How to Reduce Churn SaaS: 15 Actionable Strategies for SMB Success
Dmytro Chervonyi
CMO at Forecastio
Sep 4, 2024
15 Min
In the wild world of Software as a Service (SaaS) for small to medium-sized businesses (SMBs), growth is not just a goal, it’s lifeblood. Yet many SaaS companies navigating these rough seas are running into a major obstacle: customer churn, measured by churn rate. With average monthly churn rates for SMB SaaS companies between 3-7%, what was once a hurdle is now a death sentence for many companies.
But don’t worry, brave SaaS leader! This guide will give you 15 proven strategies to reduce churn and turn it into growth. By the end of this guide, you’ll have a whole arsenal of tactics to increase your Net Revenue Retention Rate (NRR) and take your SaaS business to the next level.
Table of contents:
The SMB SaaS churn problem
Before we get into solutions, let’s break down the unique challenges that make churn such a big problem in the SMB SaaS world:
Business volatility: SMBs have shorter lifespans and changing needs, making them unpredictable customers. The fast pace of small businesses means they may outgrow your solution or change their strategy and churn.
Budget sensitivity: Every dollar counts for small businesses, so when budgets tighten they cut expenses fast—including software subscriptions. In times of economic uncertainty, your SaaS offering might be one of the first to get cut.
Rapid decision-making: The agility that makes SMBs attractive customers also means they can pivot away from your service as fast as they adopt it. This double-edged sword requires constant attention and proactive customer success.
Feature overload: Many SMBs struggle to fully utilize complex SaaS offerings and feel they don’t get value. If your customers aren’t using your product to its full potential they’ll churn when budgets get tight.
Competitive landscape: Low barriers to entry in SaaS means new competitors are popping up all the time, tempting your customers with new features or lower prices. You need to stay ahead of the curve and continuously show your unique value proposition.
Limited resources: SMBs often don’t have dedicated IT departments or software specialists, so integrating and using SaaS solutions is tough for them. This can lead to underutilization and ultimately churn.
Scalability concerns: As SMBs grow they may worry if your SaaS solution can scale with them. If they feel limitations in your offering they may pre-emptively switch to a competitor they think can better support their future needs.
Knowing your customer churn rate, which is the percentage of customers that leave over a certain time period, is key to tackling these challenges.
Knowing these is important because it informs the strategies we’ll cover to reduce churn and increase your NRR. By addressing these challenges you’ll be better equipped to keep your SMB customers and grow long term.
The cost of customer churn
Before we get into the churn-busting strategies, it’s important to understand the full cost of churn to your SaaS business. Churn isn’t just lost revenue—it’s a multi-faceted problem that can kill your business.
In addition to customer churn, consider revenue churn which is the total revenue lost due to customer cancellations or downgrades.
Direct revenue loss
The most immediate and obvious impact of customers churn is the loss of recurring revenue. When a customer cancels their subscription you lose not only their current monthly or annual fee but also all future revenue from that account, which contributes to revenue churn. This can create big holes in your revenue forecast and make it hard to plan for growth.
Increased customer acquisition costs (CAC)
As churned customers need to be replaced to grow you may find your company is spending more on customer acquisition. The cost of acquiring a new customer is typically much higher than retaining an existing one, sometimes by a factor of 5-25 times. This increased CAC will eat into your margins and slow down your growth rate.
Negative impact on valuation
For SaaS companies valuation is often tied to recurring revenue and growth rates. A high customer churn rate can damage these metrics and lower valuations. This can affect your ability to raise capital, attract investors, or even position your company for an exit.
Reputation and word-of-mouth marketing
In the B2B world word travels fast. Churned customers, especially if they left due to dissatisfaction, can become negative brand ambassadors. This can damage your reputation in the market and make it harder to acquire new customers or retain existing ones.
Team morale and productivity
High churn rates can wear down your team’s morale, especially for customer success and sales teams. Losing customers constantly can lead to frustration, decreased motivation, and even increased employee turnover. Which in turn can make customer churn worse as institutional knowledge walks out the door.
Opportunity cost
Every churned customer is a lost opportunity for upsells, cross-sells, and positive referrals. The long-term value of a happy, loyal customer goes far beyond their subscription fee, including them becoming an advocate for your brand.
Data loss and market insights
Churned customers take with them valuable data and insights that could have been used to improve your product and services. This loss of market intelligence will slow down your product development and make it harder to stay competitive.
Now that we know the true cost of churn it’s clear reducing churn isn’t just about maintaining revenue it’s about building a sustainable growing business that can thrive in the SaaS landscape. With that in mind let’s get into our first 5 strategies to combat churn and boost your NRR.
Strategies 1-5: Laying the foundation for churn reduction
1. Tiered customer success approach
Not all customers are created equal, especially in the SMB SaaS space. A tiered customer success model allows you to allocate your resources more effectively, so your most valuable customers get the attention they need and your entire customer base gets some level of support.
Action steps:
Segment your customers into tiers (e.g. high value, growth potential, standard)
Assign dedicated customer success managers or a customer success team to high-value accounts
Create automated touchpoints for lower-tier customers so they still get some attention
Develop tiered onboarding and training programs
Schedule regular check-ins and quarterly business reviews for top-tier customers
Pro tip: Use customer segmentation tools to identify your most valuable accounts and those with the most growth potential. This data-driven approach will ensure you’re focusing your efforts where it will have the most impact.
2. Robust onboarding process
A strong start sets the tone for the entire customer journey and relationship. Invest in a comprehensive onboarding process so customers can quickly see value from your product. This is especially important for SMBs who don’t have the resources to figure out complex software on their own.
Action Steps:
Create a step-by-step onboarding checklist for new customers
Offer personalized onboarding sessions for high-value accounts
Develop video tutorials and interactive guides for self-serve onboarding
Set up automated email sequences to guide users through key features
Celebrate milestones to encourage progress and engagement
Offer a “quick start” option for users who want to get up and running fast
Provide templates or pre-configured settings so users can see value immediately
Pro tip: Track onboarding completion rates and correlate with long-term retention to refine your process over time. Use customer platform analytics to see which onboarding steps have the highest correlation with customer retention.
3. Early warning system
Identify at-risk customers before they churn by monitoring key usage metrics and engagement patterns. This proactive approach allows you to intervene early and fix issues before they become cancellation.
Action steps:
Define what “healthy” usage looks like for your product
Set up alerts for sudden drops in usage or engagement
Create a playbook for reaching out to at-risk customers
Use predictive analytics to forecast churn
Monitor customer support interactions for signs of frustration or dissatisfaction
Track feature adoption rates to see which parts of your product are underutilized
Create a customer health score system
Pro tip: Use predictive analytics to identify churn risks early and take action. The customer platform can help you create a churn risk score based on multiple factors so your team can prioritize their outreach.
4. Voice of the customer
Collect and act on customer feedback regularly so your product evolves with their needs and meets customer expectations. This is especially important in the SMB space where needs can change fast and customers expect their software providers to keep up.
Action steps:
Run quarterly Net Promoter Score (NPS) surveys
Set up in-app feedback mechanisms for real-time feedback
Create a customer advisory board for your high-value clients
Have a clear process for prioritizing and implementing customer feedback
Run user testing sessions to gather qualitative feedback
Analyze sentiment on support tickets and chat logs
Close the feedback loop by telling customers how their input has influenced the product roadmap
Pro tip: Use sentiment analysis tools to measure customer satisfaction from support interactions and social media mentions. Integrate this data with your CRM to get a full view of customer health and churn risk.
5. Flexible pricing and packaging
Adjust your pricing to fit the changing needs and budgets of SMBs. Flexibility can be a key differentiator when customers are in an economic downturn or going through rapid change.
Action steps:
Introduce usage-based pricing
Offer temporary downgrades instead of cancellations during tough times
Create bundles that provide more value for a slight discount
Offer annual billing with incentives for longer terms
Create a “pause” feature for seasonal businesses
Offer a loyalty program with increasing discounts or features for long-term customers
Create a “build your own plan” for customers with unique needs
Pro tip: Use Forecastio’s “What-if” scenario builder to model the impact of different pricing strategies on your revenue and churn rates. This will help you make data-driven decisions on pricing changes and predict the outcome of customer retention.
Strategies 6-10: Product value and customer experience
6. Continuous product innovation
Keep your product fresh and relevant by adding new features and improvements based on customer needs and market trends. This is especially important in the fast-paced SMB space where needs change fast and competitors are always on your heels.
Action steps:
Set up a regular release cycle for new features and updates
Prioritize your product roadmap based on customer feedback and market research
Create a beta program for early adopters to test new features
Communicate product updates to show ongoing value
A/B test new features before full rollout
Encourage innovation within your development team
Monitor competitors to stay ahead
Pro tip: Use feature adoption rates as a key metric to measure the success of new features and inform future development. Integrate this data with CRM to see feature adoption vs customer retention and lifetime value.
7. Proactive customer support
Don’t wait for customers to come to you with problems; proactively support your customers by reaching out and solving issues before they become deal breakers. This is especially important for SMBs who don’t have dedicated IT resources.
Action steps:
Offer 24/7 support with chatbots for instant responses
Create a knowledge base and community forum for self-service support
Prioritize support for high-value customers
Use AI to predict common issues and provide preventative solutions
Monitor customer health to identify potential issues early
Have regular “check-in” calls or emails to ensure customer happiness
Offer multi-channel support (phone, email, chat, social media)
Pro tip: Track customer satisfaction scores (CSAT) for support interactions and use this data to continuously improve your support processes. Integrate these scores with the customer platform to see the correlation between support satisfaction and churn risk.
8. Product ecosystem
Create additional products or integrations that increase the overall value of your ecosystem, making it harder for customers to leave. This strategy can be particularly effective for SMBs who often use multiple tools to run their businesses.
Create a marketplace for third-party add-ons or extensions
Develop a developer program to encourage external innovation on your platform
Synchronize data between your products and integrations
Pro tip: Use customer usage data to see which integrations are most popular and focus on those.
9. Customer education program
Help your customers become power users through ongoing education and training. This is especially important for SMBs who don’t have resources for in-house training.
Action steps:
Create a library of tutorial videos and how-to guides
Host regular webinars on advanced features and use cases
Develop a certification program for experts
Offer personalized training for high-value accounts
Create an online academy with self-paced courses
Offer “office hours” where customers can ask questions directly to your experts
Industry-specific training modules to show your product’s relevance
Pro tip: See the correlation between engagement with educational content and customer retention to refine your program. Use customer behavior analysis to see which educational resources have the most impact on reducing churn.
10. Community around your product
Create a sense of belonging and peer support among your customers to increase their emotional investment and customer loyalty to your product. This is especially important for SMBs who want to network and learn from peers.
Action steps:
Create an online community platform for customers to connect and share tips
Host annual user conferences or regional meetups
Customer spotlight program to showcase success stories
Encourage user-generated content and peer-to-peer support
Rewards program for active community members
Industry-specific subgroups within your community
Involve community members in beta testing and feature prioritization
Pro tip: Track community engagement metrics and see the correlation to churn rates to prove the ROI of your community-building efforts. Use customer segmentation to see your most engaged community members and analyze their impact on overall customer retention.
The multiplier effect of multiple strategies
As we’ve gone through these strategies, remember that the real magic happens when you combine them. Each strategy can have an impact on its own, but when you put multiple together you get the real magic.
Here’s an example:
You implement a tiered customer success approach (Strategy 1) and make sure your high value customers get personalized attention.
This gives you more detailed feedback to feed into your Voice of the Customer program (Strategy 4).
The insights inform your product innovation (Strategy 6) and you create new features that address the pain points.
You announce these new features through your customer education program (Strategy 9) and get high adoption rates.
Customers talk about these new features in your online community (Strategy 10) and generate excitement and share best practices.
Your proactive support team (Strategy 7) monitors the community and reaches out to customers who need help with the new features.
This connected approach creates a cycle of customer satisfaction, engagement, and loyalty, reducing churn and driving growth for your SaaS business.
Strategies 11-15: Advanced growth tactics
11. Win-back strategy
Don’t give up on churned customers; create a process to re-engage and win back existing customers who have left. This is especially important in the SMB space where customers may churn due to temporary budget constraints or changing needs.
Action steps:
Create a list of churned customers
Develop win-back campaigns with special offers or feature highlights
Set up email sequences for re-engagement
Smooth re-onboarding process for returning customers
Welcome back package with extra support or training
Exit interviews to understand why customers left and address those issues
Dedicated win-back team or assign to specific account managers
Pro tip: Use customer data to see patterns in churned customers and refine your win-back strategy. Look for commonalities in usage patterns, feature adoption, or support interactions that would have predicted their churn.
12. Customer success metrics
Align your team’s goals to customer success metrics so everyone is working towards reducing churn. This customer-centric approach will naturally reduce churn.
Action steps:
Define customer success metrics (e.g. product adoption rate, time-to-value)
Set team and individual KPIs to those metrics
Create a customer health score system
Dashboards to track progress on key metrics
Tie compensation and bonuses to customer success outcomes
Review and adjust metrics as business needs change
Cross-departmental collaboration to achieve customer success goals
Pro tip: Use reporting tools to create real-time dashboards to keep your team focused on customer success metrics. Set up alerts when key metrics fall below certain thresholds so you can intervene quickly.
13. Personalization
Use data-driven insights to give each customer a tailored experience and increase their perceived value of your product. This is a big deal in the SMB space where customers often feel overlooked by larger SaaS providers.
Action steps:
Behavioral analytics to understand user preferences
AI to provide personalized product recommendations
In-app and email messaging based on user behavior
Personalized onboarding paths for different user personas
Industry-specific templates or presets
Adaptive UI to highlight features based on usage patterns
Predictive analytics to anticipate and meet customer needs ahead of time
Pro Tip: A/B tests different personalization strategies to see which has the biggest impact on retention. Use segmentation tools to create highly targeted personalization campaigns and measure churn rates.
14. Renewal process
Make renewals as smooth and valuable as possible to reduce churn at this critical moment. A smooth renewal process is especially appreciated by SMBs who have limited time and resources to dedicate to software procurement.
Action steps:
Automated renewal reminders with clear value propositions
Incentives for early renewals or longer terms
Renewal risk assessments to identify and address potential issues
Dedicated renewal specialist for high-value accounts
Renewal dashboard to show value delivered over the contract term
Flexible renewal options: adjust plans or add/remove features
One-click renewal for happy customers
Pro tip: Use revenue forecasting tools to predict renewal probabilities and resource allocation. This will help you focus on the accounts most likely to not renew.
15. Benchmark and optimize
Regularly measure your churn reduction efforts against industry benchmarks and your historical data. This continuous improvement approach will keep you ahead of the curve in the fast-paced SMB SaaS landscape.
Action steps:
Set up a system to track key churn and retention metrics
Benchmark against industry standards
Quarterly review of your churn reduction strategy
Data-driven continuous improvement
Stay up to date on industry trends and best practices
Survey your team for new ideas on reducing churn
Cross-functional "churn task force" to drive ongoing optimization
Pro tip: Use advanced analytics to do cohort analysis and see which customer segments and strategies are working best to reduce churn. This will help you refine and resource over time.
Your churn reduction framework
Now that we’ve gone through all 15 of these strategies, remember these are not individual tactics but connected pieces of a larger churn reduction framework. The key is how you implement them across your business and culture.
Here’s a high-level approach to implementing your churn reduction framework:
Assess your current state: Use customer analytics to do a deep dive into your current churn rates, customer behavior, and existing retention efforts.
Prioritize strategies: Based on your assessment, prioritize the strategies that will have the biggest impact on your situation. Focus on quick wins first to get momentum.
Cross-functional teams: Churn reduction is not just a customer success job. Involve product, marketing, sales and even finance teams in your efforts.
Data infrastructure: Make sure you have the right tools and processes in place to collect, analyze, and act on customer data.
Clear goals and KPIs: Set specific, measurable goals for churn reduction and related metrics. Make them visible across the organization.
Start small, scale fast: Pilot each strategy, measure results, and scale what works.
Customer-centric culture: Make churn reduction and customer success part of your company’s DNA. Celebrate wins and learn from failures.
Continuous improvement: Use the insights from your efforts to continuously refine your strategies. Churn reduction is never “done” – it’s an ongoing process of optimization.
Turn churn into growth
By implementing these 15 strategies as a framework you’re not just reducing churn – you’re building the foundation for long-term growth. Remember in the world of SMB SaaS your ability to retain and grow your customer base is often the difference between success and just surviving.
As you start this journey remember every interaction, every feature, and every decision is an opportunity to show value to your customers and reinforce their decision to stick with your solution. With persistence, data-driven insights, and a customer-obsessed focus you can turn churn from a constant threat into a growth engine and catalyst for innovation.
If you want to increase the number of customers, you need to increase your win rate. Book a demo now to discover all the factors that influence your win rate.
Dmytro Chervonyi
CMO at Forecastio
Dmytro is a seasoned marketing professional with over 10 years in the B2B and startup ecosystem. He is passionate about helping companies better plan their revenue goals, improve forecast accuracy, and proactively address performance bottlenecks or seize growth opportunities.
