Customer retention is extremely important to your SaaS business because it can make or break your business. If you lose customers, you lose money and goodwill. It’s as simple as that. On an average, SaaS businesses see a 8% annual customer churn while the ideal SaaS business should see negative churn. According to the Harvard Business Review, if you can improve customer retention by even 5%, you will be able to improve profits by upto 95%. That’s something, isn’t it?
Now, who doesn’t want to get an edge over competitors and turn their SaaS business into one of those companies with negative churn. Read through the following tips to chalk out a strategy to retain your SaaS customers.
How Churn Effects Bottom Lines of SaaS Companies
For any SaaS business, churn represents a huge financial drain on both growth as well as profit. The churn is a statistical concept so modelling it operationally becomes a fundamental statistical problem at hand. What the SaaS churn represents is the statistical measurement of probability or actuality that a customer will cease using your product anytime. The factors that determine this are:
- Value that a customer sees in your SaaS product
- How much the customer relies on the product
- Value of your competitors’ SaaS products
- Internal issues of your customer’s organization
You will be able to analyze information based on these factors. Also, customer profiles in the CRM or your tool’s dashboard will help you analyze direct product usage data to analyze the first two factors. You can tackle the rest by implementing surveys, sales and support reps and feedback. With the right data and analytics, you can actually find the root cause of churn. Addressing and identifying the churn will improve your bottom lines significantly.
Tips to Boost SaaS Customer Retention and Reduce the Churn
1. Boost Engagement Trying to retain your customers is not an easy task. It takes time, energy and highly efficient techniques to turn your churn into negative. In SaaS, engagement happens when the customer pays attention to your product and your product consumes their time. It happens when your customer tries to figure out and understands the value of your product. Bottom-line, you have to concentrate on boosting engagement because if a customer stops using your product, they will automatically stop paying for it. If your customers are not engaged and not using your product, they will cancel it and you will lose revenue. Totango, who surveyed over a million customers, found that cancellation was preceded by a period of inactivity. So, to prevent churn from customer disuse, you should try to boost engagement so that the customer does not think of stopping at all. You should adjust the features and functions of your product and ask your customers for their feedback. Whatever you do make sure that you have your customer’s time and attention.
2. Be Proactive About Expired or Cancelled Credit Cards Expired credit cards are a major reason of cancellation. The reason being most credit cards expire every three years. On an average, 3% of your card subscriptions expire on a given month and within one year almost 36% of the cards will expire. If your product uses recurring billing, you should be proactive in finding the expiry dates of credit cards under file. Let your customers know that their card is going to expire, long before the expiry happens. Send them an email that will act as a nudge from your part. Often the card gets rejected because it has been cancelled. A huge amount of churn happens due to credit card cancellations. Whatever the issue might be, be proactive and stay on top of it.
3. Invest in Customer Success You should invest in customer success in order to retain customers. Retention is not so much about optimizing your product but it is about understanding your customer’s needs. You should make sure that the product does not frustrate the customer in any way. There should not be bugs or any kind of data loss that might irritate the customer. You should invest in making your product top-notch. In that way you will be able to make sure that your customer is successful while using your product and if they are successful, they will keep using your product.
4. Awesome Customer Service Be sure to provide the best customer service, so that customers can put their faith on your business. Give importance to whatever feedback they might have for your product. When customers come to you and suggest improvements, pay attention to them, because not only will that retain those customers but it will also help you generate more because of the improvements. Make feedback and complaints an important part of your customer retention strategy.
5. Wonderful Onboarding Experience You have to realize that whatever got a customer to become your customer will more or less be the reason for that particular customer to stay your customer for the long term. You should pay attention to your on boarding process to take note of which features of your services are more appealing and attractive to the customer. What motivates your customers to take the buying decision? Make the implementation and training as smooth as possible. Customers get delighted for a variety of reasons. If you can figure that out, then you will be able to keep your customers happy in the long run.
6. Upsell In SaaS, you got to be selling, always. Consider upsell as the process of engaging an existing customer at a deeper level. As you already know that it is about engagement, so if you raise your level of service, they will tend to pay more. But everything should be done in moderation. Upselling helps you deepen relationships with your customer, raises the value that the customer receives and also improves customer LTV or customer’s lifetime value. Upselling is a win-win scenario for both you and your customer.
7. Interact with customers regularly You should get in touch with your customers regularly so that they realize you mean business and you care for them as well. Make it a habit to engage with customers on a regular basis on social media, email or direct communication channels. Take notes about what they have to say about their product and experience using your product. If you do not interact with your customers regularly, customers will tend to forget you and they will just opt for a competitor’s product when they feel like it.
8. Build a community of loyal customers When you treat your customers correctly and listen to what they have to say, it does not take long to put faith in your SaaS product. You will soon have a community of loyal customers who will come forward with feedback regularly as they know you keep improving your product and want to make it even better by listening to what the users have to say. If you’re honest in your dealings, the customers will realize that soon enough and they will want to stay as your customer for a long period of time. Hubspot, a leading inbound marketing SaaS company has literally take this to the next level. Their community org is an online hub for over 150,000 inbound marketers to connect, interact and learn inbound marketing.
9. Invest in a SaaS Customer Retention team: Invest in a SaaS customer retention team because that will only assert the fact that you are serious about customer retention. Not only that, a retention team will be able to dedicate all their resources to engage with clients. They will analyze churn rates, reach out to customers on a regular basis, devise new methods to retain customers and identify risk areas for customer churn. They will be able to pick up signs from the customers that want to quit and try to listen and solve their issues.
10. Add important in-demand features As your SaaS gradually matures, you will realize that some features are more important to your customers than others. Work on improving those features and add important modules that your product does not have but the customers demand. That will be a sign that you truly care for your customers and you are willing to make changes to your product to please them. This not only makes customers feel important but they understand that you are a dedicated business owner.
11. Provide free training resources If you have a complex software, you will have customers who will want to learn more about its power and what they can do with it. You should provide free tutorials, webinars and training to coach your customers on how to squeeze more value out of your product. There is no use creating a brilliant but complicated product that customers will have trouble using. They will just switch to another product which they are more comfortable using. It’s up to you to make that product look easy to operate by giving them an opportunity to understand how it actually works. You will not only be increasing the product’s value in the eyes of the customer but it will also help reduce churn by improving your relationship with the customer.
At Esanosys we work with SaaS companies of all sizes and help them reduce churn, CAC and increase LTV. Partner with us today for your SaaS marketing needs.