Learn the Reasons Behind High Churn Rate

Churn rate can be debilitating for any business’s growth. SaaS companies working with subscription-based models have to always worry about lowering their churn rate. But why is it so important? As a critical metric, churn is defined as an indicator of how many customer subscriptions are canceled, voluntarily or involuntarily. It directly impacts customer retention and loyalty. In today’s world, where customers have many options, facing churn rate and subsequent cancellations are inevitable. Every business losses customers but the key is to use this SaaS metric to track how you can ensure retention and customer satisfaction. Customers usually stop doing business with certain companies due to a lack of satisfaction or value-added products or services. This is why, as detrimental as it is, tracking churn rate is hugely important, and the only way to tackle it. With software like SubscriptionFlow, businesses are receiving updates through reporting dashboard, which gives a clear view of SaaS metrics and subscription growth like churn rate, monthly/annual recurring revenue, and more.

You can still face a considerable increase in churn rate even when you are using and reviewing these metrics. This is why SubscriptionFlow, as an industry expert, has seen some underlying causes of why churn rate occurs. Although the reporting dashboard is helpful, it cannot explain why your churn rate is increasing. For this purpose, we have presented with some common reason as to why SaaS companies using subscription management software face more churn rate. Now, before we move on, it is essential to mention that the churn rate is of two kinds: voluntary and involuntary. The former takes place when customers actively cancel their subscription or downgrade from their paid version of the subscription plan. Whereas involuntary churn takes place when customer’s credit card information expires, or they fail to make payments, and their subscription has to be canceled.

Reasons Why SaaS Companies Face High Churn Rate:

To understand why your customers are leaving is extremely important, and SaaS companies also need to know how their subscription management software might not be working. SubscriptionFlow believes that without a clear strategy, any form of churn rate cannot be tackled. Before we move onto how our subscription management software can help you track and decrease churn rate, it is essential to highlight the reasons why the churn rate is higher than the allowable amount. First of all, most SaaS companies are focused on upselling and customer acquisition which is why retention might be overlooked.

When this happens, the churn rate is more likely to increase. Focusing on improving retention means that you are fostering close and transparent customer relations which is possible with CRM tools in SubscriptionFlow. When all of your customer information and contacts are saved in one place, it is easy for sales or customer-facing reps to see how many subscriptions and renewals are made against customers and those who have not engaged in any sales with your products or renewed their subscriptions. Customer activity is the primary key, according to SubscriptionFlow, which also brings us to involuntary churn. This indicates that failed payment or expired credit card information caused subscription cancellation. Lack of value-added products is also another reason why customers might seize to do business with your company. This occurs when customers are not appropriately marketed or do not get an opportunity to try out your products without signing up for paid monthly or annual subscriptions.

Tips that will lead to Better Retention and Decreased Churn Rate.

First of all, we will establish here how SubscriptionFlow will help tack the churn rate. When it comes to involuntary churn, the causes of which we have mentioned above can be tracked and avoided via smart dunning. Users of SubscriptionFlow do not have to worry about monitoring customers for failed payments because smart dunning takes care of it. How? This is done by doing multiple retries on the customer’s credit card depending on retry logic. After this, if the payment cannot be processed, then an email reminder is sent to customers. Smart dunning automates these email reminders, so you do not have to worry about tracking and annoying your customers with payment updates. This way, your customer will not have a negative experience either.

Moreover, when your customers can experience perceived value, it is recommended that you offer trials or freemium for your customers. Let SubscriptionFlow handle your trials while you experience more customers upgrading to the paid version of your plans. All in all, SubscriptionFlow has helped numerous companies improve their customer relationships and management, which is essentially the key to improving your retention and reduced churn rate.