SaaS Churn Analysis: Top 3 Reasons Users Cancel
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SaaS user cancellations can stack up faster than your sales team can get new leads through the door, and when the scales tip too far in the wrong direction, your software business may struggle to recover. That's because the pressure to showcase exponential growth is considerably higher when compared with other industries. If a software company is only experiencing a 20% annual growth (which is a reasonable figure for other types of businesses), the likelihood of it ceasing to exist in a few years is 92%. Yikes!
The average churn rate for a SaaS company sits somewhere between 5-7% per month, but if you're consistently exceeding this number, you could be paddling against the tide without a shore in sight. Churn is an indicator that you may not have your finger on the pulse of what your customers are really after.
Still, it can be difficult to identify the exact reason why customers don't renew their subscriptions or why they bounce out after a free trial, but there are some common challenges that SaaS businesses face when trying to retain new and existing users.
In this blog, we discuss some of the top reasons why users cancel so that you can evaluate your own customer retention strategy and see how you can improve your approach to targeting highly qualified leads and keeping them engaged with your software product long term.
To get started, you might want to take our free marketing assessment to gain a clear picture of any outlying challenges surrounding your lead generation strategy and whether your approach to conversion is bringing in the desired results.
1. You lose if they can't use it
Successful onboarding and adoption are critical for continued use. Various factors could affect the user experience customers have with your software.
- A hard-to-navigate interface: If your dashboard lacks the essential intuitive nuances users are looking for, they may not experience immediate benefit from your features and therefore quickly disengage.
- Insufficient guidance: Helpful content that is aligned with the expected progression path a customer follows throughout their initial interaction with your product is essential for quick adoption. If you haven't formulated the necessary educational content to nudge the user through the initiation stage, they'll quickly lose interest in your offering.
2. Your solution can't scale
Depending on who you cater for, if the pricing and feature parameters of your SaaS product can't scale to accommodate the custom needs of the users you service, you're likely to see a drop off in subscribers.
If you offer a B2B solution, your customers will likely be affected by the peaks and troughs that their industry goes through. With that, come concerns about the cost of adding new users to a platform they rely on for critical business functions, or their ability to quickly accommodate spikes in demand
If your software lacks the infrastructure to support heavy usage, or your price plan makes it difficult for growing businesses to onboard new users, they may start to look at alternative solutions that offer more flexibility to scale up or down.
3. Your communication could be better
In a relationship economy, the nature and frequency of your communication with customers is a determining factor in the amount of trust and faith they invest in your services.
If you don't reach out to your new sign-ups with a welcome email or follow up with a carefully thought-out sequence of email nurtures to provide tips and updates on how to get the best out of your software, you can't expect not to get lost in the plethora of applications they are likely to already be using.
Create value by positioning yourself as an insightful source of information about the product the user has just downloaded, how it can be applied to fulfil their needs, and what benefits they can extract from using your software.
Keep the relationship alive by sending regular (but not too regular), genuinely useful content pieces their way. Being proactive with your correspondence reassures the user that you are an active business that frequently updates the features of its product and provides helpful and reliable customer support.
Get ready to optimise your free trial and stop churn
Are you currently utilising a free trial in your lead generation strategy? If you're struggling to convert these leads into paying users or you haven't yet implemented a free trial offer and would like to learn how to effectively plan and promote one, you might benefit significantly from downloading our FREE ebook and cheat sheet. We've applied our inbound expertise to create a comprehensive guide on how to achieve tangible results with your SaaS free trial. Download your ebook and cheat sheet today to start growing your business.