In the ongoing battle against churn, you may be your own worst enemy. SaaS consultant Lincoln Murphy of Sixteen Ventures explains why understanding and mapping your customers’ needs is key to keeping them engaged, boosting their satisfaction, and reducing your churn.
Churn is unavoidable, but SaaS companies that struggle with high rates are hurtling toward bankruptcy. Improving customer retention is the name of the game, and the best method for doing so is easier to tackle than you might think.
Lincoln Murphy, a SaaS veteran and consultant at Sixteen Ventures, recently discussed the churn war with OpenView Labs (listen to the full interview here) and offered his advice on turning the tide in your favor. Remember why your customers signed on in the first place, he says, and use that knowledge to build a success map that keeps them engaged not just at the outset, but for the long haul.
The Root of the Problem
When consulting with a SaaS company suffering from a high churn rate, Murphy says that he mostly looks at how well that company engages with its customers. “If there’s a lack of engagement, I can almost guarantee that’s the reason for whatever your churn rate is,” he says. Even for companies with “incredibly unacceptable churn rates,” Murphy says he “can almost always pinpoint that to some level of a lack of engagement.”
Before you can begin addressing engagement, however, you first need to define it. Murphy acknowledges that engagement is “a funny metric,” since it varies so drastically from company to company depending on the nature of your software and your customers. He suggests that you figure out what engagement means to your company by “knowing your customers, knowing your product,” and determining how often an enthusiastic user would log into your application and what they would accomplish once they’re in.
Murphy points out that the nature of software as a service lends itself to easy assessment of customer engagement. “The great thing about SaaS is that you actually have some level of visibility into what people are doing within your application,” he says, so leverage that data to “tie engagement to actual activity within the product,” set engagement goals, and monitor those customers who are slipping away.
Building a Customer Success Map
“It’s easy to map out what it’s going to be like in the first few months as a customer, but few companies look at what the customer is going to need to continue to realize value.”
As you define customer engagement for your company, Murphy suggests that you build a customer success map to help guide you by keeping you focused on what matters to your clients. Draw your map by asking yourself three questions:
- What does success mean to your customer?
- How does your product enable your customers to achieve that success?
- How does that change over the various stages of your customers’ lifetimes?
Murphy urges you to be as specific as possible in your answers and to push your view beyond a simple outlook of “when our customers first come in for the free trial, they need to do this, this, and this,” and after that, they will see the value in the product and convert on the spot.
He cautions that while some SaaS companies aren’t even drawing this surface-level customer map, those that are can’t stop there. “It’s easy to map out what it’s going to be like in the first few months as a customer,” Murphy says, “but few companies look at what the customer is going to need to continue to realize value after they’ve been a customer for six months, for 12 months, and for 24 months.”
With your customer success map in hand and a firm idea of what engagement means for your product, it’s time to act upon what you’ve learned.
Look for users who are not achieving the success that you now know they’re after, and begin engaging with them to help them see better results. As an example, Murphy points to one way an email marketing tool can engage with users who are struggling. If you see they aren’t getting the delivery or open rates they’re looking for, and part of your service is to supply customers with reports, why not include a link in the next report that directs them to a tips and tactics page or another resource that helps them identify and fix their problem?
In short, you should always look to improve the results of your customers. “Engagement is basically where people are getting value from your product,” Murphy stresses, so if clients “are just not getting results that they should be getting,” then add documentation, improve on-boarding, and reach out to them to ensure they’re achieving throughout the customer lifetime.
Have you seen a link between low customer engagement and high churn rates? What steps have you taken to improve engagement?