Customer retention strategies for SaaS are key to long-term growth
Imagine this — you’ve just spent a lot of money on SEO and digital advertising to acquire customers, only to have them walk out the door after a couple of months.
Well, actually, you may not need to imagine that. SaaS products have one of the lowest customer retention rates (CRR) across industries, with an average CRR of 68 percent. Low customer retention is an especially common problem for SaaS companies in the business to customer (B2C) space.
Companies often rank customer retention strategies as a top priority. The question is how?
In this article, I’ll explain the best customer retention strategies for your SaaS product that are proven to have success.
Why is customer retention important?
According to ChartMogul’s SaaS retention report, companies with strong customer retention rates outperform their peers. In fact they grow up to three times faster. Higher retention rates lead to more profits.
Retention rates also show how well you’ve fit your product to your customer. When rates are high, it shows you’ve nailed product-market fit. But if rates are lower, you might need to take a look at whether your product needs to change.
Here’s another thing to consider. It’s less costly to retain an existing customer than to acquire a new one. In fact, according to SEO and content marketing guru Neil Patel, you could end up spending up to seven times more to acquire a new customer.
Solving issues with customer retention is just good for business.
Think about the products you use and why you stay with them
I tend to stick with products and services I really like. So I’m pretty forgiving. For example, I used to get really mad at Jira because I couldn’t see projects the way I needed to for capacity planning. And I found it really hard to use. I even spent about a year researching and trying other project management tools.
Why did I stay with Jira?
We ultimately decided to stick with Jira because we found Atlassian had rejiggered its tools to make them easier to use and integrate. It was almost like they heard me complaining and took action. I could see improvements throughout the tool, which it gently nudged me to try.
Your customers invested in your product. You need to give them a reason to stay.
Below are proven customer retention strategies for SaaS success, so you can keep your customers and grow, instead of churning through them and burning cash
Customer retention strategies for SaaS products
Invest in a strong first-time experience
Onboarding and education
When you invest in a robust onboarding process, your users can see the value your SaaS product provides more quickly. The experience around onboarding will vary depending on your product, but some ideas are:
- Step-by-step tutorials
When I teach, one of the first tools we introduce is Trello. Trello’s step-by-step guides help new users quickly create their first board and organize tasks. It uses tooltips and callouts to guide users through creating cards, lists, and boards. These tutorials focus on small, bite-sized steps that build up to larger workflows. - Personalize product tours
I know a lot of people who swear by Garmmarly. Grammarly provides a customized product tour depending on whether you’re using the tool for personal writing or professional work. It highlights specific features such as tone suggestions or grammar checks based on user preferences and selected writing styles. - Quick-start guides
Mailchimp provides a comprehensive yet simple quick-start guide for new users setting up their first email campaign. It includes step-by-step instructions to import contacts, create an email campaign, and track performance, offering users an easy way to get started with marketing automation.
We used both step-by-step tutorials and a quick-start guide in our design for Mednet, because the platform needed a strong onboarding process to quickly teach nurses and doctors how to use the tool for collecting patient data.
All of these consider different learning styles and meet the customer where they are. What you want to make sure of is that the onboarding reduces the time-to-value so users don’t get overwhelmed or confused. When users see immediate benefits, they are less likely to churn.
Why good onboarding works
A smooth and informative onboarding process influences customer retention because it minimizes frustration. Users are more likely to stay engaged if they can understand the value of the product early and see how it solves their pain points.
Nudge users about updates and improvements
Regular updates and improvements
New users are great, but we want to keep them over the long haul, right? Here’s the thing — users who feel a product is stale or not changing are more likely to switch to a product that is improving. That’s what I was about to do with Jira.
Keep customers engaged with regular product updates that align with their needs. For example, SaaS products like Canva frequently release new features and improvements based on user feedback. Not only do these updates demonstrate that the product is evolving, but they also show that the company values user input.
Why regular improvements work
Frequent updates keep the product feeling fresh and relevant, so customers have fewer reasons to look for alternatives. It also builds trust because they feel the product listens and adapts to their changing needs.
Consistently reinforce value
The third idea on our list of customer retention strategies for SaaS is to reinforce value. While you update, don’t forget to look for ways to reinforce the value your product provides. You want to gently remind customers how you’re benefiting them.
Send periodic reports, case studies, or success stories that highlight how your product is contributing to your customer’s success. An example of this is Salesforce’s regular business insights emails, where they show customers how other companies are achieving success with their platform. This approach is particularly effective with B2B SaaS because it appeals to their need to justify ROI.
Why reinforcing value works
When customers are consistently — not constantly — reminded of the value your product provides, it reduces the risk of churn. They are more likely to remember why they chose your product in the first place and how you’re helping them.
Make it personal
Personalization
If you are thinking about ways to leverage AI, personalization is a feature that will help drive retention. You can use your customer data to customize communications and product offerings. For example, Netflix’s recommendation engine keeps users engaged by making content suggestions based on their viewing habits. In the SaaS world, HubSpot personalizes product suggestions and marketing emails based on customer behavior within the platform.
Why personalization works
Customers feel valued and understood when they feel a product is meeting their needs. That increases loyalty. Personalization helps build a deeper connection between the customer and the product, making them less likely to leave.
Collect and implement user feedback
Feedback loops
The worst thing you can do is collect customer feedback and then do nothing with that data.
At a minimum, talk with your customer support team to find out what customers have been reporting, and then take action. On top of that, you can conduct regular user surveys, host feedback sessions, and create user forums to gather feedback.
SaaS companies like Notion and Airtable have thriving user communities and direct feedback mechanisms that influence their product roadmap.
Why feedback loops work:
When customers see their suggestions reflected in product updates, they feel a sense of ownership and loyalty. Engaging users in the product development process makes them feel invested in the platform’s success and increases the likelihood that they will remain long-term customers.
Create a community
Community building
You can establish a community where customers can share ideas, tips, and support with one another. For example, the Slack user community allows users to solve problems, share best practices, and network, which builds product loyalty. IT platforms, like N-Able also use communities to drive engagement and help their customers solve problems.
Community building can turn your most engaged customers into advocates who help promote your product.
Why community building works
Communities provide a sense of belonging and mutual support. This peer interaction increases customer engagement and keeps users connected to your platform, which in turn boosts retention.
Give love to loyalty customers
Loyalty programs
The last of our customer retention strategies for SaaS is to reward long-term customers with exclusive perks like early access to features, VIP support, or discounts for annual subscriptions.
Amazon drove a lot of customer retention success through its Prime membership program. But there are other examples from companies like Dropbox and Evernote which offer referral programs that reward users with extra storage or premium features when they bring in new customers.
Why loyalty programs work
Offering rewards for loyalty not only makes customers feel appreciated, but it also incentivizes them to continue using your product. Loyalty programs also can create a sense of exclusivity, making it harder for customers to switch to a competitor when they feel they are getting extra benefits.
Conclusion
Customer retention is key to SaaS growth and profitability. These proven customer retention strategies for SaaS success are just a few ideas you can try to improve your overall customer retention rate. You don’t need to add them all, but think about your customer, what they need, and what problems they are using your product to solve.
If you need help deciding which strategies to implement, Standard Beagle can work with you to create a strong customer experience strategy designed to reduce churn and improve retention.