Are you ready to boost your SaaS retention rate and take your business to the next level? If so, you’re in the right place!
SaaS competition is fiercer than ever, with new businesses popping up every day. You have to stand out from everyone else if you want to grow your audience and your customer base.
But getting people in the door and placing their first order is only one piece of the puzzle. If you want long-term growth and engagement, you need a strong customer retention strategy.
Put plainly, retention is the percentage of people who stick with your brand over a set timeframe, usually monthly or annually. It makes sense that when people stick with your brand while you’re actively getting new customers, you can expect to see steady, meaningful growth.
In this guide, we’re going to offer actionable advice and best practices for increasing your SaaS retention rate and creating a top-notch experience for your customers. You’ll also learn how to track your retention rate and why it matters for SaaS leaders and brands.
Let’s dive in!
Why your SaaS retention rate matters
Before we get much deeper into this, it’s important to learn about SaaS retention and what benefits it offers to marketers and business owners.
Here are a few highlights worth considering:
- Boost revenue – If people keep renewing their SaaS subscription, they’re contributing to your overall profits. Combine this with your new customers, and you have a recipe for proper funding, which means more opportunities for growth and innovation.
- Save money – Believe it or not, it costs 5–25x more to win over a new customer than to retain an existing one. By focusing on retention, you’re effectively saving money on marketing every time an existing user renews their subscription.
- Sustainable growth – High churn depletes your customer base and revenue more quickly than new customers can backfill it, which can put your business and finances at risk. If you’re working on retention, you can spend time gradually growing as you nurture existing customers and build rapport with new leads.
- Improved Customer Lifetime Value (CLV) – Higher retention translates to a higher CLV. When you improve the average amount people spend before they churn, you have more to invest in evolving your product and growing your brand.
How to calculate your retention rate
Now that you know why customer retention is important, you’re probably wondering how to track it.
Well, here’s a simple formula you can use to calculate your SaaS retention rate.
Retention metrics you should monitor
If you want to improve your retention rate, you need to understand the metrics behind it and why they matter.
Here’s the gist of it;
- Customer retention rate – This number shows how many customers you retain over a specific time period, usually represented as a percentage. A high CRR indicates customer satisfaction and loyalty, which are essential for sustainable growth.
- Churn rate – Churn is the complete opposite of retention because it measures how many customers cancel their subscriptions during a set time. Monitoring churn helps you identify pain points in your customer journey and areas to improve.
- Customer lifetime value (CLV) – This metric calculates how much revenue a customer generates for your business throughout their lifecycle. CLV is important because it shows how much value you’re gaining from retention efforts, guiding your investment priorities.
- Monthly recurring revenue (MRR) churn – This metric tracks how much recurring revenue is lost each month due to cancellations. Keeping MRR churn low ensures steady cash flow and highlights whether your pricing and service are resonating with customers.
- Net promoter score (NPS) – NPS measures how likely customers are to tell others to try your product. A high NPS often correlates with higher retention since loyal customers are more likely to promote and stay engaged with your brand.
8 Proven strategies to boost SaaS retention
Streamline onboarding
A smooth onboarding flow is one of the best ways to improve your SaaS retention rate. When people buy a subscription, they want to get as much value as they can from it.
A confusing or absent onboarding program can make it hard for people to get comfortable with your product, which could cause them to churn prematurely.
Our advice here is to design a smooth onboarding process that takes users straight to their first “aha moment,” where they understand how your product addresses their issue.
With Encharge, you can easily automate onboarding for your users so everyone has a chance to find success with your product. The best part is this can be done in just three easy steps with the drag-and-drop flow builder.
You’ll want to start by mapping out the average customer flow and friction points. Understanding where things are a bit confusing and making them clearer can help acclimate new users to your product from the start.
Creating flexible, engaging onboarding indicates that your SaaS can support your audiences’ needs and help them make the most of their purchase, which means they’re more likely to stick with your product.
Invest in a customer success program
A customer success program is another great way to build customer loyalty and boost your retention rate.
Your success team is tasked with understanding early warning systems for customers at risk of churn and reaching out to people when they need it the most.
Decreased product usage, decreasing activity, or outstanding support requests can be indicators of dissatisfaction. Tracking and analyzing this data can help you predict when someone is having trouble so you can step in and take action.
Another best practice is monitoring customer health scores, which aggregate metrics such as login behavior, feature usage, and support interactions. This provides you with a clear indication of what customers like about your product and where you can improve.
If you’re thinking of starting a success program, you’ll want to start talking to existing customers so you can find out what success means to them. Once you know what your customers deem as successful, you can align your teams in a way that helps customers reach their goals while keeping an eye out for other forms of success.
Focus on long-term customer education
Proper education beyond onboarding enhances the understanding and trust in your product and results in a higher retention rate.
You should start by creating a knowledge base and troubleshooting section that covers some of the major questions and roadblocks posed by your audience.
The goal is to structure articles, FAQs, and guides to cover all of the major issues and features users could run into. Adding a searchable library enables customers to locate solutions quickly, which minimizes frustration and customer service requests.
It’s also a good idea to develop step-by-step video tutorials for power app features. Video is much more engaging and easier to consume than text. If you need another reason why video is important, consider this: surveys show that 96% of marketers who use video marketing say it has increased users’ understanding of their service.
With this in mind, it’s a good idea to use brief tutorials to educate users on workflows, power features, and vertical-market uses. Emphasize real use to demonstrate the value of your product so they can start using it effectively as soon as your video ends.
Your customers should have a place they can go for self-service. A well-kept knowledge database is a surefire way to help your audience find value while boosting your retention rate.
Establish a robust email marketing plan
If you’re not using email marketing to engage with your audience, you’re going to have a tough time connecting with your customers when they show signs of churning. The result could result in a gradual drop in sales and engagement, which is far from ideal.
Your best bet is to establish action-based triggers for email users. If the user hasn’t logged in for two weeks, for example, start an email series asking if there’s anything you can do to help.
Similarly, if they achieve a milestone, you can trigger an email with a congratulatory message and a special gift, like a limited-time discount.
Since 4 out of 5 people prefer brands that send personalized content, it’s clear that this is the way to go with your emails. You should segment users by lifecycle stage, product use, or goals so you can be sure everyone’s experience matches their needs, experiences, and expectations.
Research shows that this strategy works, with 78% of high-converting email campaigns being highly segmented.
Automation software such as Encharge.io makes the process scalable and easy to use. You are able to automate email campaigns for onboarding, upselling, renewal reminders, and much more. Automation is a must-have; It saves time and allows you to provide a personalized experience to each user.
Create a feedback loop
A good retention program relies on understanding your customer’s goals, needs, and pain points. Establishing a feedback loop allows you to learn from users so that you can improve your SaaS over time.
You’ll want to think about all of the different feedback channels out there and how you’re best able to connect with people and gather actionable feedback.
When in doubt, review your analytics to uncover your most-visited blog posts and landing pages and include a short optional survey that relates to your product or user pain points.
Sending surveys to existing customers is another crucial part of the feedback loop. You want to hear what people actively using your product have to say. Be sure to ask questions about what they like, what they don’t like, and what features they would add if they could. Here’s an example:
Combine this information, and you have some solid data that you can use to make meaningful improvements to your SaaS and your business as a whole.
When you can, it’s a good idea to close the feedback loop, too. You could do this by emailing customers and letting them know how their thoughts and suggestions are shaping the business.
People love a product that works, and they love sharing their opinions. You can do both of these at the same time by creating an engaging feedback loop. Like most of the marketing strategies on this list, it can and should be automated at certain points!
Offer scalable customer support
As your SaaS business grows, so must your support in terms of quality. Excellent customer support has the power to turn an unpleasant experience into customer loyalty.
It’s a good idea to offer multi-channel support so customers can reach you in a way that’s comfortable for them. Common channels include email, phone, live chat, and social media. Opening the door like this makes it super easy for people to reach out, which means they’re less likely to churn.
We’ve already explained how a self-serve knowledge database leans into this idea of scalable customer support, but it’s just one part of a bigger plan.
You’ll also need to work carefully with your support team so they understand all of the most common customer pain points and questions and how to address them. Regular training and reviewing service calls or chats is the best way to uncover this information.
It’s also crucial to set guidelines around how your team helps customers. This could vary from place to place, but examples include repeating the question for understanding, aiming to help in 15 minutes or less, or inviting customers to leave a survey at the end of the session.
You probably know as well as anyone else that when people have a positive support experience, they’re far more likely to continue being a customer.
Test pricing options
Another creative way to boost your SaaS retention rate is to experiment with your pricing. People are more willing to stick with a product if they think the price point is reasonable.
There are a ton of ways you can adjust your pricing. The most obvious way is to offer customers who renew their subscriptions an exclusive discount. For example, you could send an email that says, “We appreciate you being with us for 2 years! We wanted to give you a special gift for year 3; here’s 33% off your annual subscription!”
Coupons like this will get people to take action almost right away, especially if they’re very happy with your SaaS.
You could also add different tiers based on features and functionality. You can see a good example of this below:
As you can see, there are a ton of different plans to choose from, all with different audiences in mind. Keeping a few different tiers available so customers can scale up if needed is a great way to keep people loyal to your brand.
You could also simply add an option to pay monthly, annually, and quarterly. Some people want to pay for their tool and forget about it, so they buy an annual subscription. Others might want to test it first, so they may choose to go with a monthly subscription. Giving these different pricing options is an effective way to gradually improve your retention rate.
Build a strong community
Developing a strong community around your SaaS product makes customers loyal and increases retention. The sense of belongingness makes customers stay faithful to your brand and learn from one another.
You’ll want to build user communities among customers to share best practices and experiences. They can be on social sites, online forums, or discussion groups within your app.
It’s very important to be active in these groups, either personally or via your social media team, especially when you’re first starting out. You want people to see that you’re there, you care, and you want them to make the most of your product.
Get involved in conversations, answer questions, and set an example for the rest of the community, and there’s a good chance the people in the group will follow your lead.
It’s worth mentioning that it does take time to build a community, so don’t be surprised if you don’t see results overnight. What we will say is taking this step will kick off a long-term growth strategy that ultimately leads to customer trust and retention.
Quick tips for sustainable SaaS retention
- Deliver ongoing value – Regularly updating features and addressing customer requests guarantees the users will still find your product indispensable.
- Monitor key customer touchpoints – Identify high-priority touchpoints throughout the average customer journey, i.e., onboarding, feature adoption, and renewal. Establish concrete KPIs for the identified touchpoints to measure success and institute responses that give everyone a chance to make the most of your product.
- Leverage data and analytics – Always track customer behavior, engagement, churn, and retention. With data-driven insights, you can tell what’s working and where you need to improve.
- Communicate consistently – Take the time to engage with your customers. You can do this through your customer success team by sending a survey and sending out messages when you make big updates to your app.
- Keep support channels open – Create processes for resolving customer problems quickly and efficiently. Your customer service team and knowledge database are crucial for this step. You need to make sure customers can get help when they need it across multiple channels.
- Hold regular account reviews – Set up regular touch-base meetings with key accounts to review their goals, their successes and challenges, and their victories. Utilize the reviews to agree on future plans and jointly strategize on how you can most effectively drive their results using your product. Ongoing account reviews build relationships and foster long-term loyalty.
Final thoughts
Long-term success for any SaaS business depends on customer retention. By focusing on your customers’ needs and how you can improve, you can create a product experience that keeps people with your brand for years to come.
The strategies outlined today will help you get started. If you’re looking for a way to get results and aren’t sure where to start, Encharge can help. With Encharge, you can set up many of the workflows we discussed above, including personalization, split testing, and email marketing.
With the right tools and consistency, you can get out there and start winning customers over and boosting your SaaS retention rate!
