For SaaS enterprises, churn ranks as the metric that matters most in measuring customer retention, satisfaction, and consequently, the ability to increase revenue.
Though a subject of much debate, most experts contend an annual churn rate of between 5 percent and 7 percent is acceptable. An oft-cited 2011 survey from Pacific Crest found that 70 percent of SaaS companies registered annual net churn of less than 10 percent, with 75 percent of that group at 5 percent or under.
Yet when that statistic is flipped, it means that 30 percent of SaaS companies have too much churn for their business to survive.
Even with an “acceptable” churn rate, SaaS companies must focus on ways to reduce it even further if they want to grow. A key tactic is setting up an online customer education program.
Spot the red flags
The first step in reducing churn and finding ways to combat it is to identify the red flags that foreshadow a customer leaving the fold. In fact, many of those red flags can be traced back to a lack of proper customer education.
As you analyze the data, these red flags may surface:
- Customers drop out soon after the initial onboarding (a time when customers are most likely to churn).
- The customer logs in less and less often
- The customer reduces the number of users that have access to the software.
- A customer remains stuck on a single feature/task for an inordinate amount of time and, therefore, has difficulty taking the next step.
In addition to looking for these red flags in the data, reach out to those customers that have churned and ask why. It can reveal valuable insight into the reason customers have left the product — and concerns that could be rectified by online customer education.
Teach your customers well
Identifying those pain points emphasizes areas where customer online education cries out for improvement.
For instance, customers exiting shortly after onboarding may have found the process either too complex or too cursory. If that is the case, the customer needs better support during onboarding. Customers who are logging in less frequently need to see modules in your online training that show how the product helps them with their job and returns value to them.
Not all online customer training needs to be about how to use your SaaS product. Customers also desire bigger picture lessons on industry trends and how they can excel in that industry.
A customer education center
Through online training, customers access several avenues to improve their technical expertise. Centralizing the education program in one digital hub provides a place where they can go to learn more about the product features when it’s most convenient for them. They aren’t tied to a specific time of day or even device if the training has a mobile capacity.
Learning management platforms let you build up a library of courses and monitor which ones customers use most frequently or those not attracting many learners. Upgrade where needed to polish the elearning curriculum.
Another benefit of online education is the interaction it enables not only between the SaaS company managers and customers but with other customers using the product. In that way, customers can learn from each other.
In addition, some SaaS enterprises have established academies or universities, which focus on industry knowledge rather than just dispensing technical know-how. For example, Gainsight, a customer success management software, has established a Customer Success University to teach best practices in the customer success management field.
The human touch
Don’t rely solely on an online customer education program to reduce churn and foster loyalty. To ensure regular, human contact with customers, SaaS companies have increasingly hired customer success managers to oversee the customer journey.
Related reading: Business is Changing: 3 New Roles to Fill in the Gaps
These customer success managers stand as the bridge between the SaaS enterprise and the customer, and as such act as the VOC — voice of the customer. Part of their job is to monitor data to determine how often the customer uses the software, or whether the customer has called customer service and for what specific problems.
Customer success managers can also utilize social listening to observe customers’ comments about the product on Facebook or Twitter, which offers valuable feedback that customers may not otherwise express.
Armed with that information, the customer success manager then reaches out to the customer to provide assistance or simply to learn if the customer is dissatisfied with the service in any way. They advocate for the customer with other divisions within the SaaS, such as technical support or education.
Measure the effect of online customer education
Well-thought-out elearning produces satisfied customers who will renew and buy more products and services. One study found that proactive customer education led to better retention rates, especially after the first week.
Always assess the before-and-after results of online education. Do more customers stay with the software after onboarding if the process is improved through better training? Are more customers using the software after the taking the courses?
How it pays off
Any increases in those metrics result in better ROI on the elearning efforts and more revenue for the company.
SaaS companies can also consider monetizing their online training. Once a sizable stable of proprietary courses is established, you can select the most popular lessons and sell to customers. If the lessons are worthwhile, customers will see the value and want to purchase them.
Several pricing models can be used to sell courses.
- Pay per course: The customer pays once to access the course.
- Subscription fee: Customers sign up for a recurring payment, which could be daily, weekly or monthly.
- Renewals: Renewals are typically longer in duration than a subscription, — say every six months or yearly. Customers opt-in to maintain access, but are not automatically billed.
- Pay per view: Instead of selling an entire course sequence, each lesson is sold on a pay-per-view basis.
- Pay for assessment: The course is free. However, learners pay for the right to take a final exam and obtain a certificate.
Price your elearning fairly. If the price is too low, you could end up losing money. Too steep, and no one will buy.
But, most of all, make sure that you are helping people use your SaaS product more effectively. No onboarding or training program is worth any price to you or to users if it doesn’t reduce churn. An online training program is an ideal method to do that in a way that is scalable and testable.