Why Better Onboarding Means Less Churn: Proven Tactics You Can Try Today

Optimizing your onboarding in the name of maximizing retention is a skillful combination of understanding your customers, leveraging their behavior data, and making strategic improvements at every step in the process

Ben Jacobson
August 10 2017

What do your new customers feel when they start doing business with you? What do they need to understand and do in order to grasp the value that your product can unlock for them?

It doesn’t matter if you’re with a service agency, an ecommerce firm or a software outfit – if new costumers don’t feel that value relatively quickly and with minimal effort on their part, then you don’t have very good chances of retaining them.

“Retention is one of the aspects of my businesses that I put the most effort into,” said marketing thought leader Neil Patel, “because onboarding is where we have the most control over how the relationship will unfold in the long run. If you can strike the right tone from the get-go, I’ve found that people will stick around for more. I make sure to pay close attention to onboarding for my consultancy clients, for users of my various software products and even my blog audience, and it always makes a big difference for retention.”

The onboarding process is your customers’ first introduction to how your company operates, and it can make or break the lifetime value of your customers. Get it wrong, and the steep cost of customer acquisition quickly becomes a drag on your bottom line.’s Janet Choi has calculated that a 1% improvement in customer acquisition affects your bottom line by about 3.3%. But improving your retention by 1% improves your bottom line by around 7%.

Why do so many people sign up for services that they ultimately don’t use? Dan Wolchonok, a product manager at HubSpot, polled the people who churned within their week of registering for Sidekick, an email tracking tool, and found that some 60% left because they failed to either see value or understand how to go about using the product.

Both of these failure types, mind you, can be remedied with an optimized onboarding experience. If you can lead your customer to achieve some key wins early, then you’ll effectively also improve their sense of success, and they’ll want to come back for more, lifting your monthly recurring revenue (MRR) and average customer lifetime value (LTV).

Why We Don’t Pay Enough Attention to Onboarding

Given the obvious financial benefits, why don’t more companies focus on improving onboarding? It seems like such a no-brainer – better onboarding means stickier customers and more revenues. Why is this critical piece so often overlooked?

I asked Jonathan Kim, the CEO of onboarding tool Appcues, about this during a recent AMA he hosted on GrowthHackers, and he responded that this was once a major source of frustration for him and his team. With products development today being so dynamic and agile, the idea of formulating new messaging and getting developers, marketers and designers aligned for fresh onboarding experiences every time there’s a new rollout can be daunting.

“There’s a lot of emotion tied to the onboarding experience, he commented. “Everyone wants something magical.” Plus, many product marketers and retention experts don’t have solutions in place for easy measurement of activation funnels. “I’ve found the best way to get people to see the value in good onboarding is to start measuring activation, which is where you lose 70-80% of your leads.”

Take a look at your dropoff rates, and you’re likely to agree that onboarding optimization opportunities are too great to ignore due to inconvenience. “We find that the renewal rate of our team plans are directly correlated with the quality of the onboarding provided,” Payman Taei, founder of visual asset creation tool Visme, recently shared.

But what is it about a great onboarding experience that makes it such a churn killer?

How Better Onboarding Experience Can Curb Churn

 Great onboarding leads to better retention on two levels simultaneously. On a macro level, it provides retention marketers with qualitative data that they can use to optimize product and onboarding flows over time in order to maximize loyalty. On a micro level, it offers a significant opportunity to have real, insightful communication with the customer about what they aim to achieve with the product at hand.

“This allows us to tailor our help and training to meet the unique demands of their situation, skill level, and use case,” explained Rupert Bonham-Carter, who heads Customer Success at business dashboard platform Klipfolio.

For medium to high-touch product categories like software-as-a-service (SaaS), renewal rates have been proven to be directly tied to the quality of onboarding. Customers who are properly enabled to use the tools effectively, instead of having to figure it out on their own, are more likely to renew.

Let’s look at a real-world example. For two weeks, freemium online test prep service Magoosh sent simple welcome messages to half of its new users and no welcome messages to the other half. Over the course of just two weeks, the students who received the welcome message were 17% more likely to convert to paid accounts than those who did not.

Not only can onboarding improve conversions, it can prompt your paying customers to stick around longer. Chris Bradley, founder of content curation platform Publicate, told me he believes it all comes down to the depth of product understanding that customers gain. This makes good sense – if your onboarding does a good job of introducing people to key features and tips, they will be more likely to find success and therefore value with the product. More value translates to more use over time.

And as noted by HubSpot’s Wolchonok, you don’t have very long to make an impression, because people will forget they’ve even registered for your service if they don’t see any reason to use it in the first week. Seasoned software entrepreneur and VC partner David Skok, who has invested in HubSpot, likewise champions the importance of making a big impression quickly.

Skok recommends building onboarding experiences with one objective in mind: minimizing the lag time from opting in to the “Wow!” moment, that point in time when a customer gets that “Hey, this is awesome” feeling from your product. The faster you can get them to “Wow!,” the higher the LTV.

There’s a whole science behind the various methods for identifying your product’s “Wow!” moment, or “Aha!” moment, but they all more or less involve figuring out which actions that your customer takes correlate with retention beyond a given threshold. By tracking everything your customers do, it’s possible to run a regression analysis to find the actions that are most commonly observed among people who stick around the longest. How often does this segment use your product, and in what ways?

These actions are now your “predictive metrics.” They may have nothing to do with what actually causes customer loyalty, but they go hand-in-hand with loyalty often enough that they’re worth striving for.

Rules for the Onboarding Optimization Road

 Once you’ve determined your own “Wow!” moment and predicted your retention, it’s time to look at some specific strategies to make your own onboarding process a retention-building machine.

Here are some principles to keep in mind.

#1 Make your onboarding customer-centric, as opposed to product-centric

This is especially important for software products, but it applies to ecommerce and agency onboarding as well. Remember that the “Wow!” you’re striving for with onboarding is all about the customer’s delight. No one is using your product for the sake of getting good at using your product – the extent to which people form emotional bonds with it is contingent on the product being helpful to them in a significant way.

Think of retention as a funnel of its own, one which leads customers on an onboarding journey towards value discovery which then leads to new habits. By understanding the phases of new user retention, you’ll have a better grasp of how much time you have to truly engage them – or risk losing them.

This is especially true in the SaaS space, where a user may not start engaging with the product extensively right off the bat, but gradually starts to tap into the full feature set. Making the onboarding about what the customer wants and needs, rather than what the product offers, is the way to go.

#2 Manage people’s expectations

 Don’t tell your audience that they should get enthused for one experience and then slam them with something different. They’ll feel betrayed and churn quickly.

For Johnathan Dane, the founder and CEO of PPC agency KlientBoost, retention success comes by aligning messaging across the funnel – from product discovery-oriented ads to conversion-oriented content to onboarding cues. In this sense, “onboarding” is actually a continuous process that starts even at the first touch, before the user is even converted. “The downside when it comes LTV and retention rates is that it takes a lot of data to be actionable,” he says, “so a lot of companies call things way too early. It takes both data and time to get the winning formula.”

KlientBoost has tested the conversion rates for countless combinations of keywords, audiences, ad creative and landing pages and onboarding experiences for clients, while keeping an eye on long-term conversions. Dane has noticed that overall, the best LTVs for his ecommerce and SaaS clients alike start with a clear focus on product benefits. Give the customer what they expect.

#3 Make improvements incrementally

 Understanding your customer is crucial, and perhaps the best way to do this is through vigorous A/B testing. Edin Šabanović, a senior conversion consultant from Objeqt, says that “You need to make it crystal clear and easy to get started, but if you don’t understand why customers are signing up, how can you get them to complete the flow and start using the tool?”

Objeqt recently ran an experiment for a SaaS platform that serves as a marketplace for photographers to sell their work. One onboarding workflow had fewer messages, with more content per message, while the other had more messages, which were bite-sized. The users who saw more prompts that were shorter were nearly 19% more likely to reach the “Wow!” moment of posting their first image for purchase, and their LTV shot up over time as well.

In another example of the importance of testing, Gini Dietrich of Spin Sucks made adjustments to the email drips she sends to onboard new free course students. She notes that while they didn’t nail the onboarding process immediately, ongoing testing and tweaking allowed them to drop their churn rate from 5% to less than 1%. “This year,” she said, “we’ve lost only one customer. One.”

#4 Consider manual onboarding solutions

For some companies, it may be worth revisiting that goal of automating the entire onboarding process.

Ben Carpel, CEO of business data dashboard platform Cyfe, originally didn’t offer “concierge onboarding” at all, in order to keep prices as low as possible. As his company has gotten larger, however, with a wider variety of customers, he’s recognized a growing need for personalized support.

“We recently added onboarding with live calls and demos as a part of our offering,” he said, “and what we’ve noticed is that it helps meaningfully to widen the signup funnel, and later reduce churn. Hands-on support can go a long way compared to an automated funnel.” For Cyfe, manual onboarding has been proven to improve both ends of the freemium funnel.

#5 Client onboarding is important in full-service situations too

 Freelancers and agency managers would be wise to take note: Just because you’re offering “managed service” as your product doesn’t mean you can overlook onboarding as a means to retention. A well-defined client onboarding process helps you look good, makes each project more efficient, and put your clients at ease regarding the road ahead.

Andy Crestodina of Orbit Media believes that front-loading communications with new clients is the best way to set a professional tone for the relationship and to defuse potential roadblocks.

Confusion runs rampant, he says, with many customers wondering things like, “Who is my main point of contact? How can I get in touch? When can I expect things? What do you need from me?” Good onboarding addresses these issues. “After the first contact, the customer has to have answers to all of these questions,” Crestodina affirmed. “If you miss even one of them, the fuse is lit on a client satisfaction bomb.”

#6 Sometimes product accessibility is the best onboarding

You can learn a lot about the effectiveness of your onboarding by looking at each step individually. You’ll probably find that you have different retention rates based on how far through the process your customer goes. At Innologica, makers of newsreader app Inoreader, a careful look at three stages of the onboarding flow revealed some useful surprises.

A few months ago, Victor Stankov, the company’s head of growth and operations, realized that while new user growth was holding steady, monthly active user growth had tapered off to an alarming degree. “We were effectively losing 70% of registered users on day one, and about half of the remaining ones over the next month,” he recalled. Instead of focusing on reading content within Inoreader as the “Aha!” moment, Stankov pivoted, when he noticed that the most loyal users were those who made the most of the app’s advanced functionality.

“We updated our content catalogs and made several major UI changes for the search bar,” he said. “Slowly we pushed our one-day retention rate up to consistently reach above 55%.” Inoreader’s 30-day retention rate is still hovering at around 15%, but Stankov is confident that a new round of experiments will improve that metric as well.

#7 Establishing Your Value Up Front

Clearly, onboarding is one of the most impactful factors leading to customer loyalty. Understanding your onboarding funnel, knowing where it’s hitting the mark and where it’s getting stuck, can help you eliminate customer frustration and slash churn.

Establishing this value in your customer’s mind is the key to LTV. As Visme’s Taei notes, “A product is only as good as how a customer finds value in it. You could have the greatest app, but it has no value if the customer isn’t familiar with how to use it and alleviate their pain points.”

For some companies, this might call for moving registration further along in the funnel, after people have already experienced the value of the product and are beginning to feel vested in it. Bradley from Publicate says that when he made that change, paid registrations increased by 150%, noting that “it also boosted retention because people got to try the product before making any commitment, so those that did sign up were vested and sure of the value they would get from the service.”

Optimizing your onboarding in the name of maximizing retention is a skillful combination of understanding your customers, leveraging their behavior data, and making strategic improvements at every step in the process. It’s worth the effort and the investment, and it can have massive impact on your overall business health.

Ben Jacobson

Ben Jacobson is a marketing strategy consultant who specializes in content, social media and influencer marketing for B2B firms. He contributes regularly to publications including MarketingLand, Search Engine Journal and the Orbit Media blog.

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