Reducing SaaS Churn with a Better Onboarding Strategy

By Goodnews Nwosu

Every business needs customers to thrive. In other words, customers are the reason you’re still in business. If their satisfaction and success aren’t a top priority, you’re essentially hindering your business growth. When you fail to meet customers' needs, you leave a wide opening for competitors to take over. And that’s where churn comes in.

What is SaaS Churn?

SaaS churn is the rate at which customers cancel their subscriptions or stop using your service over a given period. Churn hinders business growth and affects your financial performance.

Here’s how churn works:

If a customer pays $60/month and cancels after the first month, you miss out on the $660 that they could have paid over the next 11 months, as well as the $720 in recurring annual revenue that they would have generated if they had stayed. Now imagine losing 200 such customers at the same time. That's a total of $144,000 annual loss.

Let’s analyze what your company is doing wrong and how to improve it with great onboarding practices.

Why SaaS Customers Churn

As a SaaS owner or team, your business goal is to keep scaling through product-led growth. However, despite brilliant features, seamless integrations, and generous free trials, you still face high churn rates, which leave you wondering why.

Here are some common reasons for customer churn:

‌Poor customer support: When customers reach out and don’t get helpful, timely support, they feel they're just another revenue stream and not a priority. Customers stay with brands that show they care. If you’re not guiding or attending to your customers when needed, they feel neglected and undervalued.

‌Lack of perceived value: Customers are less likely to leave a product that solves their problems. If customers aren’t getting the value they perceive your product would give them, they move on to look for a better solution.

‌Pricing issues: Customers leave when your pricing exceeds your value or becomes too expensive for them. Continuous increases in prices without increasing value push customers away. This is not to say you should underprice your services, but you should make it worth the price.

‌Ignoring feedback: Ignoring your customers’ complaints is a quick way to lose them. Adjusting your service integrations based on your users' feedback will help improve the user experience. Remember, your customers are the market, your product needs to match their needs and provide solutions.

‌Misaligned product-market fit: Advertising your product to the wrong audience leaves room for churn. Customers will discontinue usage if your product doesn’t solve their problems, and your product can only be useful to a user who needs it.

‌Too many or too few features: Having so many features that customers do not understand can overwhelm them. Likewise, if you provide fewer features than they need, or not enough to solve the problem that drew them to your service in the first place, they end up leaving.

‌Weak onboarding: Users need guidance to understand your product and how it works. When your onboarding does not adequately teach or guide your customers on how to use your product, they get discouraged and stop usage.

Business Impact of SaaS Churn

The effect of churn goes beyond lost customers; it results in huge business setbacks.

‌Lost revenue: Loss of customers = loss of money. It is undeniable that a high churn rate directly affects your company's revenue. When a user cancels their subscription or stops using your product, you don’t just lose their one-time payment; you lose all the future monthly or annual revenue they would’ve generated.

‌Wasted CAC (Customer Acquisition Cost): According to a report by Antavo, the cost of acquiring a new customer is 6-7× higher than it takes to retain an existing customer. And when the customer leaves, your company loses all the money spent on winning that customer, as well as the money you’d spend on getting a new customer.

‌ Missed upsell opportunities: Churn reduces your company’s growth rate. Satisfied customers are more likely to upgrade their plans, purchase add-ons, and recommend your product to others. A satisfied customer has the potential to bring more customers by leaving positive feedback and personally recommending your products. This, in turn, expands both revenue and reach.

‌Reduced Customer Lifetime Value (CLV): You lose all the potential earnings to be made from this customer when they leave. 

For instance, if your average customer stays for 12 months and subscribes to $50 monthly, the customer lifetime is valued at $600. And now the customer only stays for 4 months on average, the new value obtained from this customer's lifetime is $200. This means you've incurred a 66.7% loss in lifetime value per churned customer.

‌Damaged investor confidence: High churn makes investments look too risky. It tells investors that your product might not deliver enough value, and revenue is not stable and shrinking over time. Investors aren't just interested in how many customers you're gaining but also how many you can retain. Because if users are signing up and leaving, it shows that investing in your company is a poor business decision.

Common Onboarding Mistakes SaaS Companies Make

Your brand will keep experiencing customer churn and revenue loss  if you keep repeating these onboarding mistakes:

‌ Overwhelming users on day one: Designing your onboarding in a complicated way, as if you’re training a new intern instead of a clear walkthrough that introduces your product and convinces users of the value it brings, can make customer retention hard. 

Users are often discouraged by overly long tutorials and complex settings during onboarding.

‌Focusing on features, not outcomes: When your onboarding flow just showcases features, without really pointing to the results that can be achieved, users lose interest. Customers want and care about results. If your onboarding is just a tour of features, it doesn’t help the user understand how your product will solve their problem.  

‌Skipping user research: You can’t build a solid onboarding experience if you don’t know who you’re building for. Many SaaS companies go right into designing flows and writing tooltips without talking to actual users. When you don’t understand your users' needs, you'll be unable to provide the actual support they need. Then, onboarding becomes frustrating rather than helpful.

‌No follow-ups: Abandoning your customers right after they sign up is bad for your company’s growth.You need to follow up with your customers. If you do not set a system that reminds and motivates customers to be active, they are likely to forget they signed up for a service, especially when they do not use it daily or have other options.

Generic onboarding: You get it all wrong when you generalize your onboarding system. Different customers have various purposes for the same product. Welcoming them with features they do not need only sends the message that your product is not the solution they’re searching for.

Confusing instructions: Using complicated terms or poorly explained steps can cause users to struggle and abandon the process. Not all customers are tech-savvy, and hence, may not relate to technical language. When your instructions are not clear, users get exhausted and may exit the program.

How to Reduce SaaS Churn with a Better Onboarding Strategy

Onboarding is a necessary step in welcoming customers and introducing your products to them. Your onboarding strategy can make or break your customer retention progress. But if you employ the right steps, you'll be able to deliver great customer experiences and reduce SaaS churn.

‌ Make the process simple: Simplifying the onboarding process is a great way to hook in your customers. Start by motivating them to take action. Do this by highlighting how your product aligns with their goals. Introduce your product as the solution to their problem. 

When customers have a clear view of what your product can do for them or their business, they get motivated to proceed further.

‌Send welcome emails: The email welcome series sets the tone for your customer relationship by making users feel seen and supported from the moment they sign up.

Use these emails to introduce your brand, build trust, and guide users to complete their setup or explore key features. You can also offer helpful resources like tutorials or links to your support team to keep them connected and encouraged to stay.

‌Step-by-step guidance: Use short tooltips, progress bars, checklists, or mini-tutorials to walk them through each step, explaining how to navigate through the features.

This will help users stay focused on one task at a time, making it easier for them to get confident and see progress faster.

‌ Personalize the experience: Customers use your product for different purposes; some might be looking for one key feature, while others need a broader solution. 

You can customize the features to serve each customer by tracking user behaviour or asking questions during signup. This helps them understand that you have their interest at heart and the product is exactly made for them.

‌Continuous Customer Support: Customer support is very important in achieving a successful customer relationship. Your support team should always be ready to walk them through all they need to get set up until they fully understand how to use your product.

Your team should always be available to assist users, answer questions, and troubleshoot any issues they may encounter.

‌Clear communication: Make your instructions simple and clear. Using complex or heavy terms to make tutorials will leave the customers frustrated.

 Some users are not technical experts and may not understand the complex tech terms. So, ensure your instructions are written in simple language and easy to comprehend. 

‌Pay attention to user behavior: While you cannot actually please or get everyone to stay, pay attention to why and when they leave. Is it immediately after signing up? Are they leaving before finishing the setup? Or when the free trial ends? Is there a complex feature that confuses them? Or something else?

 Track their behavioral patterns and use that information to fix the problem, remove what's unnecessary, and test more effective onboarding flows.

Conclusion

While churn is never a desirable experience, it is also a key metric for measuring your overall business health and improving your services, as well as deepening customer engagement. Analyzing your company’s churn rate and refining your onboarding strategy will enhance customer retention and significantly reduce churn.

 You can start by auditing your current onboarding flow, using your churn data to identify gaps, filling them, and focusing on what users need to succeed.  Make your onboarding clear, supportive, and personalized, and you’ll turn signups into long-term, loyal users.