7 Customer Retention Strategies for SaaS Companies that Actually Work

One of the biggest merits of the SaaS business model is the recurring subscription revenue it brings. This helps in two ways — existing users who’re still on subscription make next month’s revenue more predictable and stable. And this existing revenue adds on top of the new users signing up for the same month, helping you grow in a rapid, more sustainable way.

This makes for a great high-growth business, as long as your existing users don’t churn at a rate that nullifies new conversions and sales. Worst yet — if more users are unsubscribing than are converting on regularly, it will result in a negative growth rate, which eventually kills your profit margins.

So with this article, we’ll understand and learn how to combat churn using various tips and strategies to retain your customers for long.

What is Customer Retention?

Customer retention is the metric that measures the number of customers that have been retained over a period of time. In a subscription business, a higher rate of retention would mean more customers paying for your service over a period of time. This results in higher customer lifetime value (LTV), and stable revenue retention and growth. Retaining a customer is 5 times more efficient than acquiring a new customer to replace a churned customer.

It also allows for higher profit margins, especially in SaaS, where operating costs are much lower. This makes customer retention crucial towards building sustainable, high-growth SaaS businesses.

7 Customer Retention Strategies for SaaS Businesses

1. Provide quick, effective customer service

One of the leading reasons behind customers leaving could have to do with their experience with your product being subpar or incomplete. They’ll often reach out to customer service, or would want to, but will find it cumbersome and time-consuming. Lack of quick and immediate support could cloud your customers' perception of the product value. And this can lead them to cancel their subscription, and eventually churn.

Image from Unsplash
Image from Unsplash

Make sure your customers have access to support and success resources at all times. A simple chat widget within your app or prompts that recommend users to engage with customer support in case of problems can be useful. Apart from this, set up internal standards for communication turnarounds. The amount of time taken for back and forth between you and your customer could dictate the amount of trust they place in your product or service.

Neal Taparia, who runs Spider Solitaire Challenge, explains, “When we committed to a 12-hour customer response time, we immediately saw retention and referrals improve among premium game subscribers. When you give customers a great experience, they will want to continue using your products or services.”

2. Attract the right customers

Oftentimes, you attract customers that are quick to convert and equally quick to cancel and churn. While quick converting leads are great, they won’t do much for your SaaS business unless they stick around. In principle, customers that churn early are ones that aren’t really the right fit for your product.

Spend more time knowing more about your ideal customers — i.e. the users who’ve contributed the most through their LTV. These users are your ideal customers, the ones that’ll derive the most value out of your product, and hence stay with you for longer. They carry a certain set of characteristics called ICPs or Ideal Customer Profiles. Build your ICP based on your existing set of high LTV users, and attract more such users.

3. Make an engaging user-friendly app

When it comes to the areas of business that get the most attention — user experience and product design is often left behind in order to prioritize other functions. While this approach can help manage resources better in the short term — in the long term, it won’t do any good.

A bad user experience can cripple the product’s core functions for the user and bring down its potential value. And this could make for an influential trigger towards cancellation.

When planning out product improvements, allocate resources towards improving the product for existing users. Talk to your high-value customers, and get to know about their inconveniences with your product.

Pics.io interface

Here at Pics.io, we’ve built almost all our features based on user feedback. Feature requests are very popular in our company, and our current users are our main audience to consult about and test new features. For example, our Adobe and Google app integrations have grown out of feature requests. Among more recent developments, there is API and social media presets.

Indeed, your current customers are the first-hand users of your product, and they can provide you with tons of insights — just find time to listen to them.

4. Deliver on product value

Imagine having subscribed to a SaaS product expecting a certain outcome — say, editing images to look sharper. What happens when you discover that half of the features required to sharpen the images are either not present or barely work? You’re likely to cancel, and this would be the case for every other SaaS product as well.

While forming your SaaS marketing message and communications, make sure you aren’t making claims that would make it difficult for your product to fulfill. Also, have a customer success program in place so you can reach out and help users who might need help with generating results out of their usage.

5. Build an independent ecosystem

There will be times when your users will outgrow the utility your product or service offers and will want to leave you. This isn’t really a problem with the product’s quality or value — rather, it’s a design flaw. When you build a product that doesn’t serve your users after a certain time, they’ll move on towards using products that suit their future needs. So to counter this, build features that might complement your existing product, and make the combination difficult for users to let go of.

Shopify is a great example of this. Merchants were growing out of Shopify’s plug-and-play stores into bigger custom e-commerce platforms, like WordPress and Magento. One thing that didn’t change though — was payment processing. Platforms like Stripe and PayPal own most of that market.

So Shopify came up with its own payment product, which enabled faster checkout for Shopify store owners. In the case you’re a Shopify store owner using Shopify pay,  you’re more likely to stay on Shopify or risk a drop in conversions due to reduced checkout speeds.

Shopify evolution

6. Provide integrations with other services

In continuation to the last point — there will often be instances where users will be using your product in conjunction with other services. With the increasing adoption and popularity of the software, inter-compatibility is no longer considered a luxury.

When you build native integrations and inter-compatible features into your product, customers will find it easier to get hooked onto a workflow that now serves a bigger utility. This makes them less likely to churn early and derive more value from your product than your standalone product could have. It also helps you cross-promote and generate leads from your integration partners, who might have an audience of customers relevant to your product.

7. Build a community

With social media amplifying the impact of many-to-many communication, B2B buyers are increasingly leaning on testimonials and customer reviews for their SaaS purchases. The same is true for existing customers who’re looking for other customers’ experience using your product, which in turn helps them make the most of it.

When your product has a community of users around it — it gives you the ability to network, find solutions to problems, and talk to people who’re in the same shoes as them. It’s recommended that you create and grow your Facebook group for your SaaS product. This enables you to create and operate an exclusive community with participants that include your users and evangelists/early adopters.

Seek and assemble a group of your loyal customers, and get them to engage with each other around your product. This could be best practices, hacks, troubleshooting, etc. You can make this even more attractive using various video editing tools and other media platforms to share ideas and content. Users truly value being part of such groups as it gives them access to you, and more importantly, other customers, which makes it easier for them to trust the product and justify its value.

Underpromise, create value and care for your users

If we drill down to the fundamental reasons behind customers leaving most of it has to do with unmet expectations. Users will sign up expecting something that seems like a godsend on your marketing website and turns out to be underwhelming on the other side. Your goal for both Marketing and Product teams should revolve around your users, and giving them the ability to make the most out of your product.

Once you prioritize your customers' needs and optimize your product to cater to those needs, customers will start realizing more value out of your product. SaaS products are supposed to help businesses and professionals perform better and grow. And when your product ticks all those boxes, your customers will no longer be unsatisfied and will stay with you for longer.

And in case you’re looking for truly good software to keep and manage your sales (or any other) materials, take a glimpse at Digital Asset Management. This tool is designed to help you put your digital library in order so don’t hesitate to give it a try.


Author

Mehdi Hussen

Mehdi Hussen

Mehdi Hussen is the Head of Marketing at ZoomShift, an employee scheduling software. He is passionate about driving organic growth and customer acquisition for startups through data-driven content marketing. He spends his spare time musing about startup growth strategies, personal productivity, and remote work. Connect with him through LinkedIn or Twitter.

Pics.io Team
Welcome to Pics.io blog, where you'll get useful tips, resources & best practices on how digital asset management can help your business to manage & distribute digital content on top of cloud storage.
USA