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How to reduce churn rate (by a lot) in SaaS?

Updated: Jul 5


The problem statement

A B2C SaaS startup reached out to me to reduce their churn rate.


"Churn rate is at 14.3%. By month 3, only 55% retain. And, across all our cohorts, only 32% remain over an extended period of time."


Investigating high churn rate

They were already using Churnkey's template which had brought down churn significantly.


And after my investigation, I launched a new A/B test within Churnkey's portal.


You can see that the % of people that retained were now roughly 30%. What this means is that if 100 people clicked on the cancel button, 30% of people choose not to cancel. This was much higher than what they had originally.




The research that went into building this flow required some calculations.


First, I wanted to see why people were cancelling and how were they responding to the offers we presented.


In a Google sheet, I listed down all the reasons, and how people responded to the offers we presented (AKA the acceptance rate).


I compared all time feedback with last 30 days just to remove any abnormalities. Products can change over time, so it's nice to see trends. Churnkey's dashboards also show trendlines but I prefer to do it in a spreadsheet.



After, that I took some notes that looked like:

"When people say "too expensive", they mean they can't see the value of the product. Some have to put in a lot of hours doing the work that the tool was supposed to do it for them."

"No one's selecting this reason, maybe we should take it off?"



There were certain reasons that weren't selected as much, so it made sense to group it all in one.




The offers we made changed as well.


Instead of offering a discount to every single person, we hooked them up with either

  • support

  • or education around the product

  • pitch a different product that matches their use case better

  • or a much larger (100% discount)



Offers to reduce churn and what to do if you don't like discounting the product


I'm usually not a fan of discounts. So, I like connecting people to support. Or offering them a non-subscription purchase plan (eg, billed in credits instead of monthly).





Tactical friction and copy changes to reduce churn


We also added some tactical friction (negative one), to increase the number of people that would abandon the flow mid-way.

That copy, looked something like this:




Adding that extra sentence of "This way, your data can be preserved" raised the number of people that abandoned the flow by 14.2%.



How to reduce churn rate in SaaS?


To reduce churn, we're also tackling it on multiple fronts. We're investing in product education and better UX. A/B testing Churnkey flows and making more segments (eg, early churners vs later churners) is also another strategy to work on.


More to come soon! It's a work-in-progress and updates roll out once a few months.


Best,

Khushi

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