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User Retention and Client Retention Are Key SaaS Success Metrics

Of the many old adages in the customer success business, one says that keeping the clients that are already using your software is way better than attracting the new ones. Client retention is all about acquiring your customers, boosting revenue, and saving up the company’s money.

Hence, SaaS companies need to be proactive about user retention if they want to build a loyal customer base. And for doing that, you will have to pull off the best of retention strategies to hold on to the clients you worked so hard to convert. In this blog, we are going to delve into the reasons why retention is a critical step, some of the best metrics to use to calculate the retention. Along with this, we see a few strategies to deal with the same. Let’s get started.

client retention

Why Retention is Critical

Because your clients are the answer to increased revenue

Statistics claim that the average spend of a company on an existing customer is generally about 33% higher than that of a new client. While you may know that your clients already are loyal to you and get benefits from your product, connecting them with a segment who is not as happy with your service can actually turn the detractors into promoters. Now that would change the ball game altogether, won’t it?

Note: One of the recently conducted surveys state that 68% of the clients tend to leave a company when faced with personal indifferences, mostly irreconcilable. Meanwhile, only 9% of them make a quick switch for better service or product.

Because Client Acquisition speaks Money

The average cost of acquitting a client could be more than 2-10 times the average spend of a customer in a month. The pace with which the client acquisition costs are paid off is easier to calculate in the SaaS industry. For instance, say the cost of all marketing accounted for $500 for every customer acquired and the MRR, monthly recurring revenue is $100. In such a case, it would take almost 5 months of service for the total cost to be re-earned by the company. So you better watch out your wallet!

Because it extinguishes Churn

In movie terms, churn is like a trailer to a distasteful climax, which you would not want to be a part of. And that is why it is recommended to approach client retention by using behavioral segmentation to identify which users are doing good and which users, are unfortunately on the verge of churning out.

Key Retention Metrics

Customer retention rate

Simply put, it is a measure of how effective your retention strategies are. Low retention rates can cause a serious issue and can quickly end up in revenue erosion, especially if you bill annually.

Formula: The total number of clients who continue their subscription/The total number of customers at the start of a period.

Customer acquisition cost

CAC, is basically how much you pay to get a new client. Now you might be wondering, isn’t that the opposite of churn? Well, yes, you cracked it! To truly understand the damage of the churn, you will first have to understand the cost of acquisitions.

Formula: Total cost of the sales + Marketing / Total number of customers acquired

Customer Lifetime Value

LTV is a measure of how much a client will spend over the source of his entire tenure with a business. SaaS client retention or user retention has a lot to do with the lifetime value of a customer.

Formula: Average revenue per user (ARPA) / MRR or customer churn

Top Retention Ideas

#1 Communicate and build strong relationships

You should see this more like an opportunity whenever a new client onboards to your company. This is your chance to create a proactive and meaningful relationship with them. You begin to play the role of an amicable customer success manager when you and your client plan things together, hence, building a rapport and sense of trust together.

With this, you seamlessly outline what your client needs to do to get success with your service. This conversation will naturally give rise to a follow-up. Further, who knows you could get some chances to upsell and cross-sell in the form of disguised goodies.

#2 Be there for your clients, always!

Client retention is all about being there for them, whenever and wherever they need it. You as a leader should be there to render ample support, even when they do not ask it to you outright. Aside from this, you should have a plethora of resources on your portal to assist them during their journey, if you want customer stickiness around you.

Now resources could include some informative webinars available on-demand or perhaps some eBooks that tell them all the know-how. Blogs too can act as a good source of proving information.

#3 Contextualize your prices

While it is a known fact that pricing your SaaS products could be a tad bit daunting as a task. But having said that, your users do deserve a head’s up if you are planning to make certain changes in the price format. Time and again, the pertinence of your product’s price rears its head. And therefore, you must always provide content to all your pricing plans. And then elucidate on how that move makes your product stride the longer run.

Final Take

SaaS client retention is all about engaging the customers and offering them a legitimate quality for a lifetime. Nevertheless, you need to understand their specific needs while you are on the go to make regular touchpoints. This ensures that they are seeing the complete value of your service. Practice the aforementioned strategies and you can stay engaged with the users through each and every step pf the customer lifecycle.

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