What is Customer Churn? Why Does it Matter?
Customer churn refers to the percentage of your customers who stop using your product during a specific period. For example, if 1,000 customers purchase your SaaS product on January 1st, 2021, but by the end of the year, only 900 customers remain, your churn rate is 10% because 10% of your customers are now gone. Your churn rate is essential to monitor and even more important to keep as low as possible. Customer churn, sometimes referred to as customer attrition, is a reality that every company needs to address and prevent as much as possible.
The critical issue is that no matter how many customers you bring in, if your customer churn rate is high, you’re going to bleed profits. To increase revenue and profit, your company has to figure out a way to battle customer churn and retain the customers you work so hard to acquire.
As with all challenges, when it comes to battling churn, it pays to have an ally by your side. For any business that offers software-based solutions, one critical partner is your software licensing solution. Your software licensing platform can help you identify the problems leading to attrition and create solutions to stop customers from disappearing.
Here are 6 ways software licensing can help you battle churn:
1. Software licensing provides you with a smorgasbord of data. Your software licensing system can offer insight into every single aspect of your offering, so you can avoid pitfalls and steer towards growth. You'll be able to analyze feature usage, figuring out which of the features you’ve built out is actually being used. You can look at and compare different pricing and packaging methods, renewal and upgrade percentages, and more. Have a customer who bought a huge number of licenses and then never activated them? Early interference can help you score a renewal rather than a churning customer. Building a solid customer retention plan is straightforward when you have a clear, data-based grasp of every element of your business.
2. Software licensing isn't just a tool for selling software. It's also a tool for keeping tabs on what your users are doing once they deploy your solution. Software licensing platforms enable in-depth post-purchase mapping, so you can identify areas where your customers are hitting roadblocks. For example, your mapping might reveal that customers are spending a lot of time setting up your program. You know that if your customers experience friction, they'll start exploring competitors who might be easier to use. Once your eyes are open to a particular issue, you can find a solution to improve your user experience.
3. With effective software licensing, you can identify customers who are at particularly high-risk of churn. Indicators include customers who display low usage rates, have high numbers of customer service tickets, have failed payments, or begin downloading mass amounts of their data from your platform. These symptoms are like a big flashing red light. They show you that all is not well, and your customer is likely heading towards the exit. However, all is not lost. You’ve identified an unsatisfied customer. Now, you can show off your customer service skills and get your client back on board.
4. To prevent dissatisfaction and churn, you need to focus on solving customer problems quickly and efficiently. Having an easy-to-use software licensing interface lets your internal teams solve customer problems as soon as they come up. Tools and capabilities like back-office integration, intuitive platform interfaces, easy-access license generation, and instant activation are all critical as your whole team works to ensure a strong and positive customer experience.
5. Another essential feature of robust software licensing platforms is the ability to create automated responses to churn predictive behavior at scale. Through software back-office integration, you can trigger a series of interventions tailored for different churn-predictive customer indicators. For example, suppose a customer is not using one of your most valuable features. In that case, you could automate an email that includes a short instructional video detailing the benefits of said feature. This helps ensure your users are getting the full value of the service you offer so that you can create a deeper customer relationship.
6. Great customer service is essential. However, a big part of customer service is making sure your customers don’t need to reach out to you in the first place. That's why a software licensing solution's self-service capabilities are critical. Self-service software licensing empowers customers to take action on their own schedules, with easy do-it-yourself renewals, upgrades, seat extensions, and more. You'll retain more customers when you show them that the solutions they're after are available whenever they need them.
Don't Fight the Churn Battle Alone
It’s clear that providing a better customer experience is a great way to increase retention, lower churn, and grow revenue. In fact, according to a study by Bain & Co, a 5% increase in customer retention can increase a company’s profitability by as much as 75%.
But to do so, you first need to fully understand your customers, or you risk failing to keep them satisfied, and ultimately, failing to keep them as customers.
The challenge of customer churn is a formidable obstacle, but you don’t need to face it alone. When you include your software licensing solution in the battle, you'll get an ally who provides access to rich data analytics, identifies areas of friction, and provides you with a comprehensive toolbox that’ll help you implement meaningful changes.
When you use software licensing to face the issue of customer churn, you'll finally see the growth you've been aiming for all along.
Check out our infographic to increase your software licensing revenue by focusing on customer experience.