Every kind of business will have a different way of calculating and reducing customer churn. For a SaaS business, make sure that your product roadmap and resulting R&D, marketing, sales, and customer success investments all focus on solving your customer's most important goal or biggest challenge.
The Jobs theory (commonly referred to as Job to Be Done), developed by the late Clayton Christensen of Harvard Business School, is an excellent framework for understanding the job that your SaaS product is hired to do. As a result, the competitive alternatives are summarily fired.
Instrument Your SaaS Platform to Measure Leading Indicators of Customer Churn
Once you know the actual job that customers hire your SaaS product to do, build in instrumentation within your platform so you can measure various degrees of utilization and goal attainment.
SaaS companies scaling around product-led growth (PLG) -- such as Slack, Zoom, Dropbox, and HubSpot -- all have ways to know
(a) how customers utilize their software and
(b) when a customer crosses a product utilization threshold that nearly guarantees long-term retention and nearly eliminates churn risk.
Once a SaaS company has adopted a focus on solving customer problems, prioritized the underlying true Job to Be Done, and developed internal gauges within the platform to measure product utilization to progress towards goal attainment, you can then define what initial value, intended value, and extended value look like.
Build a Company Culture That Solves for Customer Success and Reduces Customer Churn
Product teams, customer success teams, and customer marketing teams can all focus resources on driving good-fit customers towards goal attainment (that minimizes churn).
In the Inbound Methodology, this intended state is known as the Delight phase. This mindset around customer Delight is critical to keep the growth flywheel spinning in a world where so much of the buyer's journey depends on reviews and social proof.
Then marketing and sales teams can focus their entire go-to-market strategy on attracting and engaging good-fit customers with the highest likelihood of becoming long-term delighted customers that graduate into delighted promoters and evangelists.
This focus also helps to inform strategy around buyer personas, ideal client profiles, and buyer's journey mappings.
What has your company done to measure and reduce customer churn? Let me know in the comments.