Month 7: Stopping the Fuel Leaks—How to Slow SaaS Cancellations
By Dylan Touhey
By now, we have a good sense of how to get new customers in the door. The blog is ticking along. More prospects are finding us. We’ve optimized our paid campaigns. And we are starting to get very knowledgeable about our analytics.
With any SaaS company though, customers are going to leave us. This chapter gives you a very simple, tactical way to set-up cancellation trip wires, helping you both identify and act on behaviors that will soon result in a lost customer.
Think beyond exit surveys
Right now, you are trying to save your canceled customers by following up with them after they leave. You make them promises to get them to come back so you can prevent other customers from doing the same.
But what if you knew when your customers were about to cancel– before they even knew it? You’d be able to step in and save that account. And you can do that by using tripwires.
Use tripwires to identify customers about to leave
What is a tripwire? A tripwire is a trigger for your business to take an action when a customer reaches a danger point in their lifecycle.
Tripwires can help you:
- Reduce cancellations by proactively reaching out to customers.
- Increase your customer retention.
- Lengthen your customer lifetime.
- Automatically trigger feedback from your customers to help you make informed business decisions.
- Strengthen relationships with your customers.
Examples of tripwires:
- You offer invoicing software and the user hasn’t created an invoice in 3 months. Not good!
- You offer SEO rank tracking software and the customer hasn’t checked their website rankings in 7 months or created a report.
- You know that when an account reaches 50 users they tend to leave as their monthly bill grows very large.
Common tripwires for SaaS businesses can be: a customer not logging in recently, a customer reaching a large amount of users, or a customer account reaching the age where there are a high frequency of cancellations.
How to set-up tripwires
There are three steps for setting up tripwires.
1. Identify a cancellation behavior. For a SaaS company, it could be account size (more users = bigger bill, which attracts more attention) or usage, especially when it comes them not using your product’s core value. For example, QuickBooks isn’t worth much if people aren’t creating invoices and doing payroll.
2. Build a process to handle that behavior. For example, once an account reaches 50 users, a customer support specialist gets a notification to schedule a check-in to make sure they are happy; or the account is automatically given an enterprise pricing deal. Other tactics include emails that go out when users fail to login after a certain amount of time, or offering free upgrades to new features for long-term customers.
3. See if the process fixes the customer’s objection. Your action (email, account outreach) must answer the objection. For example, you might think that your large accounts cancel because of price, but maybe they need advanced features as they grow. Or maybe your reports used to work when they were a small agency, but now they need more professional software. There is always a central objection and if you don’t answer it, your tripwires won’t work.
Most common tripwires for SaaS products
Here are some helpful tripwires to set-up.
Customer hasn’t logged in
If you notice that customers usually cancel after not logging in for 14 days, you can create a tripwire to reach out to that customer when they haven’t logged in for 10 days.
You may reach out in different ways depending on your product or your customer:
- If you are selling a small product – set up an email autoresponder to remind them.
- If you are selling an enterprise product – follow up with a call from your sales team to support your customer using your product.
Spike in cancellations
You notice that in your database you have a spike in cancellations at 20 months:
- If you don’t know why they are leaving, send out a questionnaire to get customer feedback.
- If you know that your product is too expensive for the market, offer a loyalty discount to customers at the 18 month mark.
Customer outgrowing your service
You notice that once an account grows to more than 50 users (or whatever usage tier you charge for), customers tend to cancel.
- If you have no idea why they’re cancelling, send a questionnaire on how you can better tailor your service to organizations with 50+ users.
- If your product is already priced competitively, find out if your service is missing enterprise features.
- If your customer has trouble administering a large userbase, assign a sales manager to support their account.
- If your competitors are cheaper for larger organizations, offer an enterprise pricing discount.
Now measure the impact of your tripwires
You need to know if the changes you’ve done are making a difference to your bottom line. Monitor your cancellation metrics before and after your changes to track the difference they are making.
Have you been able to reduce the amount of cancellations by getting people to log in more frequently?
Has your spike in cancellations at 20 months disappeared?
Are you retaining clients with more than 50 users?
If your tripwires aren’t working, chances are they aren’t solving the primary reason a customer is cancelling. We recommend interviewing customers who recently cancelled and ask them “what was the #1 thing that made you leave?”
Now that you’ve succeed in lengthening your customer lifetime, move your tripwires accordingly and repeat the process to find more opportunities to retain your customers.