7 SaaS Customer Retention Strategies (Examples & Key Metrics to Optimize)

SaaS firms are continuously trying to acquire new customers, but new customer acquisition is only half of the equation.

In the absence of SaaS retention plans, growing annual recurring revenue (ARR) through new acquisitions by itself could feel a bit like this:

  Growth in Net ARR comes from retention and expansion:  

In addition to gaining, maintaining customers helps to increase your Net ARR, a metric that is crucial to your survival as a subscription-based service.

  Acquire - Activate - Retain - Expand  

Although customer retention is a critical growth metric, it's far from easy. It's happened to us all. or browsed a site only to close it minutes later. Maybe it felt too intimidating to learn, or we just weren't getting use of it and became lost in.

No matter the cause, these common scenarios provide the reasons SaaS companies spend too much cash to attract new clients at the top of the funnel, only to fail to engage and activate these same customers that they've had worked hard to acquire.

For the customer to get instant value from your service It is important to clearly explain what it does , and also educate customers on the best ways to utilize the software. When you use online education to engage users and educate them more about how to use the features of your software and also enjoy the advantages they purchased your product for at the beginning.

In this blog, we'll share how top SaaS firms are maximizing retention by educating customers as well as other methods to attract and retain new users.

     Skip ahead here...    

1.    What exactly is SaaS customer retention?
2.    What are the reasons why SaaS companies invest in retention of customers?
3.    What is a good SaaS Retention Rate?
4.    The real price of customer turnover
5.    Strategies to increase SaaS client retention
6.    How can you monitor and optimize saas retention metrics
7.    Other SaaS metrics to keep track of

What is SaaS customers' retention?

In the SaaS world, customer retention gives you the percent of clients you retained over the course of time. It also shows current and future revenue. A high retention rate as well as a an extremely low rate of churn is the aim of many SaaS companies.

The final goal of maintaining customers is to make sure they experience a positive and memorable experience with your product or brand that inspire them to share the experience with everyone that they know.

Why is it important that SaaS companies invest in customer retention?

Investing in customer retention is just smart business. For every customer that you lose to churn, you'll be responsible for customer acquisition to replace them and this will range between 6 and 12 times the amount that you'd earn if they were to stay.

  The reason #1 is that online courses increase customer retention & reduce the rate of churn  

What determines whether your customer stays with you is fairly simple- do they feel comfortable enough to make use of your service frequently and get enough value enough to warrant their continued use?

In frustration and confusion, customers abandon their purchase and leave, so you need to help them figure it out quick during and post onboarding.Your top priority is ensuring that your customers are satisfied with your product.

  Reason 2: Online learning boosts your net promoter score  

With online courses that you offer, you will be able to help your customers have an enjoyable experience using the software, and also help them benefit more from the software.

In today's aggressive SaaS marketplace It's not enough to have a 'decent' product or service - as Seth Godin says, your service or product needs to be memorable (meaning it makes people want to talk about it) to be remarkable.

Online courses allow you to educate and set your customers ready to interact with your brand or products on a more personal level, which leaves an impression that is lasting and stands apart from your competitors.

What is a decent SaaS retain rate?

Mix Mannel's Product Benchmarks Report recommends SaaS retention benchmarks between 20 and 35% based on your industry.

For most industries, average retention of eight weeks is less than 20 percent.

In the case of products that are part of the media or finance industry An eight-week retention period above 25 percent is considered an elite.

For SaaS as well as e-commerce with a retention rate of over 35 percent, this is considered elite.         Mixpanel's Product Benchmarks Report

95.87 97% Of iOS users stop using the app within the first day of their 30th birthday, according to Statista's 2021 Quarterly Report. In the face of such a high decline rate, it is important to prioritize activating your customers and encouraging them to take a desired behavior or action as soon as possible so they can find value from your offerings.

The true cost of customer turnover

As customer retention is the not-so-secret element to SaaS achievement, creating a predictable client base is crucial. Customers are your most valuable assets, therefore the more time you put into making your products better and offering the best user experience the longer your customers will remain.

The cost of churn doesn't only mean less revenue; it also means your team will have to work hard on finding new customers in order to replace customers who have left. This is the real cost of customer churn:

  Unrealized expansion possibility  

Along with losing the revenue from recurring subscriptions each year, you also lose the possibility of revenue generated from renewals and upsell deals. This is a metric which many SaaS companies fail to take into account when they calculate their costs of churn.

Losing expansion opportunities is especially cost-effective since the probability of reselling an existing client is significantly greater than selling to a potential customer.

Because your existing customers are most likely to return One of your main priorities should be to retain your clients.

  Added customer acquisitions costs (CAC)  

If you lose a customer and your marketing team is required to take over the loss by trying to win back lost customers and dedicate efforts and time to bringing in new leads and prospective customers.

7 ways to improve SaaS customer retention

    Onboarding and Activation    

"We have all of the material from our onboarding webinar which was tested and test-driven. We thought that creating a course could be an excellent way to scale up the process, and heard Plus was an excellent alternative for video-based material."     -DESIREE EVANSHEN

Reduce buyer remorse by highlighting your best features

Through the entire experience of a customer with your product - beginning from the time they discover your brand's name to the moment they buy your product - they experience various feelings.

In the first couple of hours after someone makes a purchase is when they're most likely to be remorseful about their purchase, which is the ideal time to promote your product's advantages, show your customers how they can use it and reassure them that they've made the right purchase.

One way to give the "wow" factor when customers first sign up is to give them a virtual "tour" of all the options accessible to them as soon as the account has been activated. These tours provide the most thrilling, useful features and benefits as well as help users set the account.

Once you have given your clients the virtual "tour" of the features available to them, you can use online training courses to improve their use by educating your clients on how they can use these features to achieve their specific goals and resolve their issues.

Exemple of Customer Retention: Product and Business Training

Automate your communication through welcome emails

Send your customers a triggered welcome email with instructions and next steps when they purchase. Create a welcome email trigger within your platform for marketing automation so new customers can easily learn how to proceed and what they can expect.

Your welcome email should include the tools, support procedures, as well as the resources the customers require to begin. A welcome email will make a huge difference in making your client feel ready to begin learning your product without any confusion.

There is also the possibility to create an automated welcome message funnel by using your marketing automation platform. This is a set of automated emails that will be sent out upon purchasing, and guide your customer through the onboarding process.

Education content, as well as thoughtful sales

After your clients have gone taken through an initial introduction setting up their accounts, received your welcome email and have learned to make use of your product's functions through online training, they're well on their path to experiencing their first experiences using your product. The initial successes will make them aware of the product's quality, ease to use, and efficacy. What happens next?

As time passes, many users will begin to look into your sophisticated features. After a potential customer is able to master the fundamentals and observed outcomes, they will have an organic curiosity about the possibilities of what they could do using your software.

It is here that your educational content could have the greatest impact on retention as well as revenues. Getting too excited at this phase and pushing upsells can be tempting, however, you must remain sly. Make your customers aware of the advanced features they'll get with a premium or higher-tier account, by showing them additional online courses and videos, or even case studies of other possibilities with your system.

It is possible to create the Online Academy for your customers just like Engaging Networks did, teaching your clients a variety of different skills and ways to improve their performance using your products and products and.

    Educational Customer    

1. Customer Case studies:Customer stories are a un-salesy and inspirational method to explain to prospective customers how other customers have found success using your product and how it could work for them.
2. Articles and Blogs: Ideal for sharing steps-by-step instructions and in-depth information regarding the use of products or services.
3. Screen-captures and video recorded:Are a great tool to provide step-by-step guidance as well as instructional videos and tutorials that show new users the basic knowledge of how to utilize your product or service - specifically for visually impaired users.
4. Webinars: Businesses can go deeper into the more complex topics regarding the product or service you offer, answer your customers their questions and get in touch to them in a more personal way.

The Customer Retention Model: Free and Paid Certifications

Hootsuite started using online education to connect with their customers at all stages of their journey. They also aim to bring in new customers and build their brand as an industry leader within the field of social media.

    Customer Support and Success    

Customer Support vs . Customer Success: Reactive and Proactive strategies

Customer support is a reactive strategy focused on solving clients difficulties, conquering obstacles and answering questions. It's about meeting the demands of your clients in order to help them use your services and products.

Customer success is a proactive strategy, focusing on the long-term experience customers have with your products and services.On the flip side, customer service is reactive, responding to problems as they come up.Customer success is non-transactional mainly, and is often relationship-focused, dealing with the entire customer and company lifecycle. An example of this can be seen in the Plus Customer Success Team. In their strategy, Plus customers get a team of professionals committed to helping them expand their online learning business. They offer migration, implementation and launch support and best practices and expertise in expansion and strategies across the whole customer journey. The Plus Priority Support Queue is available for technical support.

Tooltips

Whether they're in your inbox or even on your Instagram you've had to be guided by the tooltips at some point. Tooltips are short messages appearing when you interact with specific elements on a website or in mobile apps.

In the process of continuing to connect to educate and engage your clients, you can use toolstips for:

• New feature announcements: Schedule tooltips to introduce new features, without disrupting the workflow of your users.

• Engagement of the product: Getting customers to use your product is different from getting them to use the product to its maximum potential. Well-placed tooltips drive user engagement, nudging them in the right direction in order to get the most value from the product.

Support webinars & Questions Us Questions sessions (AUA)

Through hosting webinars (free information sessions) it is possible to show your customers how your product works and address their greatest issues. Webinars are not about selling , or delving into the technical aspects of every feature. Instead, focus your webinars around your viewers' problems.

"Ask Us Anything" (AUA) sessions are your opportunity to interact with your viewers and create a the feeling of being part of a community. When you've got this data and know your audience, you'll be better ready to adapt your content according to the customer's requirements. The key is to keep your content short and simple. SaaS is already complicated enough, so don't frustrate your readers by overburdening users with lots of information.

    Make the knowledge base    

Knowledge bases (or help center) is a webpage with resources to answer the most frequently-asked queries. Knowledge bases are essential in the world of tech and software. They serve as organized (and very searchable) pathways to learning that aid clients make use of your products. Knowledge bases that are well-organized help to speed up learning, helping customers realize value more quickly. The knowledge base you have will contain your detailed product documentation as well as interactive guides and note-taking notes on product updates. People prefer to find the answers themselves and find solutions versus having to call an individual for assistance, so knowledge bases lower the cost and load on the customer service staff.

    Online Learning Products to increase participation    

Businesses are turning to online courses to increase engagement now more than ever. Online courses are among the most efficient assets to make investments in since you can create them and make use of them over time to reach out to your current and potential customers. As opposed to the standard free 30-minute onboarding and demos which are now standard in SaaS online classes offer more interaction, cost-effective and scalable. Investing in making an engaging, highly usable training course for your company and then continuing to improve on will give greater value for your buck than hosting continuous live classes as well as onboarding calls.

The top benefits of an online training platform for your customer retention strategy:

1. Courses online can reduce the chance of losing customers in particular during the initial sign-up and getting started on the customer journey.
2. Online courses are major benefits for customers. For example, If your email marketing program cost $47 per month and you build a high-quality course about email marketing that costs $500, then you are able to throw in your course for no cost to your clients and instantly increase their value by 10x.
3. The majority of people sign up for the online course and stay in the area to use the program. In this case, Latasha James offers T the Freelance Social Media Management Roadmap which shows her customers how to utilize popular software such as Canva and Honeybook as well as generate leads for these businesses.
4. They're extremely cost-effective. Digital products require lower upfront costs as compared to physical goods which is why you're able to utilize repeatedly.

Beyond product training, provides its customers with other areas which can help grow their business, like selling and marketing.

How to track and optimize saas retention measures

By now, you understand how important customer retention is on revenue. You need to evaluate your customer retention efforts so that you don't waste them. It is crucial to evaluate the performance of these methods once they've been put into place so that it is possible to adjust them and find areas for improvement.

Here are some of the most popular measures of customer satisfaction and the best way you can measure these:

    Net Promoter Score (NPS)    

In order to determine the level of your NPS, you'll ask your customers, "On a scale of zero to 10, how likely would you to suggest your services to someone else?" From there, you'll want to know what they thought about the reason why they answered they did.Net Promoter Score
 Net Promoter Score (NPS) measures the level of satisfaction and loyalty among customers. This question can be deployed in a variety of ways such as a survey as well as an email follow-up on customers' interactions, a pop-up notice, or an online poll.

When you've collected the responses to the question After that, add all your answers and divide them by category:

1. Promoter: Responded to the questionnaire with a score of 9 or 10.
2. Passive: Responded with an average of 7 or 8.
3. Detractor: Responded with a score between 0 and 6

On the basis of these categories, you'll be able to calculate your percentage of promoters and opponents. To determine this, multiply the amount of people who rated you positively by the total number people who responded. Repeat this process for those who had a negative opinion of you.

Finally take your detractor percentage and subtract it from the promoter percentage to get your NPS score.

    Churn Rate    

    Activation rates    

For your customers to truly appreciate the benefits of your product it is essential to activatethem. Activation is when a user changes from trial to becoming a paid customer. If users do not activate at all, they'll stay on a free plan or opt to leave. Your activation rate for users will tell you how many users that began a trial reach the activation point. For calculating your activation rate multiply the number users who made it to the activation stage by the number of clients who signed up, then multiply that results by 100.

    Customer Lifetime Value (CLV)    

CLV determines how much profit you could expect to earn over the course of your relationship with each customer. CLV can be a measure of your profitability. It allows you to make exact forecasts, and tells the most loyal customers are. To measure CLV, you must use these metrics:

2. Value of a typical purchase
3. Average purchase frequency
4. Customer value
5. Average customer lifespan
6. Customer acquisition cost* LTV can be measured by four different methods conventional, historical, prescriptive and co-based. Standard approach: LTV = (GML * Retention rate) (GML * Retention rate) (1 + Discount rate + Retention rate)

    The Cost of Customer Acquisition    

Your customer acquisition cost (CAC) is the median sum you invest to gain a single new customer. CAC can help you determine whether you're successful in getting new customers. Each business owner's aim is to maintain their cost of marketing and sales down, effectively keeping their CAC as low as possible.

A study by Mixpanel and the Product-Led Alliance suggests (1) that churn or retention, (2) average daily active users and (3) percentage of active users is among the most important engagement metrics tracked by top managers of SaaS companies.

Other SaaS metrics to consider

    Referrals    

A SaaS referral program can benefit existing customers through enticing customers to promote your services with other customers. Over the long term, referral programs help save your SaaS enterprise from CAC and increase customer loyalty. When you pick the right referral tool an effective program is straightforward to implement and runs in a way that is automatic.

Engage customers of your SaaS customers to sign up for your referral program. You can share their unique referral codes on direct messages or social media and then redeem the rewards when others sign up by using their promo coupon code.

It is essential to track the results to know if your referral program is working or not. When you evaluate the cost of your referral program against. revenue, these numbers will tell you where to make improvements or determine if your referral program is worth it. You'll know your referral program has a positive ROI when the revenue from referrals is higher than your cost to acquire customers (CAC).

    Average revenue per user (ARPU)    

It is possible to calculate the ARPU by looking at how much income each user earns.
 ARPU reveals which items or segments of business perform well. To assess your success and identify ways to improveyour performance, it's best to look at the typical ARPU benchmarks in your industry.

    Monthly Recurring Revenue (MRR) in addition to Annual Recurring Recurring (ARR)    

MRR is the measure of your business' monthly recurring revenue. ARR measure your company's annual regular revenue. Both metrics provide valuable insight into the health of your company. MRR and ARR are critical for scaling your business.ARR lets you see the year-to-year progress at a higher level, allowing for long-term product planning and creating business roadmaps. MRR is more in-depth, showing the growth of your business month by month. MRR will reveal any immediate effects of modifications to your product or pricing strategy.

  Conclusion  

Making investments in retention of customers for your SaaS company is just good business sense. Every time you lose a customer because of churn, you'll be charged the cost of customer acquisition for replacement. While retaining customers is critical growth for growth however, it is a major investment. The first investment in customer retention should be through online classes.

The online courses enable your clients to benefit immediately of your products because they give you the chance to demonstrate clearly your product's value and teach them how to make use of it in order to reach their goals. Businesses are more drawn to online classes than ever before since they're one of the most economical assets that you can invest in. If you develop your online courses, you will be able to make it available again and again to engage current and future clients.

Making an engaging, highly usable course at once is always better than conducting interviews, hiring, or providing training and paying salary for full-time workers each month for call to onboarding. In removing the friction points from the customer's journey to learning, and using educational content to keep them engaged and engaged, you'll create a loyal client base, which will result in predictable and recurring income.

  Ready to improve the customer's retention within your business?  

   The article was originally published in October of 2017 and updated on November 20, 2022 to make it more complete.