So your customer decided to cancel. It happens.
But that doesn’t mean that you have to accept it. The good news is, that lost customer may not be gone forever. Even though your customer wants to leave right now, you may be able to persuade them to return.
Here’s Why Your Customers Cancel
Let’s be clear. Churn isn’t always bad.
When customers who aren’t a good fit for your SaaS business churn, that’s a good thing. Otherwise, they’ll drain your customer care resources and leave negative reviews on your business when things don’t work out.
And churn is also an inevitable end marker to the customer life cycle. With few exceptions, your customers will eventually leave. But, if they leave on good terms, they’ll likely tell others about you, and in the long run, they may even return as repeat customers if they need your services again.
However, neither of these reasons are the leading motivators for why customers churn.
Based on various studies, here are the top four reasons why SaaS churn happens:
- Poor onboarding – You’ve spent a lot of time convincing your potential customers to buy. Once they do that, then there’s nothing waiting for them, other than the sound of crickets. You expect them to log in and know what to do, but they have no clue. Their initial excitement and anticipation have now fizzled into feelings of frustration and disappointment. These new customers will either elect to not renew or initiate cancellation and cash in on your money-back guarantee.
- Lack of nurturing – Nurturing isn’t just for leads. You should also nurture your customers so they remain engaged with your product. While onboarding gives them the big picture, ongoing nurturing gives them continuous tips and tricks on how to use your service. This empowers your customers to make small wins and is an effective way to increase customer satisfaction. The more that your customers use your product, the stickier they become. This is a great way to increase customer lifetime value.
- Negative customer experience – When your customer faces a problem with your service, they are more likely to cancel. Why stick around if your company doesn’t value them enough to invest in quality customer service? Studies show that customers will pay more for better customer care. So, if you think your bargain basement prices will serve as a mitigating factor, think again. Customers will drop you if your customer service sucks.
- Overselling and under-delivering – In marketing, you can make huge promises, but does your service deliver? Maybe it does. But if your customer doesn’t understand how to use your service to create their desired result, they will then question if your service is the right option for them. This is why you must invest in onboarding and ongoing customer success.
It’s important to know why the majority of your customers cancel. If you don’t know why they left, you won’t be able to correct the problem and win them back.
How to Win Your Cancelling Customers Back
Let’s discuss what to do when a customer initiates the cancellation process.
Let’s discuss what to do when a customer initiates the cancellation process.
First things first, you are partly (if not wholly) responsible for a customer cancelling. Either the customer wasn’t able to see the value of your service or the customer wasn’t the right match for your service. Whatever the reason for the churn, you must take responsibility for your part.
I know it sucks to admit that you’re in the wrong, but there’s a silver lining. If you’re the reason why your customers are cancelling in the first place, you can also be the reason why they stay.
Take inventory. How have your actions (or inaction) contributed to customer churn?
Make Cancellation Easy
Why make it easy for your customers to cancel? This move may seem counterintuitive, but it’s one of the best things you can do. If a customer is set to leave, don’t stand in their way. Otherwise, they’ll develop a distrust of you and never return, no matter what special offers you dangle in front of them.
Instead, make it as easy to leave as it was to sign up. This is part of your service to your customers, and is the best way to reinforce the message that you care about your customers’ experience with your brand—from start to finish.
Create a Cancellation Flow
Did you know that your cancellation flow can positively influence your customer retention rate? Put as much thought into the customer cancellation process as you do into the customer sign-up process.
One thing that must be part of your cancellation process: The option to pause instead of cancel. If the customer opts to pause, it gives you a chance to continue nurturing that customer and gently nudging them back to your service over a period of time.
Also, it’s a good idea to give them the consequences of cancelling. In addition to loss of functionality (which is a given), explain how the loss of historical data could negatively affect your customer. Then, offer them the option to pause.
Offer to Discount or Downgrade Their Service
If your customer reaches out wanting to cancel, present them with a limited-time offer or discount code. It’s possible their business has slowed, but they’re expecting it to turn around in the near future. If rewarding customer loyalty with a discount is something you can do, this last-ditch effort can help you keep more of your customer base.
Downgrading is another alternative to cancelling or pausing. Some of your current customers may bite at this, especially if you’re able to position it correctly.
In response to the pandemic, many SaaS proactively gave their customers the option to downgrade instead of cancel. You can still do that, even with cancelled customers. Give them the option to come back with limited functionality of your most popular feature set. They might just give you a second chance.
Ask Them Why They Left
When customers cancel, your first step should always be to seek to understand why. Customers cancel for different reasons. The best way to find out why your customer is cancelling is through customer feedback.
There are three ways to ask churning customers why they decided to cancel.
First, you can survey them. Send an email with a link to a short and sweet exit survey (10 questions at most). Alternatively, you can embed the survey into the cancellation page so they must answer in order to cancel.
Second, you can send an open-ended question via email. Send a simple, stripped down email that asks, “What were you missing from your experience with us?” This option feels more personal and is more likely to get results. These feedback emails provide valuable insights into what wasn’t working for your customer.
Third, you can call your customer directly. Speaking to them on the phone can give you the best opportunity to win them back because you can respond to them in real time.
Whichever option you choose, always ask because knowing why can help you win them back. But, if nothing else, this customer data can inform your cancellation and win-back strategy for future customers.
Tailor Offers Based on Why They Leave
Once you know why your customer has started the cancellation process, you can counter with the following customer win-back strategies to stay:
If your customer leaves due to price, offer a discount.
If your customer leaves due to a customer service issue, a good way to show value is by offering a free upgrade.
If your customer leaves due to not understanding your service, involve your customer success team and share educational content.
Have a plan for each of the most common causes of churn.
Tailor Offers Based on When They Leave
Create different customer win-back campaigns for each stage along their customer lifecycle.
Your plan to woo back former customers who’ve cancelled after one month will be different than your plan to woo back a customer who’s stuck around for 18 months.
Take a look at your average customer lifecycle and determine what offers you can make at key milestones along their journey.
When a customer churns, it may not be the end of your relationship. You may still be able to rescue those customers who’ve jumped ship. Use the above tips to formulate an effective cancellation strategy that retains more of your customers.
Before you go, check out these related posts:
- 7 Easy Ways to Upgrade Your Customer Experience and Reduce Churn
- How to Write Dunning Emails that Get Results
- Crisis-Proof Your Subscription Business With These Tips