With the world becoming increasingly software-defined, SaaS adoption is increasing wildly. The market is projected to reach USD 307.3 Billion by 2026.
73% of organizations indicate that by 2021 nearly all their applications will be SaaS.
SaaS has become an enterprise mainstay now. While we rejoice, we also must pay attention to some other statistics:
- SaaS businesses lose almost $1.6 trillion per year owing to customer churn.
- It costs five times more to acquire new customers than to retain existing ones.
- It also costs 16 times more to bring a new customer to the same level as an existing one.
- An average 5% increase in customer retention leads to a 25% to 95% increase in profits.
- 68% of the business for SaaS companies comes from existing customers.
So, what is one of the costliest mistakes made by SaaS businesses? It is to focus more on customer acquisition and not on customer retention.
Even a cursory glance at these statistics shows that customer retention is a key driver of organizational revenue for SaaS companies.
Financially, it makes sense to keep existing customers happy while focusing on ‘customer acquisition’. It is also more sustainable and brings in profit without expending too much energy as happy customers trust your service and act as brand ambassadors.
Here are 9 proven strategies that can help SaaS businesses reduce churn and keep the coffers full:
1. Offer pricing flexibility
To capitalize on the growing opportunities, SaaS businesses not only have to look at expanding their product portfolios to capture the market but also make sure that they can easily configure SaaS products with varying charge types.
The ability to bill accurately while enabling the creation of variations in a product in different currencies and assigning tax codes for region-specific markets is essential to retain customers.
2. Personalize product offers
The customer today is used to personalizations and customizations and expects the same from SaaS pricing as well.
SaaS businesses need to provide product personalization for specific customers using different bundles and promotions designed to meet their exact needs. They need agility to customize and personalize product pricing bundles to accommodate the growing and changing needs of their customers.
Additionally, SaaS companies should monitor usage patterns and calculate product usage, and based on that, offer limited period discounts or unique promotional bundles to drive customer retention and reduce customer churn.
3. Streamline contract management
Some of the greatest advantages that SaaS provides are flexibility and scalability. However, managing different pricing models, customizations, and personalizations can become a nightmare in the absence of robust contract management capabilities. Given the different variables at play in the SaaS universe, robust contract management is a major hurdle for most SaaS businesses.
SaaS businesses need clear visibility into the customer contracts to avoid billing errors and consequently avoid customer churn. Having strong contract management capabilities that help businesses create, manage, and amend customer contracts easily and give them clear and complete visibility into all aspects becomes an essential driver of customer retention.
4. Ensure billing accuracy
Enabling customized billing and ensuring billing accuracy is essential to drive customer retention and prevent revenue leakage. Usage metering thus becomes an essential component to compute charges based on actual usage irrespective of the form. Be it storage kilobytes, MB, GB or calls, minutes, licenses, features, software usage, data, messages, or bandwidth, SaaS businesses have to develop their capabilities to track usage to the last detail to drive billing accuracy.
5. Stay on top of taxation compliance
Along with ensuring correct usage monitoring, SaaS businesses also have to improve their tax accuracy for each customer transaction. Increasing their capability to capture the required tax information and calculating it in real-time for every invoice are imperatives for ensuring tax accuracy.
Integration of the billing and revenue management system with taxation platforms becomes an important driver of customer loyalty as SaaS businesses can then apply the correct taxation codes that apply to the products and services. Along with driving accurate billing for the end customer, this also makes sure that the SaaS business can minimize their potential tax audit risk.
6. Enable flexible billing cycles
If you thought that all SaaS customers want is price personalization think again. Along with pricing customizations, SaaS customers also demand customized billing cycles to suit the needs of their enterprise.
Providing a billing method that is tailored to fit the client using standard, flex, on-demand, order-based billing, and more is an essential capability that SaaS businesses need. Along with this, they should also be able to include all add-ons, billing, run-time charges, taxes, and other such features into the billing cycle.
SaaS businesses that can generate accurate invoices while accounting for the several variables at play can keep their revenues under control and keep their customers hooked to the product.
7. Make subscription management simple and intuitive
If SaaS businesses cannot manage their customers and their interactions easily and if customers struggle to upgrade or downgrade, add products or remove them, then customer churn is an obvious outcome.
With so many players in the market, SaaS businesses have to allow customers to change, renew, pause, or cancel their subscription plans easily. They should be able to easily add new products or remove them from customer subscription plans. Automated cancellation, renewals, pausing of plans, and updating payment information are additional features that assist subscription management and help customer retention.
8. Enable self-service
Enabling self-service for SaaS products is important to prevent customer churn as the objective for SaaS businesses is to scale the product to thousands of customers. Customers do not want to make calls to support teams and wait endlessly to resolve their issues or make the changes they want. Today’s customers want support, and they want this support fast. Otherwise, they will churn at lightning speed.
SaaS businesses need to empower their customers. By employing a self-care portal, SaaS businesses can put the customer in control of their subscription plans by allowing customers to update their account information themselves. Giving customers the flexibility to change account profile information, contact info, add new payments, view invoices, pay, and instantly download receipts drives elevated customer experiences. This ease of service translates to reduced customer churn.
9. Provide a seamless service activation experience
Given that we are living in an age where everything is instant, a choppy service activation experience is a sure-fire way to drive customer churn.
However, with so many customizations and high-level personalization, order fulfillment and instant service activation can become gargantuan and time-consuming if SaaS businesses choose manual processes over automation.
SaaS businesses need to make order orchestration faster and error-free and drive a seamless and elevated service activation experience. Automated order orchestration and service fulfillment processes are essential for this and contribute to reducing customer churn.
In Conclusion
Having a great SaaS product with features and functionalities that customers want is the first step to attract customers. However, to retain this customer base and reduce customer churn, SaaS businesses need to leverage a robust revenue and billing management platform like OneBill. Such an advanced platform can help them get a 360-degree view of the customer and keep track of all the moving parts that impact the customer and influence SaaS revenues.
Connect with us to know how you can reduce costs and avoid unnecessary revenue leakage.
