Outsourced Churn Management: How SaaS Founders Can Combat Churn

Outsourced churn management is often a game-changer for SaaS founders feeling the sting of losing users and the frustration that comes with it.

As a SaaS founder, when you work hard to get your user acquisition channels firing on all cylinders, it’s disheartening to see customers churn.

While some churn is inevitable, SaaS teams can avoid much of it by fundamentally re-examining their cancellation flows and exploring new ways of preventing customers from pressing that dreaded red button, parting ways with your SaaS solution.

Avoidable customer churn is costing U.S. businesses $136 billion a year.

Fortunately, it’s a solvable problem.

Rather than relying on your own systems for cancellation flows, you can outsource churn management by integrating tried-and-tested tools into your flows that will help set your churn prevention strategies on autopilot.

The best churn management solutions equip SaaS founders with the tools they need to automate and standardize their churn prevention practices.

• Are you struggling with high customer churn rates in your SaaS business?
• Do you find it challenging to identify and address the underlying causes of customer departures?
• Are you unsure about when and how to effectively outsource churn management?
• Is balancing churn management with other business operations overwhelming for you?

We’ll aim to cover all of the above questions. This article is for:

With years of experience in the SaaS sector and a deep understanding of customer lifecycle management, I offer a unique perspective on churn management.

My expertise is grounded in working with various SaaS companies to develop and implement successful churn reduction strategies.

This article is for:

• SaaS founders and CEOs looking for strategic ways to reduce churn.
• Customer success managers seeking to enhance customer retention.
• Operations managers in SaaS companies needing efficient churn management practices.

Understanding SaaS Churn Management

Only 1 out of 26 unhappy customers complain; the rest simply churn.

That's why SaaS churn management is so important.

When you do not receive any feedback from your churning customers, you’re allowing them to leave without providing you with useful information that you can carry forward into product development and customer support practices.

A high churn rate can indicate shortcomings in everything from your customer support setup to your overall value proposition.

If you can get a grip on SaaS churn management, this will enable you to collect a range of data on why users churn and enable you to draw meaningful conclusions.

The more data you can collect, the better.

This is why many SaaS teams turn to outsourced churn management.

What is the real cost of SaaS churn?

Churn is not just a numerical metric; it represents lost revenue and potential future growth opportunities.

High churn rates can derail a SaaS company's growth plans, making it challenging to achieve profitability and attract investors.

If you’re burning through customers quickly, the business will eventually run out of steam.

The cost of acquiring new customers often exceeds the cost of retaining existing ones.

Reducing churn is a critical aspect of SaaS business strategy and SaaS founders are prepared to invest significantly in churn reduction and prevention tools.

Churn reduction doesn’t have to break the bank. Fortunately, there are many affordable (and in some cases, free) solutions on the market for bootstrapped SaaS founders to try.

5 Common Causes of SaaS Churn

Before delving into outsourced churn management, it's essential to understand the common causes of churn in the SaaS industry. When I speak to SaaS founders about their businesses, I often ask about the most common causes of churn.

If your net revenue churn is above 2% each month, it indicates a fault within the company that you must fix.

More than two-thirds of SaaS companies have an annual churn rate of 5% or more in a given year.

Here are five common causes of SaaS churn that continuously crop up:

1 - Poor Onboarding

If customers don't receive proper onboarding and training, they may struggle to use the SaaS solution effectively, leading to frustration and eventual cancellation.

Kolsky found that customer churn can be reduced by 67% if companies succeed in solving customer issues during the first-time interaction and managing customer expectations.

2 - Lack of Value

Customers must perceive value in the SaaS product they are paying for. If they don't see a clear benefit or if their needs change, they may decide to cancel.

An effective onboarding process will demonstrate the value of a SaaS solution and show new customers how they can utilize the product for specific use cases.

3 - Customer Support Issues

Unresolved support tickets, slow response times, or unsatisfactory customer service experiences can drive customers away.

Zendesk found that an average of 66% of consumers had terminated relationships with companies due to poor customer service.

4 - Competitive Offerings

The SaaS market is highly competitive, and customers are constantly evaluating alternatives. If a competitor offers a better solution or price, customers may switch.

This is why it’s key to offer exceptional onboarding, ensuring that your new customers know how to unlock maximum value from your SaaS solution and leverage it to solve their problems.

5 - Billing Problems

Billing errors, confusing pricing structures, or unexpected price increases can lead to frustration and churn.

What is Outsourced Churn Management?

Outsourced churn management involves partnering with a third-party service provider or using specialized tools and expertise to proactively identify and address churn risks.

Raaft is an example of a SaaS churn reduction tool that enables you to build robust cancellation flows.

Outsourced churn management is a strategic approach that allows SaaS founders to focus on core product development and customer acquisition while experts handle churn reduction.

When I speak to SaaS founders, I often struggle to articulate ways to reduce churn.

They recognize that user churn is a problem in their business and want to explore ways to reduce churn, but do not know where to begin.

In some cases, the SaaS founders will look through a range of churn reduction tools on the market and get stuck in “analysis paralysis”; not knowing which to choose.

Key Benefits of Outsourced Churn Management

1 - Expertise and Experience

Churn management specialists bring extensive experience and knowledge to the table.

They understand the nuances of customer behavior and can implement proven strategies to reduce churn effectively.

This will often include recommending specific churn management and reduction tools for SaaS teams to experiment with.

2 - Data-Driven Insights

Outsourced providers often have access to advanced analytics and customer behavior data, enabling them to identify patterns and early warning signs of potential churn.

For instance, if you are using a churn management and reduction tool, this may come with built-in insights that you can leverage to inform various strategies, such as your cancellation workflows.

3 - Scalability

As your SaaS business grows, managing churn becomes more complex. Outsourced providers can scale their efforts to meet your evolving needs without the need for extensive in-house resources.

4 - Focus On Core Competencies

By outsourcing churn management, SaaS founders can concentrate on product development, marketing, and sales, knowing that experts are working to retain existing customers.

Churn can often feel like a difficult puzzle to solve, especially when you do not understand the underlying reasons behind subscription cancellations.

Fortunately, with access to the right set of tools, SaaS teams can begin to collect data and build a picture of why users choose to cancel their plans and stop using their SaaS products.

Implementing Outsourced Churn Management: Getting Started

1 - Assess Your Churn Situation

Before outsourcing churn management, assess your current churn rates, the reasons behind it, and the impact on your business. Understanding the scope of the problem is essential.

Sure, you’re not going to have all of the answers at this stage, but it’s good to start thinking about the right questions to ask yourself as you reflect on churn.

McKinsey found that 92% of SaaS companies that grew less than 20% annually failed. With this in mind, you should implement customer retention programs from the outset to survive.

2 - Identify Suitable Providers

Research and evaluate potential churn management tools and solutions. Look for companies with a track record of success in the SaaS industry and positive client testimonials.

There is no shortage of comparison websites that offer extensive user review data on the best churn prevention tools on the market.

3 - Define Your Goals

Clearly define your churn reduction goals and communicate them to the outsourced provider. This ensures alignment and a shared understanding of expectations.

If you have a specific churn rate target that you are aiming for, you can fine-tune the churn reduction tools in your technology stack to ensure you hit this target.

4 Types of Outsourced Churn Management Solutions & Services

1 - Churn Prediction and Prevention

Some tools and solutions specialize in using advanced analytics and machine learning to predict and prevent churn. They identify at-risk customers and implement targeted retention strategies.

Raaft is an example of a tool that helps SaaS teams prevent churn. The solution enables SaaS companies to develop effective cancellation flows that not only help teams prevent churn but also unlock useful insights into users who are choosing to cancel their subscriptions.

2 - Customer Success Management

Customer success managers work closely with your users to ensure they are getting value from your product. They proactively address issues and provide guidance to increase customer satisfaction and retention.

Customer success management is all about enabling users to fully explore the possibilities and use cases of your SaaS product. A well-designed customer success program can yield a 91% ROI over a three-year period.

3 - Customer Support Outsourcing

Outsourcing customer support can help address one of the common causes of churn. An experienced support team can improve response times and resolution rates.

40% of companies say that outsourcing their customer service has allowed them to focus more on other key business activities.

4 - Integration with Your Team

Outsourced churn management should be seen as an extension of your internal team. Regular communication and collaboration are essential for success. Work together to develop strategies and monitor progress toward churn reduction goals.

Using Churn Management Tools: Measuring Success & ROI

To evaluate the effectiveness of your outsourced churn management efforts, track key metrics, including:

1 - Churn Rate

You should monitor your churn rate over time to see if it decreases as a result of the outsourced efforts.

2 - Customer Lifetime Value (CLTV)

It’s important to calculate the CLTV to ensure that the customers you retain are still providing significant long-term value to your business.

3 - Net Promoter Score (NPS)

Measuring customer satisfaction and loyalty will enable you to gauge the impact of churn management on overall customer sentiment.

4 - ROI Analysis

You should conduct a thorough return on investment (ROI) analysis to determine whether the cost of outsourced churn management is justified by the reduction in churn and the increase in customer retention and revenue.

Outsourcing Churn Management: Challenges & Considerations

Cost Considerations

Outsourcing churn management comes with costs, which can vary depending on the provider and the scope of services. You should consider the potential ROI and budget implications carefully.

Integration Challenges

Integrating outsourced churn management into your existing processes and systems may require time and effort. Ensure that your provider can seamlessly collaborate with your internal teams.

Data Security and Privacy

Sharing customer data with third-party providers raises concerns about data security and privacy. It’s important to ensure that your provider adheres to strict data protection standards and regulations.

Vendor Lock-In

Be cautious of becoming too dependent on an outsourced provider. You should consider exit strategies and contingency plans in case you need to bring churn management back in-house or switch providers.

Outsourcing Churn Prevention & Reduction: Closing Thoughts

The average SaaS churn rate for companies that offer month-to-month contracts is 14%, while SaaS companies that offer 1 to 1.5-year contracts are 15%.

Outsourcing churn management and leveraging a range of tools can enable SaaS companies to tighten up their cancellation flows and maintain a tighter grip on their users.

If users are churning faster than you would like and it’s threatening the sustainability of your business, a platform like Raaft can enable you to build robust cancellation flows that automatically generate unique offers based on the reason why a user is choosing to cancel.

You can get started with Raaft for free today.

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How to build a SaaS cancellation flow for free (+ 2 examples)How to conduct Customer Churn Analysis for SaaS companiesChurn Prevention: 10 Strategies to Reduce SaaS Churn