Customer acquisition is an important part of growth for any SaaS business, but if the customers you are acquiring are simply replacing customers who've churned, you'll see no growth. In the long term, this is unsustainable. So customer retention is just as important as customer acquisition. Unfortunately, this important part of the SaaS business doesn't always get the attention it deserves.
Customer retention programs are strategies put into place by a SaaS company to help reduce churn. The goal of a good customer retention program is to predict conditions that cause customers to churn and preemptively address those issues. Although many issues will be unique to a given company, there are also some strategies that are applicable to every business.
We mentioned earlier that retention doesn't get the same attention that acquisition does. This is partly due to the fact that people don't recognize the importance of retention. But another factor is likely that retention can seem very difficult. Understanding what leads to this perception can help overcome some of that difficulty.
Every business ever started needs to get customers. Because the need for acquisition is a given and the need for retention is limited to subscription businesses, the latter is often overlooked. This means the sales team is one of the first teams to get hired and the retention team, if it exists at all, is underfunded.
When you first implement a retention program, it can feel like you are just spinning your wheels. It seems like nothing is happening; however, it takes time. This may lead to the false perception that retention is harder than it is. Though results are not immediate, they're well worth the wait.
Although there are many strategies any business can benefit from, not all of them are going to solve a particular business's primary reason for churn. Seeing the most meaningful results means moving away from cookie-cutter programs and finding the one that best fits the problem.
Improving retention takes time, and tracking the results means following the right metrics. There are three key metrics that will help you determine how much you are losing to churn and how effectively your retention strategies are performing.
Every business is different. The reasons customers leave your service will be completely different from the reasons they leave a competitor. Understanding the unique struggles of your customers throughout their journey will help to extend their lifecycle and reduce your churn. There are a few steps you can take to help identify these causes.
Figuring out the reasons customers want to leave is a mandatory part of reducing churn. But sometimes, leaving isn't the customers decision. Failed payments are a big cause of churning and minimizing those will help you focus on the real issues that drive customer decisions.
Clues to why customers churn will be hidden in your metrics. Unfortunately, the reasons are so varied that we can't tell you exactly where to look beyond a dropping net promoter score. It could be that customers aren't spending as much time using a new feature as you'd expected; are you educating them properly on its use? Customers who don't log in very often are certainly risks for churn, how are you reaching out to them to keep them engaged?
Scouring the metrics and playing detective can be a great way to figure out why customers are churning, but there is a more direct way. Ask them. You should be soliciting and reacting to customer feedback throughout their life cycle. This will inform you of their struggles before they become a problem and tell you why the left if they ultimately do.
While you'll have to find your own unique reasons for churning customers, there are some strategies that can help every SaaS business slow churn. You should consider implementing some of these strategies into your overall retention plan.
Some of the above may work well for your business. Others may not make any sense at all to your business model. Others still might make sense but do not address an actual concern with your particular customers. In order for your efforts to have an effect on your churn rate, you'll need to come up with a system that is tailored to the value you drive and built around a proposition that your customers respond to.
By using your metrics to see where your customer base is struggling and experimenting with different methods to help relieve them of those struggles, you'll soon find the combination that works best for your business and be on the road to keeping churn low.
We've talked about some strategies that can help with retention, and we've talked about the need for a retention team to have a budget. Beyond the simple strategies mentioned, what does a retention team do that justifies their cost? There are several number of customer retention programs that your team can make a part of their regular routine the same way your sales and marketing team have routines specific to their goals.
Customers who aren't able to fully take advantage of your software are likely to grow frustrated and leave at some point. An onboarding system will help them get up to speed, so they can hit the ground running and immediately start out having a rewarding experience with your software.
Even after they've been onboarded, your customers may struggle. This is especially true if a new use case pops up that they aren't familiar with, or a new challenge arises that your software doesn't address well. A customer success program will help proactively stay in touch with those customers and ensure that they are getting the most out of the software by finding solutions to the problems they have.
It can be easier to win back old customers than it is to win over new ones. The easiest customers to win back are those that have previously rated you highly and never sent complaints to customer support. These customers might have left due to financial issues (that could be resolved with a discount) or some other reason besides being unhappy with the service. Start with these customers and then move on to more difficult ones.
Keeping existing customers is just as important as getting new ones. You'll need a solid plan in place if you are going to minimize churn. To execute that plan, you'll need a proven set of tools. With free ProfitWell Metrics, you'll be able to track the KPIs that you need to inform your decisions about why customers churn and gauge the success of your retention efforts. If failed payments are causing your customers to churn, ProfitWell Retain can help win them back.