“We have 0% customer churn.”
– said no SaaS marketer ever.
Instead, what I hear all the time is:
“If only we could keep growing without churn growing with us.”
“If only we could get new trials to actually USE the product, they’ll see how great it is.”
And even this story someone shared on Reddit about how they lost a potential investor because of high churn:
Imagine having your acquisition efforts pay off like crazy but your customer churn is also crazy-high! The rest of the Reddit post went into the steps they took to fix churn but it also got me thinking…
Why do great-fit customers leave?
Why can’t we all have 98% user retention?
Why should the standard be significant customer churn in month 1?
It’s well-known that many mobile and web apps hemorrhage users in their first month. Analyses like this one proved it.
Yet there are SaaS like Atlassian whose apps have a 98% customer retention rate. And Hubspot & Adroll at 97%.
What are they doing differently?
I decided to spend 28.5 days of my life finding out.
But before I could understand how these retention unicorns achieve their astounding results, I had to fully understand why users churn.
“It’s a great product. Why on earth are you leaving us?”
Google “reasons for churn” and you’ll get over 1,900 search results. But none of them will be specific to your business. To find out the top reasons your own customers churn, you’ll need to conduct a churn analysis and simply ASK them.
In the meantime, here are a few of the most common causes of churn:
Did you notice that 4 out of 7 of those top reasons involve communication?
- Attracting the wrong customers → might be a message mismatch
- Poor customer support → limited knowledge base and help resources or a reactive (not proactive) support team
- Poor onboarding → lack of communication on the right actions to take
- Customers not achieving their desired outcomes → links to lack of guidance during onboarding
Seeing this got me thinking… if most of the top reasons for churn are communication issues, then communicating more & better with users should increase retention right?After digging around for a while, I discovered that Future of SaaS reported that after onboarding, 78% of SaaS marketers said proactive and frequent communication was their top retention strategy.
So I started to wonder, how do these companies with absurdly high customer retention communicate with users? And how do customers like to be communicated with?
I dug deeper and saw a Salesforce survey of 14,300 customers. The survey showed that 93% of customers prefer to use email to engage with companies.
In another survey, 70% chose email as their preferred way to be contacted by brands.
Woah. Look at that gap between emails and the runner-up: texts. Email is 52% higher!
And I’m not surprised, seeing as there are 4.3 billion Gmail users and that big number keeps getting bigger.
Customer retention starts with building a relationship.
And how many times have you heard 80-something-year-old couples say that communication is the key to a lasting relationship?
So if email is the #1 way that 70% of customers want to communicate with your company…
Then maaaybe SaaS like Buffer and ConvertKit that boast 95% and higher user retention are doing something special with email?
Reading glasses on, I committed the remaining 27.5 days to finding out.
But reaaally quick.
As I write this, I know you might be thinking, “Why should I care? If customers want to leave, they can leave. I’ll just ramp up my acquisition efforts and replace them with new customers right? RIGHT?”
Let me hit you with a bunch of stats. Various studies have shown that:
- Acquiring new customers can cost 6 to 7 times more than keeping existing ones
- Reducing your churn rates by even as little as 5% can result in a profit increase of as much as 25-125%
- Improving customer retention by just 5% can increase profits by 25-95%.
- And 65% of a company’s revenue comes from existing customers. That means, you’ve pulled time and resources to acquire, onboard, and support this customer. Are you really about to miss out on that sweet expansion revenue because of an annoying mistake like… the customer didn’t know you had a feature you actually had?
Still not convinced?
Here’s why Casey Winters, former Head of Growth at Pinterest, GrubHub, and now CPO at Eventbrite, thinks retention is the ultimate growth tactic:
“We typically think of monetization as the lifetime value formula, which is how long a user is active along with revenue per active user. Retention has the most impact on how many users are active and lengthens the amount of time they are active.
For acquisition, retention is the enabler of the best acquisition strategies:
For virality or word of mouth, for example, one of the key factors in any virality formula is how many people can talk about or share your product. The more retained users, the more potential sharers.
For content, the more retained users, the more content, the more that content can be shared or discovered to attract more users.
For paid acquisition or sales, the more retained users, the higher lifetime value, the more you can spend on paid acquisition or sales and still have a comfortable payback period.
Retention really is growth’s triple word score.”
SaaS businesses are usually better served focusing on retention. Are you starting to see why this matters?
Great. Let’s pick up where we left off.
If email is the most popular communication tool, how are the top SaaS using it to increase user retention?
That was the final question that led to me frantically signing up for dozens of free trials (127 to be exact). Just so I could study their email strategies.
27 days. 1,012 emails later. Here’s what I learned in summary:
- When a user signs up for your free trial, their inbox becomes your sales floor. Don’t take it lightly.
- You can get users hooked. Even if your product isn’t a typical habit-forming app like Slack.
- Triggered emails are personalization on steroids. When done right, you’ll build a solid base of long-term customers.
Let me break these down a bit more:
1. Their inbox = your sales floor
I don’t mean body-slamming a new user with upgrade emails the moment they sign up.
Selling is a conversation.
I remember my first experience in sales back in my college years. I made $1800 a week selling handmade notebooks with colorful fabric I brought from back home in Nigeria.
I’d initially tried jamming folks passing by with my sales pitch. But over time I realized that people just wanted to talk.
When I switched from asking if they wanted to buy to talking less and listening more, my revenue grew from $400 a week to $1000 until it hit $1800 a week.
What does this have to do with SaaS?
The inbox is where you’ll start important conversations with your users.
It’s where you’ll find out why they signed up, what they’re looking for, and what outcomes they’re expecting to get from your product.
Thankfully, I received an average of 8
emails possible conversation starters in the course of a 14- or 30-day free trial. Not bad.
Out of 127 SaaS companies, 37 (29%) sent between 7 and 10 emails. Take a look:
2. Creating habits for a non-habit-forming product
“When it comes to designing products people love, far too many entrepreneurs focus on getting customers to check out instead of getting them to check in.
There’s no doubt that a frequently used product like Facebook, Slack, or Snapchat has an easier time of changing consumer habits. However, habits can still help companies that might make a sale to consumers every few months or years.”
Nir went on to list two ways to build a habit around an infrequently used product:
But that begs the question. How did the companies I studied achieve this with email?
Simple. An email newsletter.
Buuuut not so simple.
Because I don’t mean the typical corporate newsletter with 99 links to all the announcements, events, and goings-on in the company that month.
I mean strategic content tailored to a specific audience. With your brand voice shining through.
Like UserPilot’s Product Rantz newsletter that I can’t get enough of:
Or how Hubspot acquired The Hustle and so neatly integrated the newsletter into its content flow:
When done well, email newsletters can hit both the content & community aspects of habit-building for software that doesn’t require daily use.
3. Behavior-triggered emails.
AKA personalization on steroids
Triggered emails are automated emails that go out in response to a user’s action (or inaction).
According to a GetResponse study, triggered emails average a 35.33% open rate. But if you do them the way these companies with 95% retention rates do, I’d expect much higher opens and click-throughs.
So let’s take a look.
First off, only 57% of the companies I studied used behavior-triggered emails. Thankfully, many that did, did it reeeaally well.
Like this one from Boardable that noticed I was inactive in the app:
And this one from Duolingo that stopped sending me emails when I wasn’t taking the French lessons I test-signed up for:
Each triggered email is an opportunity to nudge users toward the only way they can get value from your product – USING IT.
“Okay cool. But what does this look like in practice? How do I decide which emails to send and when?”
Lots of SaaS use triggered emails at different points of the customer journey:
- Outbound sales
- Lead nurturing
- Onboarding & activation
- Upgrade flows
- Secondary feature adoption
- Referral programs
- etc etc
No matter which point of the user journey you use ‘em, behavior-triggered emails have one thing in common – they’re intentional. They’re sent to only the people that need them, when they need them.
You know how Duolingo stopped sending me emails because I wasn’t engaged? Let’s take a deeper look into how their email strategy played out:
I received 6 different reminders before the final email that paused the notifications because I wasn’t engaged. If I were someone who was serious about learning a language, at least one of those reminders would’ve worked.
Side note, Duolingo’s emails also had some great subject lines:
(Ignore the fact that I’m called EmailExperiments in the second email. I used that username when signing up lol)
But the moment I signed back into the app and took a lesson (just to see what email they’d send), the reminders kicked up again, with an email showing my current streak:
That’s how triggered emails work.
And it’s how you can get users to fall in love with your SaaS – by offering an unusual level of attention and personalization that others won’t offer.
“Cool cool. But this is only one app’s strategy. What’s the secret? How do these companies use triggered emails for retention?”
They essentially build an arsenal of behavior-based flows that deploy to different users depending on where they are in the customer journey.
During my experiment, I went through 2 stages of the lifecycle:
- The beginning of the journey – onboarding
- When I was on the ledge – about to churn/ghost
Here’s what I discovered about retention in these phases…
Phase 1: Optimizing onboarding for retention. Is your product sticking?
Retention becomes so much easier if you’ve kept a customer engaged throughout their test run (free trial) or their first few days with you. So ideally, you should be thinking about retention from the second a customer signs up.
Lyla Rozelle, product manager at Appcues says:
“It might seem like onboarding and customer retention are a million miles away, but they’re not. In fact, a strong linking strategy between them can really help strengthen the bonds of your customer relationships. It’s a bit like a first impression. You’ve done your marketing and snagged a customer, perhaps they’re interested in your product, but now you have to make them interested in your company.
Customers who experience a positive onboarding process report more positive feedback and stay with the company for longer periods of time. They’re also more likely to recommend the company to others. The two top reasons why you lose customers is because they don’t understand your product, or they don’t obtain any value from it. You can solve both of these issues during your onboarding process.”
Casey Winters again shares why onboarding is so critical for growth:
“When people talk about growth, they usually assume the discussion is about getting more people to your product. When we really dig into growth problems, we often see that enough people are actually coming to the products.
The real growth problems start when people land… and leave. They don’t stick. This is an onboarding problem, and it’s often the biggest weakness for startups. It can also take the longest to make meaningful improvements when compared to other parts of the growth funnel.”
So what exactly should you do to optimize onboarding for retention?
1. Guide them to the AHA
Once a user signs up, you don’t have all the time in the world to onboard them. Act fast!
In a SaaS onboarding bootcamp in Copyhackers 10xEmails course, Copyhackers founder Joanna Wiebe explains it better:
“Trial users believe they have 30 days to evaluate your product or service.
But you should look at it differently…
You have about 4 days to get users to USE the product and about 10 days to get them to the AHA.”
Guiding your trial users towards the first “aha moment” is the key to a successful, retention-optimized onboarding. The “aha moment” or “first value” is the moment when a user finally realizes the value of your product and why they need it.
Joanna also goes on to say, “Your trial users don’t need to know how to use your product at the beginning… they just need to know what to do next.”
Leading them to the right next step (and not anything else) should be the focus in onboarding.
2. Exploit your data advantage
Throughout the experiment, I could tell when a SaaS had actively used data to set up behavior-triggered emails. Or when they hadn’t. Because those that hadn’t would send classic “hope you’re enjoying your trial” emails. Like this one:
Every time I saw this in my inbox, I slightly cringed (in pain). Because all I saw was a huge missed opportunity.
But when I received emails like this one…
…I actually got excited. Because I know that if I were a good-fit user who signed up then ghosted and I received that email, there’s a 95% chance I’d take one of those actions.
Too bad I currently use ConvertKit.
Anyway, the advantage for SaaS companies is that you can set up automated systems that tap into user activity data to deliver highly personalized emails like that one.
Remember those SaaS I mentioned with crazy-high user retention?
Intercom is one of them. And Ruairi Galavan, ex-Intercom director of customer engagement said:
“If we know certain customers have visited the campaign page three times but have not created a campaign yet, we might push some content to them to encourage them to get started with campaigns.
We follow the pattern of “has done x, has not done y” all the time. These are the people who’ve shown some level of commitment but have yet to activate.”
But what does a “has done x, has not done y” onboarding sequence look like?
Let’s take a hypothetical project management app. We’ll call it ashana.
I’ll assume the first aha moment is when a user completes their 3rd task. Assuming it will take 3 steps to get there, this is what a bare-bones “has done x, has not done y” onboarding map would look like:
This flow closely matches the emails I received from Pendo, one of the 127 free trials I studied. But because I ghosted, I only received the emails from the lower part of that email map:
You can see that the full onboarding flow is way more robust. And there’s a bunch of emails I didn’t receive because I didn’t take the actions needed to trigger them.
So on the backend, you might have a 30+ email flow (which is very normal I promise)
But one user might only receive 5 of those emails.
So no. You’re not annoying your customers. You’re creating a personalized experience that’ll help them onboard & activate faster.
3. Don’t make it all about you
61% of companies sent what I tagged as “value emails.”
These were primarily GIVE emails like tips, educational emails, industry reports, customer case studies, and newsletters.
Compared to the usual ASK emails like upgrader emails, webinar invites, feedback surveys, etc., I like to call these GIVE emails hardcore retention emails. Because even if the call-to-action isn’t to drive me back to the app, they’re building a relationship with me by giving.
And ConvertKit’s weekly newsletter that’s always packed with great resources:
Value emails are great for trial users that are slower to activate. Mostly because they typically contain credibility-boosting content that’ll help new users start to recognize your app’s value.
Phase 2: What to do when a user is already at the “churning point”
It’s simple. Identify customers that are about to churn. And respond accordingly.
But also not so simple.
Because how do you know when a customer is about to churn?
A study of one million SaaS users by Guy Nirpaz, CEO of Totango showed that most app cancellations were preceded by a period of non-use.
That is, product (non)usage is usually the #1 sign a customer is about to churn.
This takes us back to the SaaS data advantage.
If normal product usage is 1x per day and a user hasn’t logged in for 2 weeks, you should have an arsenal of retention flows that automatically trigger based on that inaction.
If a user is suddenly exporting all their data, there should be a triggered flow to respond.
It’s the Wild West out here. Your retention strategy should be like creating a crisis management plan. Think of all the possible scenarios. Especially using data from what you’ve seen churned customers do right before they leave. And use the #1 communication tool at your disposal to fill that gap before a perfectly good-fit customer jumps ship.
Several SaaS companies sent me emails when they saw my low product usage. Like this one from Product Fruits:
Quick tip: Take notes from your happy customers
To increase overall customer retention, your best bet is to hear from your happy users on what makes your product so valuable.
As you get their feedback, pay attention to the particular features of your software or facts about your business that they love. Then apply that messaging when reaching out to customers at the “churning point.”
Now let’s see the types of emails most companies sent me…
Out of 1,012, these were the most popular emails I received:
But I noticed a few missed opportunities:
Welcome emails are underrated
Yes, welcome emails were the most popular (a whopping 85%!). But why do I call them underrated?
Because 100-too-many SaaS stuck to the same old “Welcome to [insert company name]” type email. And subject line!
The risk of churn starts as soon as a user signs up. And welcome emails help attack it immediately. So why still use the overused welcome email templates? Why not get a trial user super pumped to use your product and build a hopefully long-term relationship with you?
Anyway, here are a few welcome-email-writing tips from some of the emails I received:
Do: Test curiosity-building subject lines. Like this one from Userlist ↓
Do: Start the relationship on the right note with a great GIVE. Like this one from Loom with a Loom video from the CEO ↓
Don’t: Use a template!! I’ll avoid naming names here 🤐
Step emails are CRITICAL
Quick recap: You know how Joanna said, “Your trial users don’t need to know how to use your product at the beginning… they just need to know what to do next.”
Step emails do just that. They tell a trial-er exactly what to do next so that they don’t get stuck and totally ghost you. Sadly, only about half of the companies sent any emails telling me what I needed to do next.
Here’s what this looks like in practice:
Here, Pendo gives me the exact next step I need to take to get set up in the app: copy and paste 7 lines of code. That simple huh?
Quick tip: If you already use a checklist flow in your in-app onboarding, you can create a triggered email sequence that works with that checklist to email trial users if they get stuck on a certain step.
Usage review emails are surprisingly unpopular
This one was unexpected. Not many SaaS (only 9%) used the data they had on my activity to share a usage report.
I’ll admit there wasn’t much activity to report to begin with, but still. I expected a lot more.
These emails don’t have to be detailed usage reports like CleverTap’s:
They can be “what you’ve missed” usage update emails like Slack:
It all changes depending on the app. But it’s worth testing some form of usage review or activity log for your users.
By letting them know the exact value they’re getting from your product, you’re likely to see more user activity and engagement.
So with everything I discovered, how would I optimize a SaaS email program for retention?
I’d do 3 things…
1. Apply user data to personalize emails beyond the first name merge tag
Apollo.io’s director of content Janet Choi said:
“Communication that truly retains customers helps them visualize and understand their own progress, which requires a certain level of personalization. And when you’re communicating at scale, investing in data and actually using it is the only real way to achieve it.”
It all keeps going back to the data advantage.
In this hyper-competitive SaaS world, a hyper-personalized customer experience might be the only way to stay on top. And that requires tapping into user data. Lots and lots of it.
2. I’d ask better questions
I received a ton of “Have you been enjoying exploring our product so far?” That’s a horrible question. Terrible.
In Copyschool training, Joanna would teach, “Avoid asking closed-ended questions – questions that the reader’s answer might be NO.”
I agree. And I’d take this a step further and say: Avoid asking generic questions your data should answer for you.
The data advantage creeps up yet again!
You already have user session data that shows that the last time this user logged in was 23 days ago when they signed up. Why ask if it’s been great exploring it? How about finding out where they got stuck instead?
3. I’d write more emails
Your customers want more communication. As long as it’s valuable.
Remember the “has done x, has not done y” onboarding sequence I shared? An onboarding sequence like that might have 30+ emails but one user might receive only 5 or 6 out of 30.
The goal is to send a mix of step emails, customer support offers, value-based emails, and even sales emails based on where they’re at in the user journey and the actions they have (or haven’t) taken within the app. By doing this, you increase the odds of them finally seeing how valuable your product is.
Bonus #4: I’d do everything else I mentioned in this post. Because email marketing works for SaaS
The Copyhackers team recently switched from an agency serving tech companies in all their copywriting needs… to an agency focused on email marketing.
If that (and this 4,084-word post) isn’t a sign that email marketing works, I don’t know what is.
By staying in your customers’ inbox all year round and helping them get value from your product, you can significantly reduce your churn rate and start moving towards that 95%+ customer retention.
Or the holy grail – negative churn.