Increase SaaS customer retention

[Goals (Hit top goals)]

Customer retention is one of the most important metrics to nail in SaaS offerings. If you have a high customer turnover, people are leaving your product without providing you a high customer lifetime value. So you’re spending money to gain customers - but not receiving much revenue for your investment.

Rebalance your customer acquisition costs and revenue

To improve the ratio between your acquisition costs and your average customer lifetime value, you need to decrease your customer churn rate. That means building solid, positive relationships with your customers, and ensuring that the product they’re using actually meets their long-term needs.

Steps

Calculate metrics that will help you to measure, track, and analyze customer retention.

Calculate your base customer retention rate, net revenue retention rate, customer churn rate, monthly returning revenue churn, and customer lifetime value. Compare these to industry benchmarks to understand how you’re doing compared to competitors.

Identify customer retention metrics

Create strategies that maximize retention and minimize churn.

Segment your customers and personalize content and UX to each.

Collect attributes for your customers, segment them by natural groupings like product usage or organization size, track customer retention metrics for each segment, and create personalized content for each.

Segment your customer base

Create personalized communications, better reach customer needs, and improve customer retention.

Measure, track, and report your customer retention rate regularly.

Make sure people understand how your company is performing over time and against industry trends.

Measure and report customer retention rate

Identify trends and retain customers.

Talk to customers about the product and their experiences with it.

Interview existing customers to find out about the problem they were trying to solve, the reasons they chose your product, and what difference your product has made to their situation.

Conduct a customer interview

Uncover first-hand insights to use in product/service development, testimonials, and other customer-based content.

Consider using user testing to see people actually using the product. Observing how people use a product is way more powerful than asking them.

Set up customer feedback loops that continually harvest information about what your customers do and don’t like.

Automate customer surveys, add interactive surveys and live chat to your product, and survey specific segments for detailed information. Integrate customer support.

Create customer feedback loops at scale

Improve your offers and increase conversions.

Put together a customer retention strategy that addresses the problems you’ve identified.

Use the information you gathered to improve your site, product, and offers. Work to build customer relationships and loyalty.

Develop a customer retention strategy

Increase repeat purchases and boost revenue.

Price

People will always complain about the price. Compare your prices with competitors and note what price changes do to conversion rates. Consider your framing. The price you set early will determine how people feel about long-term pricing. It’s often better to go in with a high price and then discount for long-term customers to build loyalty than to offer a low price and then increase it over time.

Functionality and usability

Adding functionality can easily add complexity and negatively affect customer retention. To minimize this, regularly track usability with the system usability scale to see if you are undermining usability as you add functionality.

Improve your onboarding process to help new users get familiar with the product, without overwhelming them with detail.

Create an onboarding experience that’s customized to your users and gets them to the point of being able to confidently make your product useful in their lives.

Onboard SaaS product users

Improve customer retention.

Set up a product help area to offer quick answers to common questions your users might have.

Find out which problems and queries your customers are most likely to come to customer support with, and provide answers in the product help area. Make sure these answers are easy to find and simple for people to follow.

Create a product help area

Increase customer satisfaction and reduce the burden on customer service.

Last edited by @hesh_fekry 2023-01-15T22:51:01Z

[naomi_kramer]

@Goals

Set up customer feedback loops that continually harvest information about what your customers do and don’t like.

Automate customer surveys, add interactive surveys and live chat to your product, and survey specific segments for detailed information. Integrate customer support.

Improve your offers and increase conversions.

@hesh_fekry I added this step.

[boagworld (Paul Boag)]

I tend to see three big areas of customer dissatisfaction; price, functionality, and usability.

To be honest, pricing is always a tricky one. People will always complain about the price, so it is very hard to judge just how big an issue this is beyond comparing to competitors and noting what price changes do to conversion.

The one thing to consider about pricing is framing. The price you set early will determine how people feel about long-term pricing. It is better to go in with a high price and then discount for long-term customers to build loyalty than to offer a low price and then increase over time. At least that is my opinion.

Functionality and usability are interesting areas because improving in one area often comes at the cost of the other. For example, the more functionality you add, the more complexity you add, which can negatively impact customer retention.

It is easy to fall into just adding more functionality because people ask for it. However, you need to be careful that doesn’t come at the cost of usability. This is where I favor regularly tracking usability with the system usability scale. This lets you see if you are undermining usability as you add functionality.

[boagworld (Paul Boag)]

@Goals

4. Talk to customers about the product and their experiences with it.

Talking to customers is great, but people tend to say one thing and do another. In my experience, observing how people use a product is way more powerful than asking them.

[naomi_kramer]

Thanks for the feedback on this, @boagworld – I’ve incorporated your comments into the playbook.