Reduce Subscription Churn Rate with Customer Health Score in SubscriptionFlow

For SaaS and subscription businesses, one of the most challenging tasks is to keep the churn rate in control whilst not letting it exceed the usual limit.

Reducing churn is closely interlinked with the revenue stream because the higher the churn rate, the lower the revenue. To fight churn rate, there are a number of strategies applied along with keeping the metrics in consideration to understand the customer behavior.

Before we delve into the ways customer health scores (CHS) would help to reduce churn rate, let’s discuss churn rate and customer health score (CHS) briefly.

Subscription Churn Rate

The subscription churn occurs when your existing subscribers do not renew the subscription or stop paying for your service and product. With that being said, there could be a number of reasons for the increasing churn rate and the main task is to identify the reasons that cause it.

Talking about subscription churn rate, there are a number of ways churn can be demonstrated since it specifically links to the recurring revenue stream. Here are a few ways, the customer churn rate encompasses different factors affected by it.

Customer Churn: an off-the-shelf software solution that can’t be altered

Customer Churn Rate: Percentage of customers lost

MRR Churn: Value of monthly recurring revenue lost due to churn

MRR Churn Rate: Percentage of MRR lost due to churn

Churn rate, an important SaaS metric, can be calculated by:

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Churn Rate= (Number of cancellations in a period / Total number of subscriptions in that period) X 100

What is Customer Health Score?

A customer health score represents the probability if a customer is likely to churn or not. The churn score is a percentage figure computed from a number of weighted variables such as user logins, touchpoints, billing history, feature usage, and so on. The score can be as detailed as you want it to be, and it can contain all of the essential characteristics you believe are crucial in determining the value your customers receive from your product. A customer may churn today, but the signals that they will churn appear months in advance, which is what the health score attempts to predict.

With that being said, a customer health score gives you the premonition for which you take significant steps that lead to customer retention strategies.

Read more: The Definitive Guide to Improving Customer Retention for Your Business

Calculating Customer Health Score for Churn Reduction

Customer health score depends upon a number of factors that are driven by customer behavior and insights gained from the analytics and reporting of the software. Let’s see the factors on which customer health score is analyzed along with churn reduction.

Product Usage

Product usage is one of the most essential factors that play a key role in calculating the customer health score. For product usage, there are three more factors that come under it.

Firstly, active days of product usage determine how actively your customer is using the products and features on an average basis. As there are a number of features in a product, it would aid in knowing if your customer is more inclined towards the features or not. It is understood that if there is little to zero product usage then the chances to end subscribers will be more than usual.

The product usage aspect further branches out to the adoption of the feature. Adopting features is when customers value the product for it has solved their problems or concerns. However, if the feature adoption has not been done yet by the customer so it signifies that the likeliness of them sticking to your product is alleviated.

In addition to that, it is important to check for the month-to-month basis usage for the fact that you can compare the usage. This is aided by the churn management software which encapsulated the robust features and solutions that work solely to manage and reduce it.

Customer Feedback and Sentiment

Customer feedback and sentiment are the lifeblood of the business as it helps in growing the business and taking it to the heights of scalability. It covers a few metrics that come directly from the customers and not the system.

Under the umbrella of customer feedback and sentiment, the three important scores are calculated:

• Customer Satisfaction Score (CSAT)
• Customer Effort Score (CES)
• Net Promoter Score (NPS)

To calculate the scores, surveys can be sent periodically, and with that being said, you will know from time-to-time what customers have to tell about the products, services, and pertaining factors.

Customer feedback is also supported by another factor of subscription renewal, upselling, and cross-selling.

Onboarding the customers to the new features along with additional features is significant to reducing the churn rate as customers are more likely to use your product. All these factors count into the customer feedback and understanding of what they look for in the services or products of your business which is helpful in reducing the subscription churn rate.

Customer Engagement and Customer Support

Customer engagement links to customer support and it is primarily determined by the touchpoint frequency by customer support.

It is entailed by the fact that how many tickets of the customers have been solved. Communication with the client and keeping them in the loop whilst they use the services improve the chances to reduce the churn rate. Lingering on the tickets and not solving them on time can take a toll on businesses’ health and customer business as well. Therefore, good customer support and touchpoint frequency can reduce churn and improve customer health scores.

Financial Health

The financial health of the customers and subscribers of your SaaS business determines the subscription churn rate and customer health score. It is a crucial factor for the fact that the payment failures, overdue invoices, credit card declination, and other pertaining aspects determine the financial health of the customer and the revenue stream of the business. The overdue invoices signify the product usage and customer sentiment for how much the product is prioritized.

How Will SubscriptionFlow Fight Churn Rate with a Customer Health Score (CHS)?

SubscriptionFlow is a subscription management platform that renders its services to SaaS and subscription businesses.

With that being said, we understand the most crucial factors for the SaaS and subscription economy are churn rate and retaining the customers.

With our agile feature of revenue management and churn reduction management, we analyze the health score of the customers through analytics, reporting, analyzing customer behavior, and the above-mentioned factors to fight churn proactively.

Our customer health score will help you reduce churn by the application of customer retention and customer reduction strategies. Moreover, through our customer segmentation, you will better understand the customers with respect to product usage, lifecycles, customer behaviors, etc.

With our optimized strategies for churn reduction, your business and revenue will be streamlined – keeping the customers using your products and services.

Read more: Important SaaS Customer Retention Metrics for Subscription Businesses

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