilled and closed by an account or user. It’s also quite common that customers may not reach out for help even though they face difficulties, but instead churn in silence.  
  • Solution:
    • Proactively offer technical help to customers by monitoring their activities.
    • Improve accessibility by picking the right channels for customer service delivery.
    • Offer fast and responsive customer support by prioritizing the tickets that need to be taken care of or implementing chat bot to decrease ticket volume and speed up the process.
    • Spend the time training your Support team — it’s a worthy investment when your team can quickly answer questions.
    • Build repeatable workflows. Using documentation and KBAs (Knowledge Base Articles) can help your support team increase speed, improve consistency, and still get the best answers to customers.

 

  • Little or no ongoing customer success: Customers feel disconnected from the company or product. Helping your customers achieve early success with your product doesn’t guarantee they’ll continue to succeed. In short, you should prepare for doing everything you can to help them move closer and closer towards their desired outcome.
  • Solution:
    • Be available to your customers through relevant communication channels.
    • Understand customers goals and help them make continual progress.
    • Check in with them on a regular basis.
    • Provide customer training or working sessions.
    • Develop relationships with your customers and help them derive value from your product.

 

  • Competitors: The problem is not your competitors themselves, but the pain points you have and aren’t addressing, that the competitors are (or their sales team says they are).
  • Solution:
    • Understanding the competitive marketplace helps you know where you stand and how you can address the pain points of others or alternatively look for ways to help your customers through those pain points (also known as workarounds).
    • Send out a survey to collect customers’ feedback and act on it.
    • Keep an eye on your competitors; keep your product/service updated and competitive; keep iterating by working with product team.
    • Differentiate yourself from other SaaS solutions (in terms of your unique expertise, product features or customer service), to gain a competitive advantage.

Unavoidable churn

Unavoidable churn is a by-product of the unavoidable problems with the SaaS business model. These problems can’t always be avoided, but it is possible to take steps to limit the harm and/or find new opportunities.

  • Poor fit customer: Companies may change their mission or business model due to the dramatic industry shifts or trends. As a result, they may not achieve their desired outcomes from your product/service any more. In this case, it’s best to be upfront with the customer when your strategy doesn’t match their needs. Work with them to find solutions where you can. But if at the end of the day your product doesn’t solve their needs, they should move on and it can be an amicable parting.
  • Solution:
    • Communicate with your customers regularly to assess the customer persona.
    • Reevaluate by finding why this customer was obtained in the first place and whether their profile makes sense for the strategy. If you’re moving away from them, recognize and assess whether alienating them is an acceptable loss. If not, communicate transparently and work with them to accomplish what you can.
    • If you find out that they are better off churning, give them some advice on the possible solutions that fit their new requirements, if needed.

 

  • Organizational changes: Your champion left the organization, your subscription may be canceled because the new decision maker may not be in favor of your product or service.
  • Solution:
    • Strive to have multiple contacts at your large customers, particularly an executive sponsor. Having a single champion leaves you exposed if they leave, but multiple champions and/or an executive sponsor can greatly reduce that risk.
    • Contact the new decision maker to discuss your product because it might be new to him/her.
    • If the users in that company like your product/service, deliver this message to the decision maker.
    • Follow up with your old contractor to see where he/she goes. This could be an opportunity for you to establish a new relationship with a new company.   

 

  • Cash flow problem: Customers delay or fail to make payments, causing cancellation. You’ll be surprised to know how many customers churned because they unintentionally let the subscription expire.
  • Solution:
    • Track customer payment and send them notifications to confirm whether they paid or not.
    • Be proactive in outreach when you know a customer’s credit card is going to expire or the account is up for renewal to prevent unnecessary churn.

Wrap up

It’s always sad to see a customer churn. Learn about the warning signals in Red Flag Indicators of Your Customer Churn. Some churn is bound to happen, but remember it’s not just about saving churning customers. Avoiding churn begins as soon as a customer joins and continues for their entire tenure on your product.

 

Resources:

Yuyan (Fiona) Mao

About Yuyan (Fiona) Mao

Hi! I'm Yuyan (Fiona) Mao. I'm currently pursuing my Master's degrees in International Business and Business Analytics from Hult International Business School and received my Bachelor in Economics from University of Maryland. I care about efficiency, profitability and feasibility. I believe in data and communication. So I'm excited to share my knowledge and keep learning at the Data School by Chartio.