The Retention & Loyalty Playbook – Part 2: Understanding Churn & Eliminating Drop-Off Points

If you’re reading this, you likely already understand churn on a basic level. A rising tide raises all ships—unless you have a hole in your bathtub, and the water is steadily leaking out. In that case, no amount of rising tide is going to save your toy boats. They’ll just keep sinking.

And nobody wants their toy boats to sink.

So today, we’re continuing where we left off in the Retention & Loyalty Playbook for AI Productivity SaaS Companies. Last week, we talked about how most SaaS companies focus so much on fixing churn that they forget to build loyalty in the first place. But before we can even talk about making customers so happy they never want to leave, we first need to understand why they’re leaving in the first place.

Let’s go back to our example, ACME Productivity—an AI-powered productivity platform helping teams work faster and smarter. Like many SaaS companies, ACME has strong acquisition numbers, but they’ve noticed a troubling trend.

Customers sign up. They go through onboarding. They explore some features. But by month six, engagement starts dropping. By month nine, they’re gone.

The leadership team, faced with an increasing churn rate, starts trying to fix the problem before they fully understand it. A few suggestions are thrown around. Maybe it’s the pricing? Maybe the onboarding needs improvement? Maybe competitors are offering something better?

But before they can fix anything, they first need to map out the entire customer journey—from the moment someone enters the ACME ecosystem to the moment they leave. That’s where they’ll find the real reasons customers churn.

Step One: Are You Attracting the Right Customers—or Just the Loudest Ones?

The first thing ACME looks at is how customers are entering their ecosystem in the first place.

At first glance, acquisition seems strong—lots of free trial sign-ups, a solid pipeline of new users. But when they dig deeper, they find something concerning.

Many users sign up for the trial but don’t convert to paid plans. And the ones who do? Many leave within the first two months.

That raises a red flag. If the product is good, why aren’t people sticking around?

One possibility? Misaligned expectations.

ACME’s marketing heavily emphasizes AI-driven automation tools, but when users sign up, they expect a plug-and-play experience that instantly improves workflow. The reality? ACME works best when teams take the time to integrate it into their workflows.

At the same time, ACME notices something else in their long-term user data:

• The customers who stay the longest aren’t necessarily the ones attracted by the AI automation hype.
• Some love ACME for its collaboration features, while others use it primarily for task tracking—neither of which ACME has ever emphasized.
• Some of their most engaged customers started on the mid-tier plan but expanded into higher-priced enterprise contracts over time.

This raises an important question: Are they attracting the right customers—or just the ones who respond to their loudest marketing messages?

To move forward, ACME has two options:

1. Adjust marketing to better match the long-term users who actually get value from ACME.
2. Adjust the product to better serve the audience they originally intended to attract.

Retention doesn’t just start with onboarding—it starts with acquisition. If your marketing is pulling in the wrong audience, churn is inevitable.

Step Two: What Kind of Onboarding Experience Sets Customers Up for Success?

Acquisition is about getting the right customers; onboarding is about keeping them long enough to see real value. And that’s where ACME Productivity runs into its next problem.

At first glance, their onboarding process looks fine. New users sign up, complete the setup tutorial, and get dropped into the dashboard. But when ACME looks closer, they notice something concerning.

Users go through onboarding, click around for a few days, but by week three, engagement has dropped significantly. They aren’t integrating ACME into their daily workflows, and by month six, many are gone.

The problem? ACME’s onboarding isn’t designed to create long-term success—it’s just getting users through the setup process.

That’s when the team realizes they need to answer a bigger question:

What kind of onboarding experience do we actually want to create?

Companies like HubSpot require new customers to pay for onboarding, ensuring users invest in learning the platform from the start. Others, like Zoho, offer structured onboarding for free.

For ACME, this means deciding:

• Do they want a self-serve, lightweight onboarding experience?
• Do they need a high-touch, concierge-style onboarding for premium customers?
• Or would a hybrid approach—free for standard users, premium onboarding for enterprise clients—be best?

Step Three: Are Customers Actually Using What They’re Paying For?

Onboarding gets customers into the product. But does it keep them there?

That’s the question ACME Productivity is now facing. They’ve already realized that some customers aren’t the right fit from the start, and that onboarding needs to be more intentional. But even for the customers who make it through those first hurdles, something still isn’t clicking.

ACME introduces subtle in-app nudges that encourage users to try underutilized features. They launch a best-practices email series, sharing real-world examples of how successful teams are using ACME. And they add a team adoption prompt, encouraging admins to invite teammates—since data shows that teams using ACME together churn far less than solo users.

Because at the end of the day, a feature customers don’t use might as well not exist.

Step Four: Not All Churn Is the Same—Voluntary vs. Involuntary

Churn isn’t always about dissatisfaction. Sometimes, people leave by accident.

ACME realizes that a surprising number of cancellations are due to failed payments—expired credit cards, billing issues, lapsed renewals. These aren’t customers choosing to leave; they just didn’t notice their subscription had lapsed.

A few small tweaks—like automated payment reminders, backup payment options, and grace periods—help recover these users before they churn permanently.

Because reducing churn isn’t just about convincing people to stay—it’s about making sure they don’t leave by mistake.

What ACME Productivity Learned About Churn

After stepping back and analyzing the full customer journey, ACME Productivity finally sees the bigger picture.

It’s not just about fixing one weak spot—it’s about how every stage of the experience shapes retention.

They realize that churn doesn’t start when a customer cancels—it starts much earlier. It begins with the moment someone first hears about ACME. It takes root if onboarding doesn’t help them integrate ACME into their workflow. It deepens if they never engage with the right features. And in some cases, customers aren’t even leaving because they’re unhappy—they’re leaving because of a failed payment or a missed renewal reminder.

The key takeaways are clear:

• Acquisition sets the foundation. If the wrong customers sign up, churn is inevitable.
• Onboarding determines long-term success. Customers need to integrate ACME early or they’ll forget about it.
• Engagement drives retention. If users don’t explore beyond the basics, they won’t see the full value.
• Not all churn is dissatisfaction. Some customers just need a gentle nudge to stay.

Fixing these issues isn’t just about reducing churn—it’s about actively building a stronger, more engaged customer base that sees ACME as essential to their success.

And that’s exactly where ACME’s journey goes next.

Coming Up Next: The Power of Proactive Customer Success

Now that ACME understands where customers are falling off, the next step is making sure disengagement never gets that far in the first place.

Next week, we’ll explore:

• How to spot churn risks before they become a problem.
• How ACME can use proactive engagement strategies to keep customers invested.
• How AI-powered SaaS can automate retention—without adding overhead.

Retention isn’t just about stopping cancellations—it’s about creating an experience so valuable that leaving isn’t even a thought.

What’s been your biggest challenge with retention? Drop a comment or send me a message—I’d love to feature your question in a future post.

PS: Scaling an AI Productivity SaaS isn’t just about acquisition—it’s about retention.

📥 Download the Guide: The Profitable Growth Guide for AI Productivity SaaS Founders—your 3-step framework to scale profits, stand out strategically, and create long-term customer loyalty.
📅 Book a Consult: Struggling with churn? Let’s map out a plan to maximize retention and secure your market advantage.

The future of your SaaS business isn’t just about who you bring in—it’s about who you keep. Let’s build it together. 🚀