Why Do So Many SaaS Companies Struggle with Churn?

High turnover and more sales might mask the effects of churn on the surface, but deep down there's an underlying problem with customer success.

In the SaaS market, there’s a lot of talk about churn, but what does it really mean?

Basically, churn is the software version of a burn rate. The rate of customers who sign up but then disappear. Unhappy, confused and dissatisfied customers put into numbers.

So how do we solve this problem? High turnover and more sales might mask the effects of churn on the surface, but deep down there’s an underlying problem with customer success. We believe companies should address this before it even gets to this point. How? With successful onboarding.

We’ll talk more about how we as a company address churn in a later blog post (look out for it!), but first, let’s dig a bit deeper into the issues causing churn, with insights from our Partnership Manager Daphne Lopes:

  1. There are too many tools in the market

SaaS is relatively cheap, so people will buy it and try it in a cheap way (without a deployment or project management), so after 2-3 months it doesn’t work, and they cancel because they can just go to the next one.

SaaS has made access to software easy and relatively affordable, so there’s now a big gap between end users and the people who designed the software. Product designers don’t interact with end users and clients when it comes to online sales, so there isn’t that face to face interaction that you would have in an old-school, traditional sale, where potential problems could be solved upfront.

2. People don’t see the need to invest heavily in one tool

People often don’t get what they want from a tool, but instead of complaining and fixing it, it’s easier just to move onto the next tool, which creates an ongoing pattern of buy-try-churn.With a variety of tools to choose from, it’s also easier to try a range of options instead of investing in premium customer support,

3. It’s a bigger, more structural issue

SaaS is not about being computer literate. It’s not about being able to click on a button and create a task, it’s about creating the right environment. An environment that’s scalable, transparent and enables collaboration

To be able to use a SaaS tool effectively, you need to create the right environment. You can’t just buy a tool and assume that people will know how to use it to its full potential,  you need to do some deep thinking about structures and processes and how these integrate into a system (i.e. do a deployment).

4. There’s a mismatch between sales promises and the reality of using a tool

SaaS people are product people, so they also position the tools as easy to learn, so that clients think that they don’t need a deployment. It doesn’t matter what software you use, if you don’t have someone guiding you through this process, and helping you to create those environments, they’re not going to create themselves.

5. Because of tools like email, society’s default mode is silo thinking.

People automatically bring all of their bad habits from email into new platforms, which makes user adoption more difficult. If you don’t address those bad habits upfront with an effective software onboarding, you’ll be sure to experience high churn rates.

Find out more about how one of our Deployment Consultants can onboard your clients more successfully onto a new software tool. Contact Us to find out more.

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