Churn | 5 MIN READ

5 Effective SaaS Customer Retention Tips

Customer retention for a SaaS provider, is more crucial than any benefit that the software offers, unlike companies that deal with single transactions.

Rakhin V
Dec 6, 2019

Customer Retention

Providing solutions through a SaaS model is a great way to develop and nurture enduring customer relationships. As a SaaS provider, your business is, however, dependent upon retaining customers. Unlike companies that deal with single transactions, your customer’s ongoing success is more crucial than any feature or benefit that your software offers. SaaS is convenient, so it is easy for a customer to jump ship to a competitor’s service.

Customer Retention

This problem is called “churn” — short for churn rate, or rate of attrition. The churn rate is a percentage of service subscribers who cancel a subscription. It applies to any subscription service. Several reasons contribute to a high churn rate, including lack of use of the service — think of why many people have discontinued physical newspaper delivery — to dissatisfaction with the service. Reducing churn rate is a priority for SaaS companies, and customer retention is, therefore, a full-time effort. With a few tips, you can focus your energy and resources in areas that impact customer satisfaction and lead to long-term business relationships.

Here are five areas where businesses can ensure customer retention:

Measure and monitor customer engagement

A SaaS solution is an ongoing service by its nature, so the sales and support processes should be aligned in tone and provide constant value to the customer. SaaS is not about selling a service and moving on to the next customer. Businesses aim for growth, and that means frequent changes. If your customers’ goals change, you need to ensure that your software meets their needs and helps them on the path to their goals. Customer engagement is the degree to which your customers use your service, and whether or not they are using it effectively.

How can SaaS companies monitor and measure engagement? Communication is vital, but so, too, is ensuring that customers realize value from your SaaS. Behavioral analytics help SaaS providers determine usage rates, and also give insights into customer information that could lead to churn.

Make selling a part of all customer contact

Remember, your SaaS sale is never fully closed. Top sales executives know this, and even apply it to non-subscription situations, leading to increased sales through building great relationships. With SaaS, staying on your customers’ radar is not optional. But this tip must be executed with a great deal of balance that knows your customers’ needs and communication preferences. We do not mean always pitching to the customer. Instead, make customer service a priority and sell the excellent relationship that you offer and the value your SaaS provides, in all your communication and interactions with your customers. If your customers feel abandoned and left out to sea, they will look for other solutions, or be much more vulnerable to sales overtures from competitors.

When a competitor contacts your customer, you want them to reply, “no, thank you; we already have a great solution that grows with us.” So, that means being in tune with your customers’ needs, and always know how you can improve their business through your SaaS.

Communicate proactively about renewals

Sometimes, a SaaS customer can cancel unintentionally by failing to take steps to renew. An expired credit card, for example, means you cannot process payment. It can also signify a lack of engagement on your customers’ part. It also can lead to a mindset of “well, we never use that service anyway.” The SaaS relationship should incorporate frequent, ongoing communication that ensures engagement, and this includes being proactive about payment. Calendar expired credit card dates in your system and schedule brief status meetings before expiration. Make sure to discuss any issues or concerns that the client may have, and also make a note to get updated card information.

This open communication can put you ahead of any potential problem. And it incorporates an ask for the ongoing sale. Objections can be useful tools for highlighting customer needs. If the customer responds with, “well, we don’t use it as much as we thought we would, so we probably won’t continue,” you have opened the floor to discuss how you can provide more value to the customer. Open communication is always preferable to silent cancellation, because even if your customer ultimately decides to cancel, at least you know which areas in your SaaS that need work.

Reward your customers

Another effective way to ensure customer retention is to incentivize the use of your SaaS. By rewarding active and long-term users, you can make the customer journey more engaging. Simple ideas could include offering a free month, testing new features, or creating VIP tiers with discounts and other features. Rewards can also play a key role in word of mouth marketing and encouraging participation in surveys to determine customer sentiment. Since dissatisfied customers sometimes remain silent and unsubscribe, an engaging incentive program can take customers’ pulses and better inform your efforts to improve and deliver customer value.

Most importantly, customer incentives need to be scalable and easy to administer. Automated systems that operationalize customer success can help deliver effective customer incentive programs.

Know your NPS

A final tip for improving customer retention relates to several of the others: determine your net promoter score (NPS). This metric involves taking the pulse of your customers to determine how likely it is that they would refer others to your SaaS. NPS is determined after asking your current customers this question, then grouping the responses into promoters, detractors, and passives. The higher the NPS, the more likely it is that a customer would refer others to your SaaS, but it also tells you whether or not they are likely to remain your customer. NPS is another way to engage, communicate, and sell to your customers

Customer retention

These five tips aren’t magic tricks; they require resources and effort. SmartKarrot is a customer success tool that helps businesses minimize churn by reaching connecting with customers and providing visibility into engagement and other factors that influence retention.

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Originally Published December 6th, 2019, Updated December 6th, 2019

Rakhin V

Rakhin has over 10 years of experience driving business development and client services. In his prior roles, he stayed close to customers to understand their requirements and help them achieve their business goals. He is passionate about customer success.

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2 years ago

Zara Bowden

Thank you for the helpful tips! I’m managed a new startup business using the SaaS model and it has been a rocky start. There is a lot of competition and whilst I think we offer the best product, it’s hard to get discovered and the current user base we do have isn’t telling anyone about it. I like your idea of rewarding customers and I think I’ll do just that for the early adopters. A survey will be helpful, too.

2 years ago

Emily Garrett

Rewarding customers is definitely worth it. Whether it’s discounts, loyalty points, free gifts or something else, it makes the customer feel welcome and cared about. Something else I do to retain customers is to let them choose what they need. By building a modular service and allowing them to pick only what they will use, it becomes more affordable for them. Everyone loves to save money!

2 years ago

James Beardsley

I like to lock-in customers to yearly contracts for a discount. It may be less money overall for me, but it’s guaranteed money vs monthly customers where you just hope they continue to use the service. Of course, these are all great suggestions as well. I especially agree about proactively communicating with customers about renewals. You need to make sure they stick with you.

2 years ago

Chris Nicholson

Those who have committed long-term are usually confident in your service and know how to use it. It’s the monthly subscribers who need the most attention, at any moment they could cancel if something is not right. I like the suggestion of communicating proactively about renewals, too. Sometimes I like to offer a discount if they seem uncertain.

2 years ago

Frank Thomas

I’m currently in the planning stage of switching from a one-time payment to a monthly SaaS model. I like these ideas a lot. It seems you have to put a lot of focus on existing customers, something that was not a priority before. I’ll probably have to track users a lot more, any suggestions for specific metrics I should be looking at?

2 years ago

Troy Baker

My business partners and I have been discussing customer retention recently. SaaS can be quite difficult to maintain so I appreciate these tips. I’m thinking we could combine your 2 tips about proactive renewals and rewards by offering a discount to those who auto-renew their plan. Anyone who chooses not to, we could send an email out 2 weeks before reminding them.

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