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Lead Your Team Strategy

Good Customer Service Reduces Client Churn

Vishal Sankhla is Co-Founder of Viralheat

The rise of Software-as-a-Service (SaaS) businesses and continued growth of technology businesses has created a "land grab" for users, forcing many companies to focus heavily on user acquisition. Marketing and sales departments bloom, tasked with lead generation, while existing customers fumble around an unfamiliar UI, left to navigate on their own in a new product.

As marketing and sales departments bloom, so do company expenses. It is more difficult and costs 6 to 7 more times to acquire a new customer than it does to keep an existing one. Advertising, promotion, selling, and time invested are all factors in the high cost of acquiring a customer. But while businesses invest money, time and effort in new customers, they tend to neglect existing customers allowing them to fall by the wayside.

But alongside rapid growth rate, SaaS companies need to focus on the other end of the spectrum — churn rate. Churn rate, simply speaking, is measured by the number of contractual customers lost/(number of new customers + number of existing customers) over a given time period.

SaaS companies are prone to higher churn rates due to the competitive nature of the tech space (especially in younger companies), but on a larger scale churn can significantly affect a company's revenue. As a result, maintaining retention by reducing the churn rate is just as important as increasing the acquisition rate. Thousands of new customers mean nothing if thousands leave at the same time.

This is the current state of the technology world, so how do SaaS companies reduce their churn rate? What practices can they implement to keep the number low? Though a high churn rate is common among young startups, Viralheat, a social media intelligence company founded in 2009, managed to reduce its churn rate 50 percent since January 2012 and has continued to reduce it by 10 percent month over month through the implementation of a customer success program.

What's making Viralheat's customer success plan so successful? Let's take a closer look at five facets of the plan and how each has contributed to reducing churn.

Contact new customers: Go beyond the traditional welcome email and support ticket route if you realize that the type of support customers need is more hands-on. New services can be intimidating to new users, some of which are using a product like this for the first time. Customers who feel inundated or overwhelmed by a product or service are more likely to leave than customers who feel comfortable and educated. By personally reaching out to new customers, the customer success team was able to learn each client's specific needs and sufficiently guide them through usage of the product. Customers were more knowledgeable with the tool and able to use it to its full capabilities, resulting in less customers leaving.

Create a learn center: SaaS companies have a lot of information for their customers. Many questions can be answered simply, but FAQ sections don't resonate well with most customers. Visual resources serve a better purpose with hands on products so creating a customer Learn Center where how-to and informational resource pages and videos are housed proved to be extremely useful. Customers can come to the Learn Center and find the resources they need to assist them with Viralheat's core functionalities.

Offer real-time online chat services: In today's fast-paced world, and especially in the technology field, potential customers want answers and they want them now. The difference between choosing services could be the response time to a question about a product, especially in the early stages of shopping around. Implementing an online chat on the homepage, allowed current or potential customers to immediately reach a member of the customer success team for support.

Conduct new user demos: Using SaaS products often require training or visual demonstration of the product's capabilities. Product demonstrations are especially helpful for prospective and new users as they directly see how to use a product. Some companies offer a prerecorded demo to highlight features, but often these demos are hard to follow along without rewinding and pausing along the way and any questions attendees have at the end are left unanswered. Offering live demos twice a week where attendees join a web demo allow the customer success representative to demonstrate the product in real-time. Moreover, customers are able to ask questions during and after the demo for an immediate response.

Interact on social networks: Customer support solely through email correspondence is quickly becoming a part of the past. Social media networks like Facebook and Twitter serve as a ripe stomping ground for customers and consumers to pose their questions or voice their dissatisfaction. Ignoring those reaching out through social networks is a mistake, we've all seen the damage that can be done by doing so. By constantly monitoring the social web, the customer success team ensures that they quickly reply to all inquiries or feedback. In fact, many users have laud companies for their quick responses on Facebook and Twitter.

The implementation of a customer success program should be geared toward satisfying all customers — potential, new or existing. A happy customer is less likely to leave a product or service than an unhappy customer. Ensuring that customers feel satisfied at all stages of their relationship with a product also ensures higher acquisition and retention rates. And although SaaS companies enjoy rapid growth and increased popularity, they must remember not to focus all their efforts in acquiring new customers. All businesses must also keep churn rates low for continued success.

The views expressed are those of the author and do not necessarily reflect the views of BusinessNewsDaily.

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