When Jimit and Tejas started SocialPilot in 2014 from Ahmedabad, little idea did they have about the difference between revenue and MRR or what churn means. They have come a long way to get to $1M in Annual Recurring Revenue in the next six years.
Tejas remembers ‘When we hit $10K revenue getting global customers sitting in Ahmedabad we were over the moon. But when we met Team Upekkha in mid 2017, we realized our journey is just beginning. With the help of their Value SaaS philosophy, nineteen months after joining Upekkha’s cohort we reached $1M in annual recurring revenue.’
In 2020, despite the pandemic, SocialPilot reached its $2 million in Annual Recurring Revenue. Tejas attributes their growth to multiple factors that include managing churn, pricing choice, etc.
Churn Dollar Or Logo
After learning that managing customer churn is a SaaS imperative, Tejas and Jimit wanted to measure it so it could be managed. They instrumented and built reports for revenue churn, logo churn, and even subscription or plan-based churn.
Briefly, revenue churn is the loss in revenue, and logo churn is the number of customers that stop using your product. SocialPilot used Chargebee (free for Upekkha startups!) and ProfitWell that provided them with churn insights.
Tejas says, ‘If you have more than ten paying customers, churn reduction should be a priority, and one of the founders should own churn as a KPI. In SMB churn can happen due to factors that are out of your control - the customer shutting their business down. Focus on factors, which you control - like bad usability, causing churn’.
Retention of customers by managing churn had a compounding impact on SocialPilot’s recurring revenue.
Can You Reduce Churn Before Your Customers Sign Up?
Yes. But how do you do it?
Who are you building the product for? And, narrow your ICP audience and talk to them frequently. If you do not attract customers who do not fall in your ICP category, you reduce your churn before the wrong customers sign up.
SocialPilot started with a broad segment of ICPs and narrowed it down. The ICP choice changed several times. They spoke to dozens of their customers for 20 to 30 minutes monthly.
Regular interactions helped them understand the customer’s pain points, their demands, and what delights them.
After trimming down the Ideal Customer Profile (ICP), these regular customer interactions helped them create a homogenous customer segment to prioritize features that solve big high value challenges for that segment.
Tejas emphasizes, ‘SaaS founders should start with a homogenous customer segment before they write their first line of code. If their ARR is less than $100K, they should talk to customers daily’.
He continues, ‘We focused on one or two of our ICPs, and progress did not happen overnight. It took 6 to 8 months after joining Upekkha to experiment and identify the right ICP whom we should solve the problems for’.
Getting an idea of what problems we are solving and who we are solving for will help SaaS founders deliver higher value with their products and retain customers.
The Churn and Pricing Relationship
Many SaaS founders think that their product should be price-competitive to get global customers. But Tejas says many price-sensitive customers also churn fast.
He remembers, “We wanted to be 50% cheaper than our closest competitor. When Prasanna from Upekkha forced us to double the price in our first sprint, we were worried about what would happen. But we doubled the price and witnessed our revenue growth rate double. While we do not want to be exorbitantly priced, price also serves as a marker for quality to customers’.
If your customer chooses you for your pricing advantage, they will switch their product when they find a better deal. Removing highly price-sensitive customers from your ICP will help you reduce your churn.
SocialPilot started prioritizing customers who are not worried about the price, but care about their problems being solved. Customers who look for value in the product do not mind paying you more if your product suits their needs and makes their lives easier.
Building A Stellar Product
You can’t control your customer churn if your product doesn’t work well enough.
Building a great product for your customers is instrumental. What does Tejas say about a stellar product?
Tejas focuses on three things: Stability, Usability, and Validity of features and how fast you are developing them.
Your product is stable if your customers come across zero errors and bugs. SocialPilot’s co-founder Jimit and his team focused on minimizing bugs for the first six months.
Usability is not just how your product looks and feels for users, but how naturally the sequence of actions flow to accomplish a task. Tejas says, ‘The number of steps can be more, but the natural flow should be smooth and intuitive.’
Slow and steady progress in building a great product helped SocialPilot reduce its customer churn rate.
Observe & Analyze What Your Customers Are Doing
SocialPilot used Full Story, a behavioral analytics platform for SaaS products, to understand its usability by analyzing customer behavior while using SocialPilot.
Full Story provided them with insightful product analytics: How many users click the wrong things, how many users get frustrated, and upset when they can’t do what they want in the product.
Tejas says, ‘Poor Usability is death by a thousand cuts.’ Many small frustrating things across the product can impact its usability. Tools like Full Story will help SaaS founders study their users’ product experience and make improvements to reduce churn.
Tejas recommends tools like Full Story, Hotjar, or Crazyegg to study product experience and usability.
Analyzing usability will help you understand how users cant achieve what they want to in the product instead of what you think is a better feature in your product.
Track Your Consumption Metrics
Are your users using your product after paying for it? If not they drop out and churn. If your pricing strategy is to be extremely competitive, customers signing up for a paltry fee would discontinue using your product.
Monitoring product consumption teaches you which features customers use & their relative importance.
Jimit says, ‘We were not sure about which feature we should monitor. We focused on our core feature which is publishing. We measure how many people used SocialPilot to publish social media posts’.
SocialPilot used Mixpanel to gain product analytics insights. One of their team members used Google Data Studio to analyze how many people have not used their product in the last 5 days, 7 days, 15 days, 30 days.
Speak to paying customers whose consumption is low to understand their challenges and then offer support. There could be a number of reasons why product consumption is low. Not interested anymore, stuck without a feature, a slow down in their business, etc. It’s important to understand the reason so that you can improve an existing feature or roll out new features.
‘Understanding our customers deeply is the reason why customer success is crucial for us’, says Jimit.
Importance of Customer Success
SocialPilot is popular among its users for its customer success. A quick look at the G2 reviews will tell you how SocialPilot proactively supports customers to be successful using their product.
48% of SocialPilot customers say that the main reason why they decide to continue using the product is their customer success.
‘We care for our customers and we listen to them. They believe we are there to help them and we take all efforts to resolve their challenges immediately, which helps us to upsell our services’, quotes Jimit.
Once customers are happy using your product, you earn their trust. Once they trust you with one of your products, they will trust you with your other products.
Tejas recommends SaaS companies to invest in people and technology to provide in-app chat and walkthroughs, documentation or knowledge base and consistent support to their customers. He also says the support and customer success team should work directly with the founders to reduce customer churn.
‘I would hire for empathy, and communication skills for customer success roles’, says Jimit.
Don’t Stop Talking To Customers
Throughout their journey, it is important to speak to your customers in every stage to ensure they are using your product and making the best value out of it. Constant communication will also help you understand more about your product, customer pain points, and challenges.
Understanding customer sentiment will help you build and improve a product that solves high-value problems for your customers.
It is inevitable for SaaS companies to talk to their customers regularly. Tejas gives the following ideas to build communication with customers on a regular basis.
- Implement NPS: Ask customers who are 30+ days old for feedback every 90 days.
- Implement a feature request form
- Capture churn reason
- Implement cadence to speak with customers regularly
At least one of the founders should be actively involved in listening to the customers and ensure they are heard. They feel happy if you lend them ears.
One of the advantages of having a happy customer is the referral clients you get through word of mouth. Sounds like a no-brainer but it's crucial.
Tejas summarizes SocialPilot’s churn management by offering the following ideas:
- Managing churn is a collective organizational effort. Involve your customer success, support, marketing teams to discuss customer retention strategies
- One of the founders should actively speak to the customers at regular intervals
- Build hypotheses about churn, create action items and monitor results. Keep experimenting
- It cannot be done quickly. Stay focused and it takes a while.