Times are tough for many of us now. The coronavirus pandemic has had a profound impact on the economy as businesses struggle to stay afloat and scenario plan their way through this. Startups are conserving cash as much as possible to extend runway. As a result, customers have been cutting non essential vendor expenses, which have led to an extraordinary uptick in churn and downsell for SaaS companies. Conversely, new sales have slowed to a snail’s pace as companies cut budget. This double-whammy, is the current environment startups must persevere through. Below are some examples to combat churn and win logos during this challenging time.
Get ahead of churn by identifying risk factors amongst your customers. Meaning, don’t wait for a churn notification, but rather have a solution and strategy ready for customers who are financially struggling. For example, build customer profiles such as sector, company size (SMB, Mid Market, Enterprise), Geography, and leverage data to quickly identify customers affected by the coronavirus by providing data indicators such as layoffs and hiring freezes from live data sources such as layoffs.fyi and candor.co. Both of the websites provide live updates of companies, who are unfortunately experiencing layoffs. Leveraging this data, will help you not only identify some of your current customers experiencing layoffs, but also the company sectors and locations. For example, the travel and industry sector has been affected the most. Mapping company sectors and locations to your customer install base will provide you with leading churn indicators.
Not all industries are under duress during this pandemic. There are plenty of industries whose product is complimentary to the work-from-home environment such as e-commerce, logistics/delivery, video conferencing, and streaming. Site, Candor.co also provides the companies who are hiring. Leverage this data to seek the companies and industries who are thriving during this environment and who could benefit from your product or service.
Strategy For Helping Customers In Need
The strategy for navigating COVID-19 challenges is to keep your current MRR, while maintaining healthy cash burn levels. Prior to implementing any of the strategies below, it’s important to first consult with the CEO, Finance, Sales, Customer Success, and Legal leaders to make sure your business doesn’t suffer such as cashflow or time sensitive operations. Depending on the customer cases, could require lengthy negotiations, contract amendments, or revised billing schedules.
For customers who are looking to churn because they can no longer afford your product, establish payment solutions that help ease the burden for a period of time and in exchange, ask your customer for a longer contract duration.
Some payment strategies to help your customers in need are below.
- Switch to monthly payments
- Defer payments a quarter or two (if you can afford it)
- Re-amortize payment schedule to where payments are minimal for the first few months and ramp towards the back half of the term
For customers who cannot afford the current product suite, then combat lost logos by downselling where you can. As the economy picks back, it should be an easy upsell opportunity.
Increase customer service. Now is a great time to learn about your customer pain points and make your service more valuable by helping your customer succeed.