Will Lowering The Price of Your B2B SaaS Product Lower Your Customer Churn Metrics?

My experience in reducing churn for a company doing £13million in ARR:

When In was the lead Product Manager for a few products at one of the UK's largest Ed Tech companies we got really focused on churn to prepare for an eventual sale. We plugged in a product called Churn Zero which was bloody great. We started to really get metrics, data and feedback on who we thought would churn.

After a few months of trying to combat churn and helping the customer success team tackle our riskiest accounts, I found that the most effective anti churn tool was time spent understanding why someone why unhappy and really making them felt heard. Making them feel understood and that we could fix their issues. Listening to someones problems is a powerful tool. When was the last time a company you worked with really took the time to understand where you were coming from?

Whilst it is a powerful way to stop accounts churning and improve your product, not every company can afford to be that high touch with their customers. I would bet that most of you reading this post would struggle to afford to spend that much time with a customer based on the prices you are charging them. More on that later. As we were selling long term contracts and high ticket, we could afford to spend that time making sure our customers loved us. Loved the product and wouldn't entertain any of the poaching attempts that our competitors sent their way every week.

But what can you do if you have not yet raised prices sufficiently to be able to combat churn in such an intense way?

We found that the next most important aspect of customers churning was their onboarding experience. Those who had a smooth onboarding experience could face giant issues later down the line with support etc and they would BLAME THEMSELVES for the issues. Read that again. They would find themselves at fault for major service errors we were responsible for. The onboarding was so good that they made the association in their head that our company had our shit together. Meaning any problems ultimately were either their fault or would be handled quickly enough that it didn't matter.

Putting time and effort into honing the first interactions a customer ahs with your company yeilds a high ROI. Although it can often be difficult to directly track in your monthly Profit and Loss statements. Retaining customers, for longer is one of the best investment that you can make into your business. If done well enough those customers will recruit themselves into your own marketing team (for FREE) and start to tell their network about how great you are to work with. A powerful tool in your arsenal as you begin to scale.

However, this also means that there is a dangerous counter balance effect at play. Those customers who had a crap onboarding experience (for what ever reason) could experience even the smallest issues later in the contract and they would scream bloody murder.  For them the onboarding experience cemented in their head that we didn't have our shit handled. And that any issue would repeat itself and was a continuation of a crap product experience. Their confidence and conviction in our ability to deliver our service was eroded. These customers are very likely to churn and are very hard to turn around. The association will remain long into the future, and it will take repeated acts of incredible service to start to overwrite that impression that they formed of you and your company.

My Experience of selling high ticket vs low ticket:

Generally it has been my experience that the lower priced your item the more your customers are a pain in the arse. At least you see them that way. I have found that they demand more, expect more for less and if that small amount is still a large sum of money from their perspective they really need your product to pay off for them as they have invested their limited resources in your solution.

When you are being paid well, you don't mind bending over backwards to keep your customer happy. When someone is demanding but also paying rock bottom prices you resent them. Even if it is ever so slightly. Because you know the more time you spend with them on their issues the more money you are losing.

Think about it - 1 hour with a customer paying $10 a month could not be a profitable customer again for the next 2 quarters if your effective hourly rate is $60. So you want that customer off of your plate as quickly as possible. They aren't happy. You literally can't afford to spend time making them happy. They churn anyway, you lose money and they talk shit about your product or service to everyone they know. Its a lose - lose game.

If you can't find a problem that is worth a lot of money to someone to solve (think enterprise level pricing at the top end, I would question if this journey is even worth it).

Runaway Churn

If you have a crazy churn problem, don't fuck about with the pricing. People pay what they think they will get back in value from the product. If you are charging $10 and they get $1 of value. Churn.

If they are paying $10 and they get $100 of value - happy customer.

You don't have a pricing problem you have a value problem. Those who are churning are no longer weighing the value equation in your favour. So they look for alternatives or other work arounds and go and pursue those.

If churn is a real problem it indicates a mismatch of expectations in your customers mind and what you manage to deliver to them. They expected more than they got. So they left. Simple as. When was the last time you dropped a product that you loved and couldn't live without?

The best way to solve that miss match is to conduct do deep dive qualitative research with those who churn (literally pay them to come speak to you about their experience). Identify the common patterns and stories and then build a product roadmap that is aligned with address the most pressing issues quickly and constantly.

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