You have Micro SaaS and people are unsubscribing? What should you do? Can you get subscriptions again? Or should you look for new customers? It’s all written in detail in this blog post. What is churn rate?
In Micro SaaS, which we developed with my former partner, subscribers could cancel their subscriptions. We were trying to return these lost customers with different solutions. At least I can say we were planning. Clever plans.
Contents:
- What does Churn mean?
- What is Churn Rates?
- How is the Churn Rate Calculated?
- Why Churn Prediction is Important?
- Can Churn Rate Be Negative?
- Can Churn Be Positive?
- Why are Subscriptions so Hard to Cancel?
- Who to Calculate Churn Rate for SaaS?
- Can Churn Rate Be Over 100?
- Churn vs Retention Rate
- Churn Win-Back Strategies
What does Churn mean?
Churn means loss of customers. If a customer pays you monthly and suddenly stops paying, you’re churning.
What is Churn Rates?
The churn rate is the rate of losing customers. The percentage of customers that a startup loses each month.
For example, if you had 250 customers last month and 200 customers this month. You have lost 50 customers.
For example, you have a Micro SaaS with an MRR of $20,000. Let’s say your monthly customer abandonment rate is 5%. This abandonment rate will cause you to lose as much as $1000 per month (thus around $10,000 per year).
How is the Churn Rate Calculated?
Churn logic is very simple. You will see that it can be done with simple math in the formula below.
(Number of customers who left in the last 1 month / Number of active users 1 month ago) * 100
For example, if the churn rate is 5%, it means you lost 5% of your customers within 30 days.
You can do this annually. Then you need to change the time zone. It’s all that simple.
(Number of customers who left in the last 1 year / Number of active users 1 year ago) * 100
Why Churn Prediction is Important?
Churn is your loss of customers. The higher this ratio, the less money you will earn. It means you will be less successful. Because the more money you make in this industry, the more successful you will be. The criterion of success is measured by the money earned. In fact, how many real users there are can be a separate success criterion, but people generally look at money.
The higher your churn rate, the greater the sinking rate of that venture. The more churn, the greater the risk. Technically, it’s too much stress. High churn can put you or your team in a panic mood. I suggest you know this in advance and make an emergency plan. We should minimize the churn rate in our enterprise. We need to think about it, research and learn.
But not every churn has to be bad. For example, you built a Micro SaaS for $5 per month and you have 100 customers. You earn $500 MRR per month. But when you raise the prices to $10, you churn 20%. You now have 80 customers. Numerically few. (80<100) But if you look at it financially, 80*10=800$MRR. You have earned more.
Can Churn Rate Be Negative?
Yes. It occurs when the amount of income you get from your current customers exceeds the amount of income from the customers you lost. Loss of customers is different from the loss of revenue. Also, usually, SaaS installers accept 5% as normal.
Can Churn Be Positive?
Yes. When positive, a customer starts paying more than they normally pay, that’s positive churn. For example, if a customer pays $49 per month and upgrades, this would be a positive churn. Now your customer is paying $99.
Why are Subscriptions so Hard to Cancel?
Unsubscribing is difficult because companies don’t like the idea. Because they will lose money. Therefore, they make this process as difficult as possible. This works on other issues as well. For example, the process of logging out of your social media account. For example, let’s examine how many steps you need to follow to log out of your Instagram account.
- Go to profile.
- Click on the hamburger menu in the upper right.
- Go to the settings page.
- Click the sign-out button at the bottom. (You have to do an extra scrolling action for this)
- It will ask you if you really want to sign out. It will even offer to save your login information. Even stop bidding, it will make it ticked for you.
Look, we have followed 5 steps to log out on Instagram. It’s easy for them to put one button. This is not difficult to do. They just don’t want to do it. Because they are trying to keep the user in the product.
Likewise, in Micro SaaS, it is necessary not to accept the departure of the outgoing customer quickly. Of course, I’m not saying something like getting in front of it and blocking it and pulling on your arm. 🙂 Below I will tell you what to do.
Above all, there is another thought. If something is difficult to cancel, it may be insufficient or anything. Let’s take a real-life example. For example, if you are looking for a house to rent, people will force you to make an annual contract. You can’t go out whenever you want. But on the other hand, places, where you can go out whenever you want, can offer better quality experiences. If he is making a contract with you, maybe there is dampness in the house or your neighbors are troubled types. Of course, this is a very frivolous example, but I think you understand what I mean. So there is another side to the coin.
Who to Calculate Churn Rate for SaaS?
Since you are a Micro SaaS installer and mostly one person, you will logically calculate. 🙂
Can Churn Rate Be Over 100?
Technically yes. If the churn is 100%, you are screwed. 😀 If the Churn is negative, you’re screwed. If the chuck is positive, your exit. 😀 👉🧠🆓
Churn vs Retention Rate
Churn is lost. The retention rate is customer retention.
The churn rate is bad because it means you lose customers and the retention rate is good because it means you retain customers.
Churn Win-Back Strategies!
With SaaS, the loss is inevitable. Everyone loses. The aim is to reduce these losses. Remember that the rate will never be zero. Acting with this mentality will make you feel more comfortable.
If you become a churn mark (and you will 🙂) the first thing you need to do is to contact the unsubscribed user and understand why they canceled their subscription. Otherwise, you’ll be wandering around like a blindfolded chicken. 🐔
Solutions:
- Find out the reason for subscription cancellation
- Offer incentives to ease the pain point. For example, if he says that some features are not working, give him a 1-month free package for detecting the problem and solving the problem in that 1 month. You catch the customer before he leaves. In this way, it can share it on social media and make your extra advertisement.
- You can also change your churn rate by changing your pricing. For example, instead of a $49 monthly fee, offer a $19 paid package with some features restricted.
- Prevent the churn before it becomes churn. Listen to your customer’s feedback. Make sure they don’t go to your competitors. Develop things that your competitors don’t. Give him what no one else has. That way, he won’t be able to leave you.
- Find out which features of yours are liked the most and market them more. You can reduce the churn rate with newly acquired customers.
- Communicate with your customers periodically. Send an email to see if there is a problem. Or a need.
- You can create a community for your customers. Tally.so created this community. A community is loyal to its roots with one-on-one communication. It could be a forum site, a Discord server, or a Slack channel.
- Offer new features to unsubscribed members.
- Give a badge to the member who unsubscribed.
- Give a gift to the member who unsubscribed.
- Listen to the problem of the member who canceled their subscription.
- Say that the friends of the unsubscribed member are included in the system.
- Offer the option to return to the unsubscribed member and explain the percentages of selection from these options. It’s like saying 87% of them chose option B.
- Allow the unsubscribed member to add the desired feature.
- Interview the unsubscribed member.
- Interview and publish your current members as well. This story of becoming a hardcore user will affect other churns as well.
- Make a meeting with the member who canceled his subscription. Seeing face-to-face can sometimes melt all the ice. We, humans, are emotional creatures.
If you have any items you would like to add, please don’t forget to write them in the comments. Information multiplies as it is shared. 🙂
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