RESEND: How B2B SaaS Companies Reduce Churn (4 min read)

Analysing HelloFresh's Churn Reduction & 5 Ways to Reduce Churn in B2B Saas

👋 Welcome to B2B Pricing Insights, where we break down the pricing & monetisation strategies of the world’s best software companies to help you understand how to apply it in the world of B2B software.

In today’s edition: We analyse HelloFresh’s offboarding and how, despite being in a world of discounting competitors, they effectively reduce customer churn.

If you’d like to get free access to a deck on reducing churn I did for a former B2B SaaS client just leave a comment and I’ll send you the link (original value $5,999).

Who are HelloFresh?

HelloFresh, a prominent player in the meal kit delivery industry, was established in 2011 by Dominik Richter, Thomas Griesel, and Jessica Nilsson. The company aimed to revolutionize the way people cook and eat at home by delivering pre-portioned ingredients and easy-to-follow recipes directly to customers' doorsteps. Since its inception, HelloFresh has raised over $350m and is now a public company.

Today, HelloFresh boasts millions of subscribers worldwide, navigating an increasingly competitive landscape. While the company has successfully cultivated a substantial subscriber base, it faces growing competition from industry counterparts like BlueApron, Gousto, and others.

Moreover, HelloFresh's sustained expansion over the past decade has compelled it to broaden its target audience beyond its initial ideal customer profile (ICP). In response, the company has embarked on large-scale advertising campaigns, offering significant discounts such as 60% off the first box and 20% off the next two months, attracting more price-sensitive customers prone to churning.

So today we’re diving in to the psychological principles that HelloFresh uses to reduce that churn, and how they can be applied to the world of B2B software.

Breaking Down HelloFresh’s Offboarding

Screen 1 - Leverage Loss Aversion

As soon as I indicate I want to cancel, HelloFresh doesn't mess around - they trigger loss aversion by showing me all the credits I've racked up that I'll forfeit if I bail now. It's a smart opening move. The screen displays the exact number of unused meal credits sitting in my account, making that potential loss feel very personal and tangible.

If you want to read more about the power of loss aversion we did a breakdown of it last week.

But HelloFresh doesn't stop there. Instead of just showing me what I’m about to lose they also suggest ways to make the plan work for my individual circumstances by reducing the delivery frequency or skipping an order, subtly pointing out that a full cancellation may not be necessary.

Screen 2 - Ask Why They’re Leaving

Next up is a nicely designed screen prompting me to select my specific reason for wanting to cancel from 9 clear options, complete with supporting icons.

This multiple-choice approach helps HelloFresh gather valuable customer insights into why people churn, without the risk of getting vague responses like “don’t need it anymore” and having product managers spending hours sorting through natural language responses (AI anyone?).

If 80% of people are saying it's too expensive, they'll know to evaluate pricing. If delivery problems are the main issue, perhaps they need to tighten up operations.

If you’d like to read the second part of this article click here.

It dives into personalised offers, reactivating churned users and key takeaways for B2B software companies.

Screen 3 - Provide Personalised Salvage Offer

The next screen is a big positive for HelloFresh. Based on the reason I selected for leaving, HelloFresh now provide a tailored offer in an attempt to retain me, which is super impressive.

This personalisation does wonders. Imagine you had a problem where the delivery driver just didn’t turn up (this actually happened to us). A discount likely isn’t going to make much difference. But getting on the phone with a customer support rep definitely might help. Citing HelloFresh as too expensive? A 25% budget definitely might work.

But I appreciate that they don't just blindly throw the same 25% off discount at every single churner. That's a race to the bottom, attracting only the most price-sensitive subscribers who will likely bail again anyway once the discount ends.

HelloFresh also misses an opportunity here by not asking what you liked about the service. By including a question like "What was your favorite thing about HelloFresh?" they could remind you of the value proposition and nudge you to reconsider cancellation.

Screen 4 - Subscription Cancelled

Finally, the cancellation confirmation screen is refreshingly straightforward and devoid of manipulative tactics. Instead of resorting to guilt trips with "sad to see you go" messages or melodramatic emoji faces, HelloFresh opts for a simple, respectful conclusion. They clearly inform you of when your access will expire, without any emotional ploys.

HelloFresh seems to understand that an overly difficult or cringeworthy cancellation experience would only breed resentment towards the brand in the long run. By keeping the offboarding relatively pleasant and positive, they increase the likelihood that you'll remember them fondly if you decide to reactivate down the road.

The goal should not be to make cancellation needlessly arduous or shame people into staying, as that leaves a sour taste. The Peak-End rule shows people heavily judge experiences by their peaks and endings.

Rather than friction, companies should educate users on what they'll lose, clarify the process, and attempt to provide attractive offers to incentivize remaining a customer. This approach, devoid of unnecessary hurdles, allows churned users - who are 300% more likely to reactivate than new customers - to maintain a positive perception of the brand, provided the offboarding didn't anger them.

Takeaways

Many companies still stick their heads in the sand about cancellations, hiding the option behind labyrinthine menus or making it unreasonably difficult. But HelloFresh recognizes that battling churn through dark patterns ultimately erodes trust.

Instead, they've taken a research-driven approach to understand the precise drivers of subscriber churn. They use that insights to provide personalized retention offers and messaging. And they respect people's autonomy by not throwing up unnecessary roadblocks if someone genuinely wants to cancel.

So if you really want to get a handle on churn, stop treating cancellation as something to be avoided through trickery. Instead, make it a thoughtful experience that leaves users feeling understood and respected - not trapped in a hostage situation. Your customers will appreciate it.

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