Customer Attrition: What It Is and How to Cope

SaaS business owners deal with a lot of metrics that allow them to evaluate whether their company is moving in the right direction.

Customer attrition is one of those metrics any SaaS business owner needs to keep an eye on.

What is Customer Attrition?

Customer attrition reflects a rate at which paying users stop doing business with a brand within a set period of time.

In other words, customer attrition is one of the worst things that can happen to the health of a SaaS company.

Yet, some attrition is inevitable, especially in B2B business where people often move on to different positions and points of contact are often lost.

What Causes Customer Attrition?

There can be many reasons why customer attrition happens. Some things are beyond your control: Cards expire, your customers’ priorities (and consequently their budgets) shift, etc.

There are many causes that require your prompt attention:

Poor onboarding strategy

Your onboarding strategy is crucial for retaining more of your newly acquired customers.

Your customers fail to have been introduced to your platform properly. Consequently, they don’t understand the value of your product.

Poor customer support strategy

As many as one-third of consumers claim they would consider switching to a different company after a single instance of bad customer service.

Further reading:

• How to Monitor Your Inactive Users and Re-Engage Them
• How to Engage Your Subscription-Based Customers Better
• Personalized Marketing: How to Increase Conversions

Lack of interactions with your customers

Inactive customers are common for any SaaS business but waiting for your customers to reach out in order to talk to them is a poor strategy as well. Invite your inactive customers to a personalized demo, never miss a kick-off call, etc. 

Encourage your customer support to try and get introduced to more than a single point of contact within your customer’s company. This will ensure their retention in case your point of company moves on.

Poor Targeting Tactics

Your marketing tactics may be reaching the wrong customer. Maybe you are simply onboarding the wrong customer.

Think about your ideal customer and look at your web analytics: Can your marketing be misaligned? Know your customer personas and find a better way to reach out to them.

PayKickstart provides a great deal of information about your current customers, their demographics, income and more. You can look at each customer’s profile to understand if this looked like a good fit for your product.

Look at their spend, refund requests, overall history with your brand and engagement:

The feature is included in PayKickstart’s Growth plan.

Product glitches

Your product may be just failing to perform well. The earlier you identify this problem the better. 

Make sure you consistently ask your trial and paying customers to share their feedback and make it as easy as you can.

Misaligned pricing strategy

It is extremely hard to determine your pricing and billing strategy and do it right from the very start. Customer attrition is often a signal that you failed to.

Look again at your competitors and if their pricing strategy has changed since the last time you researched it. There are different ways to price your product and looking at the current market is always the first step:

Survey your customers often to identify if your pricing strategy seems fair to them.

Additionally, make sure your pricing strategy is meeting your international customers’ needs.

Further reading:

• Tiered Pricing vs Volume Pricing, Which Model is Better?
• How to Create a Successful Loyalty Program 

Poor payment recovery strategy

Failed payments happen to any subscription payment business. Technical outrages happen, credit cards expire and payment processors fail. What really makes a difference is a proper payment recovery strategy which helps you overcome most of those failures which are otherwise beyond your control.

Use PayKickstart payment recovery tools to revive more of those failed payments:

1. The dunning feature automatically sends a series of emails to the customer prior to canceling the account:

• Right after the failed rebill attempt,
• Three and then five days after the payment failure:

2. Auto-recovery feature can be set to automatically retry failed payments after a given number of days:

2. Enable a variety of payment processing options to allow your customers to easily switch to an alternative one after any of the existing methods fails.

How to Calculate Customer Attrition?

Customer attrition rate (also known as churn rate) is calculated by dividing the number of customers you lost by your total number of customers within a certain period of time (e.g. a month), multiplied by 100.

For example, if you lost one customer out of 100 within a month, your attrition rate is 1%

1/100 x 100% = 1%

What is a Good Customer Attrition Rate?

There’s no definitive answer as it will heavily depend on your niche, nature of your business, current customer base, etc.

Typically, attrition rate is seldom lower than 3%, so attrition rate between 2%-3% is considered good.

Obviously, the larger the businesses you target, the lower your attrition rate should be. For an enterprise-level platform, attrition should be less than 1% monthly.

Conclusion

Customer attrition is an inevitable evil that haunts any SaaS business. It doesn’t mean you don’t have to monitor your attrition rate and try to lower it. Focus on identifying clear reasons behind your SaaS customer attrition and come up with a strategy to fix those issues.

Take the necessary step to take this metric under control. Good luck!

Ann Smarty

Ann Smarty is the Brand Manager at Internet Marketing Ninjas, as well as co-founder of Viral Content Bee. Ann has been into Internet Marketing for over a decade, she is the former Editor-in-Chief of Search Engine Journal and contributor to prominent search and social blogs including Small Biz Trends and Mashable. Ann is also the frequent speaker at Pubcon and the host of a weekly Twitter chat #vcbuzz

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