If your business is a SaaS or other recurring service, you’ll eventually have to deal with the unpleasant reality of cancellations. But how you deal with cancellations can have a big impact on your business’s overall growth, customer retention, and churn rates.
So, should you let customers self-cancel, or should staff handle cancellations — and maybe try to convince the customer to stick around?
We’ve tried both approaches for our monthly membership SaaS, WebinarNinja. Having gone both ways, we formed a pretty good picture of the ups and downs of each. Which policy will benefit your business, however, depends on a few factors.
Self-Cancellation, Pros and Cons
Letting customers cancel their own membership has its advantages. Believe it or not, letting your customers slip away with no attempt to stop them might make more business sense — because trying to stop them requires time and resources. How much time and resources are worth putting into something that, frankly, isn’t likely to succeed?
It’s all about the ROI.
Obviously, customers prefer self-cancellation. People are generally non-confrontational. No one likes to have to speak to a rep, to break the bad news to a human being. It’s almost like breaking up. Think about it: if you could just click “Cancel” to get out of a relationship, there would never be another “It’s not you, it’s me” speech delivered for the rest of human history.
It’s easier for both of you to allow self-cancellation. The customer doesn’t have to suffer the awkwardness of explaining their decision to leave, or — worse — endure the hassle of a customer service rep trying to convince them to stay. As Comcast has shown us, that can get ridiculous.
More to the point for you, a customer service rep’s time isn’t free. Every second you or your rep spends on the phone with someone is a second they’re not doing something that may have a better ROI, like dealing with customer dissatisfaction before it reaches cancellation level.
Of course, the counterargument to all this is easy: what if the customer service rep can stop the cancellation? What if the problem the customer has is easily solved? If the customer’s dissatisfaction is rooted in, say, their own lack of user knowledge, a rep can fix that. Perhaps the problem is a glitch that can be referred to support and easily sorted.
Even if the customer service rep can’t save the membership, they can identify common complaints or shortcomings, allowing you to perfect the product and avoid future cancellations with improvements and upgrades.
All things considered, it’s always possible that the customer doesn’t really want to cancel. They just don’t realize that the product can meet their needs with a simple tweak on their end or yours. That’s worth a few minutes on the phone, right?
Frankly, dissatisfaction based on user error should be headed off before it happens, with good customer onboarding. Technical glitches are unlikely to produce immediate cancellation, unless they go unresolved or repeat incessantly — in which case you have bigger problems to deal with.
Ask yourself: what percentage of cancellations are really based on something resolvable?
Most cancellations are due to reasons over which you and your business have no control. The customer simply doesn’t need your product anymore, or can’t afford it, or doesn’t think it’s worth the cost. Whatever the case, they’ve concluded that your product doesn’t have the ROI to keep them around. That’s not a conclusion you’re likely to talk them out of, unless you or your customer service reps are extremely sales-oriented.
Even then, it’s a long shot.
When we built the first version of WebinarNinja, we didn’t want to make it easy for customers to cancel. Who wants to give up business without a fight? Originally, if you wanted to cancel your membership, you had to get on the phone with customer service, and we’d try our best to keep your business — or at least analyze what turned you off, so we could improve the platform.
We thought requiring this dialogue was a no-brainer. And we weren’t exactly wrong. But in the end, the numbers showed that requiring a pre-cancellation talk had a point of diminishing returns.
First, it didn’t save that many memberships. In any given stretch of time, we found that on average, less than 5% of people who called to cancel were talked out of it. From a bottom-line perspective, that wasn’t worth the time and resources spent (mostly) talking to people who were leaving no matter what we said.
Our reps’ time was better spent preemptively addressing customer problems, so they wouldn’t make that cancellation call in the first place.
Second, the data gathering was useful at first, but only for so long. We kept a spreadsheet of reasons for cancellation, so we could track and analyze what exactly was costing us customers. In the end, it helped us identify areas of improvement, and helped us better our product.
But we didn’t to spend hours on the phone to get this information.
If a shortcoming in our product caused someone to cancel, we fixed it the first time! We didn’t need to register the same complaint from 20 other customers in order to make our platform better. More importantly, it didn’t require a live conversation to identify any given problem or shortcoming.
That’s what forms are for.
We switched to an automated cancellation procedure over which the customer had control, but wasn’t as simple as clicking “Cancel.” To end their service, the customer simply had to tell us why in a brief, low-hassle exit survey.
The customer got to leave without having an awkward conversation. We got the data we needed to improve, and saved the money it cost to pay someone to acquire it.
As for talking people out of canceling…that was never realistic in the first place. In the end, we were happier to give the customer a pleasant exit experience that didn’t leave a bad taste in their mouths, leaving the doors open to both improving our product and potentially earning their business back in the future.
Of course, just because self-cancellation works for us doesn’t mean it’s the right move for you. WebinarNinja, like most SaaS products, is a relatively low-cost monthly membership service. That’s to say we depend more on the volume of repeat customers than on revenue generated by any single customer or payment.
Other services work differently. Pricier memberships, like certain expensive courses or mastermind groups, can run thousands of dollars for membership. In those cases, it may be well worth the time and money spent to try talking a customer out of cancellation.
The decision all comes down to math. Broadly speaking:
- If losing a single customer will hit your revenue hard enough to make a conversation worth the investment, by all means don’t let customers self-cancel.
- If your business model is about landing thousands of small-to-medium sized fish rather than a few whales, go automated.
If you do choose to allow self-cancellation, make sure it’s customer-friendly and leaves the door open for a future relationship. Make the exit survey quick, easy, and upbeat. Be magnanimous, and make sure any automated emails or messages make it clear that their success, not your revenue, is priority one.
If you don’t allow self-cancellation, make sure that your customer service reps take a sales-oriented — but not pushy — approach. Their goal should be to educate the customer on the product’s value to them, not the customer’s money’s value to you. Above all, make sure that your onboarding and pre-crisis customer service are optimized for customer retention, so fewer cancellation calls come in the first place.
In both cases, keep the customer’s account active for a full billing cycle. Whatever they already paid for, deliver.
We learned which approach works for us the way we learned everything else: experimentation, mistakes, corrections, and experience. You may have to make tweaks to your onboarding, customer service, and cancellation policies as you go.
Don’t be afraid to try things. Your customer retention and churn rates will improve as your customer service experience grows. Keep your head up, and keep moving forward.