Customer retention is the most effective way a SaaS company can ensure growth, but a poor user experience and payment failures can interrupt the customer relationship and put this essential retention at risk. Regardless of your product or service, user retention needs to be your top priority.
How to Provide a Great User Experience
Customer care doesn’t have to be complicated. Here are a few ways to create a positive user experience.
Personalized onboarding
Begin your retention-focused customer journey with a personalized onboarding experience that quickly introduces users to the product. Your onboarding should catch any dissatisfaction early so new users don’t regret their purchase. Onboarding can involve dedicated training and support, videos, and emails to get users using the product right away.
Pricing flexibility
Give users the option to switch to a higher or lower priced option (i.e., downgrading from a full product to a free version) to ensure a good fit and improved satisfaction. The idea is to build long-term relationships with a loyal audience.
Ease of cancellation
Don’t make users jump through hoops if they want to cancel. Make your cancellation policy easy to understand and easy to find. This will reduce customer frustration and improve the chances of the user coming back in the future.
Billing transparency
Your billing practices need to be clear and straightforward to maintain customer trust. This means no surprise fees or unexpected price increases.
Usage tracking
Identify customers who are at risk of churning by monitoring how often they use your product or service. This will allow you to better understand their needs and how you can improve their experience. Having conversations with your customers and getting feedback will also help you identify areas where your product can expand and grow.
Trigger marketing to improve engagement
Giving regular updates about new features, helpful tips and tricks, and resources to help users make the most of your product improves engagement and gives you the opportunity to upsell. Reaching out to users at specific times throughout the customer lifecycle — such as when a user hasn’t logged in for a long time or when a new feature is available — improves engagement and reduces the risk of churn.
Seamless payment experience
With the average churn rate for a SaaS organization ranging from five to ten percent, businesses need to do everything possible to keep the users they have. Providing a smooth payments experience is one way to do this since it sets the stage for a successful customer experience.
Barriers to User Retention
Even the best customer relationship strategies can hit a snag. According to the 2023 KBCM Technology Group Private Company SaaS Survey, the annual median logo churn (which describes how many customers are lost YoY) is 13%.
Why the high turnover? SaaS customers leave for a variety of reasons, including financial insecurities due to the changing economy. This has forced many to reconsider their spending habits, which has contributed to higher voluntary churn.
According to a study by PYMNTS and FlexPay, 26.8% of consumers experienced a failed payment in the past 12 months, and these failed payments threaten your retention and growth by contributing to involuntary churn. SaaS companies need to address both voluntary and involuntary churn with the same level of urgency and importance.
Technical Tools to Minimize Churn and Improve Retention
There are several technical tools you can implement to reduce the number of failed payments your SaaS business sees. These can either help avoid the failed payment in the first place, or help you recover the payment after it occurs.
Card account updater
This is a service offered by credit card companies and payment gateways to help businesses maintain up-to-date credit and debit card information. The card account updater automatically puts the new card details into the company’s system when a customer’s payment information changes, such as when a card has expired or has been replaced. This is a good first step in any recovery process.
Rules-based payment retries
A rules-based payment retry system runs a failed credit card transaction again on a certain day or time to try to get a successful payment. This is a good second step in the failed payment recovery process if you have the resources in place. However, the high cost of hiring the necessary data scientists and software engineers makes in-house payment recovery programs cost prohibitive for most businesses. You need data from millions of transactions to understand the most effective billing retry patterns and companies not in the business of payment recovery typically don’t have access to this type of information or expertise.
Failed payment recovery software solution
This specialized third-party solution uses AI and machine learning to select the best method to recover each failed payment. This type of sophisticated recovery solution delivers the highest user recovery and retention rates by beginning the recovery process on fresh declines and works directly with the payments system to avoid customer awareness of the failed payment. For the times when customer involvement is needed, positive, empathetic messaging is used to encourage the customer to update their credit card.
This strategy results in a significant reduction in involuntary churn and more revenue from recovered customers. For example, our study with PYMNTS revealed that top-performing companies are 12 times more likely to use third-party payment solutions and recover 13% more failed payments.
Do you want to recover failed payments and improve your customer retention? Reach out to our team to get started.
