In a SaaS business, there are a few important metrics to measure like Cost of customer acquisition, Customer lifetime value, Engagement, Retention and Churn. Whether you are an early stage startup or growth company focusing on customer acquisition is pretty natural – you want more customers. However, ignoring Churn could mean ignoring early signs to improve your product or marketing, and impact on your customer lifetime value.
Ignoring churn can make it hard for your business to survive and be profitable. For large companies a high churn rate can mean loosing market share.
Additionally, angel investors and venture capitalist are looking at churn rate closely to determine their investment decisions for startups, as well as Wall Street for large companies.
Focusing only on acquiring new customers could dry you out of your funding or budgets, not only that but doesn’t give enough time to correct your product strategy which could lead to business failure. As a large company, this can lead to quickly loose market share and open your market to competitors.
Churn measures the percentage of people who are dropping from your product, which could mean any of the following:
Your product is not providing enough value
Pumping money in your marketing to acquire customers but ignoring churn rate will delay in learning that your product is not providing enough value to your customers. It could also be that a small set of features are valuable but not all.
Your customers didn’t understand your product
Sometimes it takes a while to understand a product. Product walkthrough like walkme.com are used to help customers understand the product.
You are targeting the wrong customer
You could be targeting customers who are not getting the benefit from your solution. This is more common in startups as you are just starting it takes time to find the right customers.
Your product is hard to use, slow or has bugs
The design and usability of your products can impact customer engagement and long-term retention – which in turn increases churn. A slow product or product with bugs can put off customers and cause them to drop as well.
Your pricing is not matching customer expectations
You must be providing value to customers but if the price is exceeding the value then customers would not have a choice but to leave and find other solutions.
Ignoring any these signs directly impacts business profitability. As we know in sales that selling to existing customers is much easier than to new ones, similarly retaining customers is more profitable than acquiring new customers. Focus on customer engagement and retention which can lead to lower churn rate.