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How to reduce churn in B2B SaaS companies: it’s all about providing value

Nov 10

After unlocking the secrets to building up a sales team and process we wanted to know from our experts how to retain customers and keep churn to a minimum. After all, churned customers mean lost revenue for your business.

Lauris Lietavietis
#B2Bsales #salesstrategy

For this purpose we talked to Lauris Lietavietis, Chief Sales and Partnerships Officer at Printify, and former EMEA Sales Director at Prezi and Head of Sales at Infogram. Lauris established sales, customer success and support strategy, process, and structure for the early stage technology startup Infogram, where he grew the customer team profitably from 0 to 20 people. When Infogram was acquired by Prezi in 2017, Lauris went on to lead also Prezi sales, customer success and support team in EMEA before joining Printify, a fast-growing print-on-demand platform, this autumn.

If you want to know what metrics to observe, what mistakes SaaS startups often make and how to ensure your customers’ success and ultimately your success, keep on reading. ⬇️

Probably some churn is inevitable, right? After all, one cannot expect to never lose a single customer. When does churn become a problem, though?

Indeed, some churn is inevitable because companies go out of business, their structure and priorities change, the economy changes as we’ve seen with COVID-19, so the needs change. 

There are certain industry benchmarks but it really depends on your customers, service type, and deals size. My take is that for an average SaaS company, an annual account churn of up to 10% is really good, 10-20% is moderate, and anything above 20% probably warrants a closer look. What comes to revenue churn, it would be negative for the most successful companies, they would be growing revenue from their install base. 

Typically, churn is lower in B2B than in B2C and enterprise-level customers churn lower than small or medium-sized businesses that go out of business or change priorities more often. So, a generalization would be ‒ the larger the customers you are working with, the lower your churn will be.

The simplest formula for calculating churn is dividing the total number of churned customers over the period by the number of customers you had at the beginning of the period. Is it always necessary to go more granular? 

Absolutely, it does not make any sense to look at average churn. First of all, there are several types of churn: revenue or user churn; monthly or annual churn, gross or net churn (that is,  including revenue from upsells to existing customers). 

If you have several subscription plans it definitely makes sense to look at churn by the plan; by the deal and customer size; by contract type (monthly vs annual). You could still go much deeper, for example, analyze churn by the acquisition channel or the customer vertical to see who your best-fit customer is. Also, you could break it down into cohorts ‒ first year, second year, third-year customers. 

Typically, annual contracts churn lower than monthly contracts as the customers are more committed. Also, you will see more churn in the first year (or the first months for monthly subscriptions), after which it would decrease. More expensive plans have lower churn, team plans have lower churn than individual plans, etc. 

Who should be doing this analysis in the company?

It depends on the structure of the company and what stage you are in. The analysis part is less important than the actual impact. Analysis can live within the Data or Finance. The impact can be achieved by Customer Success and Product. Eventually, it should go under the goals of the customer success team in my opinion.

What is the role of the Customer Success team?

In my opinion, customer success, support, and sales are all part of a holistic customer team or revenue-generating team. Each of them is simply approaching it from different angles. The CS team is accountable for renewals and expansion: their goal is to renew as much business as possible and, ideally, not only to renew but grow business from the existing customer base.

What is your secret to customer retention in Prezi and Infogram? (Our conversation took place before Lauris made the leap into Printify.)

There is no secret. But we are really focused on activating customers, helping to achieve value as quickly as possible. Our Customer Success team is very proactive in that. 

Right after the deal is closed our CS team takes over the customer: onboarding the customer, training the customer, making sure we know which goals they want to achieve with the service and how we can help. Then there are several regular check ins scheduled throughout the year. We would have dedicated meetings where we train customers on new features which are valuable to them. And we’re religiously monitoring the product usage. If we see some fluctuations, we reach out. It is important to know the different usage patterns and what is normal for the particular customer.

For the kind of product that we have ‒ a content creation tool ‒ we also need to support and empower our champions within the customer organisations. A champion is someone who is a fan and expert in our solution and makes sure internally that the company gets value from it. That’s something that has been working very well for us.

How do you know where the value is for the customer so you can also incorporate it into product development?

We know it from our customers. We have a very good feedback loop from the CS team to the product team and back. The product team evaluates how the requests fit in our long term strategy and part of the requests will go into the pipeline.

A feature is a functionality and the value lies in what the customer gets from that functionality. If a customer asks for x, we also want to know what problem they want to solve with it because there are multiple solutions to a problem.

What are the typical reasons for high churn that have you observed in SaaS companies? 

Churn is a symptom. You need to find the reasons which typically lie within the usage of the product, understand the bottlenecks and how you can eliminate them. 

A typical mistake is not having the Customer Success involved soon enough. Or having it as an extension of support. Churn starts right after you land the customer. Often we forget about that and check in with the customer only on Month 12, two weeks before renewal. In fact, the job starts right after the deal is closed.

You’d also need to take care of technical problems, such as credit card expirations. If the typical validity period of a credit card is 3 years, each month 3% of your customers’ cards will expire. Whenever that date is approaching, you’d want to take care of it proactively.

What do you think about offering customers a temporary discount or pausing their subscription in order not to lose them? 

By pausing and discounts you buy time. What matters is what you will do during that time. If nothing, then you just delay the churn a little bit. 

If someone is not using your product, lowering the price will not make them use your product. The customers need to get more value out of it. So you should use that time to learn and fix the underlying problems. 

Yet pricing structure probably matters?

Sure. There are two ways how you can grow revenue from an account: either sell more licences or make the customer upgrade if you offer multiple plans. Or, if your pricing is based on usage, you can make them use your product more. 

However, it all starts with usage and whether the customers are getting value out of it. Then you can start the conversation: hey, your existing users seem to be doing something really great and hitting their goals with our service, why don’t you leverage it some more and allow the rest of your team benefit from that, too.

Can you give some examples of SaaS companies who excel at customer retention?

Salesforce, Zendesk, Hubspot, Slack, Workday, Dropbox... I assume. All successful and growing B2B SaaS companies have negative revenue churn, which means they are growing revenue from existing customers.

For example, Net Revenue Retention of companies selling to development teams, such as Snowflake, Twilio, Elastic or PagerDuty is around 150%.  

What else should you keep in mind when addressing churn as a SaaS startup founder?

Sometimes plans are big on paper but don’t live up to that in reality. So aligning plans with reality and keeping it simple enough is the key. 

Instead of a complicated framework that really rarely happens, focus on some simple things and make sure they are actually done. Onboarding, activity check, 3-month and 6-month check-in, announcing new features ‒ these are all simple tasks that can be delivered.

Also, understand the goals why your CS/AM team exists and make sure they are not just an extension of the support team.

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Lauris Lietavietis is the Chief Sales and Partnerships Officer at Printify, and former EMEA Sales Director at Prezi, and Head of Sales at Infogram. Lauris established sales, customer success, and support strategy, process, and structure for the early-stage technology startup Infogram, where he grew the customer team profitably from 0 to 20 people. When Infogram was acquired by Prezi in 2017, Lauris went on to lead also Prezi sales, customer success, and support team in EMEA before joining Printify, a fast-growing print-on-demand platform, this autumn.

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