Customer Success 101: Improving the Health of Your SaaS

Customer Success 101: Improving the Health of Your SaaS

If you can’t help your customers become successful, your SaaS won’t become successful.

That’s why Customer Success Management (CSM) is one of the greatest tasks faced by every SaaS owner. So, what’s the definition of “customer success” as a process?

It’s reducing customer churn by developing strategies designed to keep your users happy. It involves determining problematic stages in your SaaS businesses and then implementing steps to carefully guide users towards getting the value your product truly offers.

A SaaS marketing funnel is both a subtle, and a complex, machine full of pitfalls, tricky user experience conundrums and other problems that hide just below the surface.

Software as a Service is, by definition, a subscription-based business. You need happy customers to come back each month and pay you a dollar for using it. If they’re not happy, they’re not coming back.
It’s a “no money, no honey” game. And that’s where customer success comes in. Read on for Customer Success 101 where we tear down all the main troubles faced by SaaS owners and how to fix them.
By the end of this read, you’ll have some solid tools to get your SaaS in healthier shape.

Common troubles faced by SaaS products

1. High churn rate

Churn is expressed as a percentage and represents the rate at which customers cancel their recurring subscriptions. It’s arguably the most important metric in your entire business for one simple reason – a high churn rate means your company is not growing.

The equation looks like this:

# of customers cancelled within a given time frame ÷ # of customers remaining

But how high is too high? Well, Pacific Crest published a survey of private SaaS companies in 2012 which determined what they think is an acceptable percentage rate of churn. Around 70% of companies had a churn rate of less than 10%, around 75% of which had customer churn whittled down to less than 5%.

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Consequently, it’s safe to say that between 5% and 7% is acceptable. If yours is too high, you need to take action.

A) Look at your onboarding process
What’s the average timeframe before somebody cancels a subscription to your service? If it’s in the early stages, it’s likely your onboarding need some work. We’ll look more at onboarding later on in the article.

B) Analyze customer engagement data for early warning signs
Customer engagement can be a key metric in determining which customers are likely to cancel. By tracking and measuring it, you can spot a potentially dissatisfied user early, reach out to them via email or other communications, and offer help.

Lack of user engagement

Credit: Natalie Dee

C) Do your “cohort analysis”
Okay, this is a big subject, but essentially, it involves segmenting your cancellations and analyzing them from different perspectives to gain actionable insights. If you chase down and speak with your cancelled users, you can get to the bottom of the problem. Here’s a great article on the subject written by Jason Cohen.

2. Low Life Time Value

The Life Time Value (LTV) is the total amount of income your average customer pays you for the entirety of their signup period. Naturally, this metric is directly related to churn rate.

If the average customer pays you $10/month and your monthly churn is 3%:

Life time value = $10 * (1/0.03) = $333.33

In this excellent article written by venture capitalist, David Skok, he points out that your mission to create a healthy SaaS business means striving for an LTV that is three times the CAC. Skok states that:

Life Time Value > Cost of Acquisition. (It appears that LTV should be about 3 x CAC for a viable SaaS or other form of recurring revenue model. Most public companies, like Salesforce.com, ConstantContact, etc., have multiples that are more like 5 x CAC.)CAC should be recovered in < 12 months (for subscription businesses)

If your LTV is lower than this, it’s time to tighten things up.

A) Preemptively answer common questions
Start tracking the most commonly asked questions and problems faced by your customers. If you preemptively answer these via email or with useful annotations using myTips, you can nip problems in the bud. Oh, and make a habit of updating your FAQ regularly, too.

B) Make customer service easy
According to one study published by Harris Interactive, 56% of customers will switch brands if a competitor offers more ways to connect. That means offering, LiveChat, a free follow-up call for newly signed-up users, a contact form, email address, phone number and even social media customer care. Make it as easy as possible for people to get in touch.

C) Incorporate customer feedback at every opportunity
Use services such as Survey Monkey or Survey.io to gather and then act on customer feedback. If you allow your users to feel like they’ve taken an active part in improving the product they’re much more likely to stick around. Check out this example from Start-Up Marketing to get some ideas.

customer support

3. Low activation (actual usage of the service)

The Activation Rate measures how many of your visitors or prospects move on to become active users. A low Activation Rate is the ultimate sign that your onboarding needs work. Because afterall, no one will spread the news of your SaaS when they don’t understand how to get any value from it.

When a customer signs up, they won’t reach that “Aha!” moment – that moment when they really see the what you can do for them – without any help. This is where onboarding comes in.

A) Use myTips to apply code-free annotated tutorials directly on your site
Modern SaaS products often require intricate interfaces. With myTips, you can create simple and intuitive annotations to carefully guide your customers to the moment where they get a quantifiable benefit from using your service.

guided tutorials

Regardless of what your SaaS helps customers acheive – money saved, a scheduled appointment with one of their clients or whatever, a simple myTips tutorial can help them obtain that goal and learn exactly how your UI works in the process.

B) Use email onboarding with tools like Mixpanel
Email onboarding is a proven method of getting your new customers using your service. Check out this article from ConversionXL for an excellent guide on how to successfully engage your audience using this method, and increase activations.

C) Install LiveChat
This tip fits neatly into the statistics published by Harrison Interactive (mentioned above). Also, when you consider that some companies increased conversions by over 200% with LiveChat alone, it’s easy to seethe value of the service.

Conclusion

A happy customer is a profitable customer. And that means profitable both for themselves as well as your business. There are many skills for any SaaS owner to learn, but if there’s one that absolutely must be mastered at all costs, it’s customer success.

Commit to nurturing your skill on a continual basis and you can watch your customer churn rate reduce significantly. Sure, the simplicity and intuitive nature of myTips makes it every Customer Success manager’s dream come true. But, you should also keep up to date with the resources mentioned in this article, such as Lincoln Murphy, to deepen your understanding further.

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