The percentage of customer cancellation by percentage (%), known as churn, is an important metric in virtually all SaaS businesses. Therefore, it is essential to know, understand how it works and know what are the tools to work this indicator in favor of your SaaS products and / or services.
When your company has a monthly turnover of around 0.50% it means that your team is doing 'homework' and creating a profitable business, especially in the first three months after enrollment, in which the average number of customer cancellations in the SaaS market, they account for 80% of new user registrations.
To help understand how to improve this metric, we will cover in this article the main reasons that lead the customer to make any type of cancellation and what are the best ways to avoid high turnover. Come on!
After all, how do I measure my company's churn?
It is a metric that indicates the number of customers using the service for a given period, which can be divided by month, semester or year. Considering this index and understanding that it is responsible for evaluating a company or number of consumers who are canceling is fundamental to the financial health of the business.
Therefore, the decisive point here is not to ignore this metric and follow the percentage, especially when there is a drop, because, therefore, it can act strategically to improve this index. As you comment at the beginning, a company-wide goal is to keep or shake as low as possible. This means that the lower the rate, the better the company's performance. An estimate considered adequate in the case of SaaS, for example, can vary from 5% to 7% per year.
Let's assume that your company has 500 active customers per month and in the last 30 days 8 canceled the contract or the provision of services, so we have 8/500 = 0.016. Multiplying that number by 100, your monthly turnover rate is 1.6%. That is, it is high!
The turnover rate balance must also be measured by the customer's profile, as there may be 8 users who have no relevance in revenue, but only 1 user, who is responsible for the large part of the profit to be saved, and promote a great impact without billing. So it is important to do the traditional calculation, but also in a systematic way. Thus, you will have a view not only of lost customers, but will have an impact on the company's revenue.
If you do a semiannual or annual turnover assessment and this rate is high for consecutive months, you need to raise the red light and stay tuned. Something about your operation needs to be revised and improved. Start by investigating where it comes from and what is causing this cancellation fee. The reasons that lead or the client to take this action can be different. Perform a robust analysis of the data and devise a strategy to reverse and avoid churn.
And what should I do to avoid cancellations?
There may not be an assertive answer to that question, but a way to reduce turnover. Start creating an essential product, insert your customer's profile and the reason for canceling. There are three starting points that help in this process of reducing this index.
- Essential product: have a precise definition of your project and product. Create a necessary and exclusive service in the consumer's routine, offering incentives so that the customer does not find something similar in the competition and always delivers with high quality and relevance. Also read "How to differentiate your SaaS product from the competition".
- Customer profile: start with market research to understand who your customer is, their needs and what they are satisfied with. With this information compiled, it is crucial to develop a personalized strategy and understand what must be done to retain it. Also read "Understand as main strategies for satisfied customers".
- Reason for cancellation: Detecting customers who may be rotating is not an easy task, but it is essential to reverse a turnover. The reason can vary: number of complaints made, lack of customer support or even lack of customization in the service. Take this data, reverse and transform precious insights for your management. Also read 'What is product marketing'.
Changelogfy: we help to avoid a high turnover rate.
A Changelogfy is an allied tool in retaining its users, as it allows to maintain a clear and effective communication. In this case, using the software to update version and product notes, it is possible to obtain feedback and feedback reports, useful information for your team that has data enabled to create a behavioral map of the customers who most interact with the inactive, using an action plan to engage them differently. For those with a low participation rate, they can create actions with special advantages, reducing the turnover of cancellations.
Already have a changelog? Connect with your team and customers quickly and easily. Create your changelog for free now.
Liked the article! Share!