Building SaaS Products with Customer Churn in Mind
Building SaaS Products with Customer Churn in Mind
A happy customer in the hand is worth two in retention. Learn more about techniques SaaS companies can use to keep consumers consuming.
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To a great degree, the success of Software-as-a-Service (SaaS) business hinges on maximizing customer lifetime value. Each subscription counts, so it’s important to take care of each one of them. It takes less effort and cost to retain existing customers than to find new ones. Therefore, reducing churn should be central to any SaaS strategy.
While customer issues are typically the preoccupation of commercial teams, developers would do well understanding why churn matters. Gone are the days when development teams could isolate themselves from the business side of things. The rise of trends like Agile, design thinking, and DevOps keep us always considering the user in what we do.
Design and development efforts should strive to create great customer experience (CX). As entrepreneur-turned-venture capitalist David Shok shares, “Customers bought your product to get a clear business benefit. To make them happy, I believe that you need to make sure they are getting the business benefits they hoped for.”
Adi Azaria, Chief Evangelist and co-founder of business intelligence platform Sisense, recently used his company’s own analytics tools to study Sisense’s churn issues and unearthed some counterintuitive findings.
Here are three key insights Azaria found out in his analysis and what they could mean to your SaaS customer retention efforts.
It’s Okay for the Customer to Work
Most SaaS products' value proposition involves making users' lives easier. On the other hand, there’s much to be gained by imposing some hard work on them.
The more involved customers are, the more likely they are to stay. You should strive to constantly engage them and keep them excited about the value your product provides, but in order to achieve this, you’ll need to prompt them to interact with your app.
Unfortunately, it’s common in business transactions for a lull to occur between signing customers and onboarding them. This, however, is a critical point since customers tend to lose interest when they are left to wander off to other concerns.
“Your goal as a SaaS company is to onboard clients as soon as they sign,” says Azaria. “The longer the wait, the more likely it is that the client will churn.”
To prevent losing the initial impetus of client engagement, you should design an experience that offers customers ways to readily start onboarding. This could mean improving user interface (UI) to make it more intuitive. For example, feed reader app Inoreader noticed that its loyal customers are those who took advantage of the app’s advanced functionalities. By improving their UI to highlight these early in the user flow, Inoreader was able to reduce its churn.
For more complex SaaS applications, integrating technologies such as guided tutorials, lessons, and even scheduled instructor-led training all help keep customers engaged.
Forget Impulse-Friendly Pricing
Many companies still fear that they have to enter a pricing war to entice customers to sign up. Fortunately, though, more customers are realizing that cheaper isn’t always better. Rather than viewing SaaS adoption as cost, a growing number of customers now consider SaaS as investments – whether they’re aware of it or not.
Azaria’s findings confirm this, with Sisense’s data indicating that in general, bigger spenders tend to be happier. The more substantial the investment, the greater interest there is for them to maximize value. Discounts, on the other hand, have diminishing returns and could even have a negative effect to customers’ perception of the brand.
“In our business, whenever large discounts were being applied, there was less investment by the other side,” Azaria shares. “People value stuff less when you give them a bigger discount.”
In addition to being cautious with discounts, you may also have to optimize prices so that they create the impression of affordability and still showcase value. From a development standpoint, this may require carefully structuring access levels to the service. Customers must be able to enjoy the benefits of their subscribed plan without being stymied by unnecessary restrictions.
Adobe serves as a good example of how apps and plans can be optimized. Over the years, Adobe has streamlined its Creative Cloud apps by making each more focused and targeted. While the company offers subscription to its whole lineup of apps albeit with a hefty fee, Adobe offers options for users to subscribe to select applications at more affordable rates.
This strategy has worked well for Adobe in attracting both new customers and retaining current ones. The lower fee for specific apps has encouraged more creative professionals to subscribe. Creative Cloud remains the company’s cash cow, contributing $1.16 billion to the company’s coffers in Q4 of 2017 alone.
Part of customer engagement is receiving feedback. Emotionally charged ones can be common and can often get the most attention. However, while no one wants irate customers, it’s actually the silent customers that you should be most concerned with. According to Sisense’s findings, customers who don’t provide feedback and participate in surveys are the ones most likely to churn – regardless of their level of usage.
“In SaaS, angry customers are usually not customers who are leaving” Azaria says. “When they’re complaining about the product, they’re complaining because they use it, they’re invested in it, and they want you to fix something that isn’t working right.”
Customer complaints can be a source of ire for developers. It’s easy to get prickly when faced with criticisms levied against something that you’ve worked hard to design and develop. But given this insight, developers should reframe their perspective regarding negative feedback.
It’s time to set aside egos and emotions and be more appreciative when customers share their concerns. In the very least, you could take it as a sign that people are using what you’ve built. At their best, even emotionally charged ones could provide insights on how to further improve the service.
Develop with Churn in Mind
Delivering customer happiness and satisfaction is a company-wide effort. With SaaS, the most critical point of contact is in the actual use of the service. Thus, developers play a critical role in shaping a delightful experience that reduces churn.
SaaS development is a cycle. Customers are constantly evolving, so it’s only smart to evolve with them. To ensure customers’ continued patronage, improvement is a must. Your company’s relationship with customers is truly symbiotic. Your success is tied to how well they can enjoy your service’s benefits.
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