B2B SaaS retention is a marathon. The competition is fierce and customers today have higher demands than ever. If you’re growing a SaaS platform, you already know that customer acquisition means nothing without churn retention. The question is: how does one stand out?
According to ZenDesk’s Trend Report, approximately 50% of customer churn occurs after a single bad experience. That’s a shocking statistic. You might provide the best software for your niche, but dozens of other competitors can be offering similar high-quality services with competitive price tags and excellent customer support.
To maintain happy and loyal subscribers requires creativity and sustainable tactics. That’s where customer retention strategies and tools come at hand to automate this process for you. At Churnkey, you get valuable insights on why your churn rates occur and how to prevent customers from cancelling their subscription.
What Is Customer and Revenue Retention?
Before jumping into the ins and outs of B2B SaaS retention, let’s cover some of the basics. Customer retention is the ability of a business to maintain its customers over a monthly or annual period by reducing its churn rates. It is defined by a customer retention rate, which is calculated as follows:
Customer retention rate = (Customers at the end of a period - Customers acquired during that period) / Customers at the beginning of the period.
Similarly, revenue retention is based on the amount of recurring revenue your business managed to maintain over a period. It represents your financial health and business growth.
So, even if customers are churning, you still might be able to increase your recurring revenue with upsells, cross-sells, and upgrades from existing subscribers. It is calculated with Monthly Recurring Revenue (MRR) or Annual Recurring Revenue (ARR) as follows:
Monthly Recurring Revenue = Total MRR from existing customers / Total MRR from customers of the previous month.
Retention Metrics for Your B2B SaaS Company
Retention is important to handle finances and clients in the long run. Alongside customer and revenue retention, other key customer retention metrics that help plan your strategies are:
- Net Revenue Retention (NRR) - How much revenue a business retains within its current customer base, including expansion. It’s calculated as follows:
Net Revenue Retention = (MRR at the start of the period + expansion - churn - contractions) / MRR at the start of the period.
The NRR formula will provide results between 60% (bad) to 150% (excellent).
- Gross Revenue Retention (GRR) - How much revenue a business retains within its current customer base, excluding expansion. It’s calculated as follows:
Gross Revenue Retention (GRR) = (MRR at the start of the period - churn - contractions) / MRR at the start of the period.
The GRR formula can never give results higher than 100%. Thus, it will always be equal to or lower than NRR.
- Customer Lifetime Value - How much revenue a customer generates during their relationship with your company. It’s calculated as follows:
Customer Lifetime Value = Average amount of purchase x Number of purchases per year x Average length of customer relationship in years.
You can learn more about Net Retention vs. Gross Retention in the Gross Retention vs. Net Retention vs. Logo Retention guide. Consistent with prior years’ data, benchmarks for B2B SaaS companies indicate an NRR of 100% and a GRR of 90%.
These benchmarks can function as helpful guides on what to expect on customer retention metrics. However, they are not to be taken seriously, as every business is different. Parameters such as time in the market and benchmarks’ accuracy can create chaos of metrics that disorientate B2B SaaS businesses from what matters the most; customer satisfaction.
Customer Retention Strategy Hacks and Best Practices
Research shows that 44% of companies focus more on customer acquisition than retention. In the churn vs. retention battle, it’s no use trying to onboard more customers when you can’t keep the ones you already have satisfied. According to Harvard Business Review, even a 5% increase in customer retention can improve your company’s profit by 25-90%.
The best customer retention strategy doesn’t solely count on defense mechanisms. Instead, you will need a 360 degree approach that keeps customers loyal and likely to recommend your software to others. Here are some strategies and tools to improve your B2B churn and customer retention:
1. Ease the onboarding process
From the moment a prospect becomes a client till a few moments before they churn, customers need to be educated. They need to understand how your software works and how they can make the most out of it. Create guides, ebooks, forums, or blog posts to teach them how to use your product and avoid frustration.
Ghost, for instance, managed to increase their conversion rate by 1000% just by fixing their onboarding flow.
Treat them with care, welcome them, ease the onboarding burden and keep them engaged via the most natural channels. In exchange, they’ll reward you with loyalty. Use tools like Nickelled to answer their questions before they ask during onboarding and guide them every step of the way.
2. Be Aware of Red Flags
Red flags are warning signs that can signal you have a problem with customer retention. Examples include customers who haven’t signed into your platform for a while, non-engaged subscribers, or even customers looking for cancellation information on your website.
Restore your contact with them via a call or a meeting and ensure they have everything they need to remain active. For B2B companies, a churned customer is not just an individual, but a whole team who will be quitting for another competitor. Use tools like Zoho CRM to access your contacts’ history, touchpoints, and activity for your customer retention predictions.
3. Treat Loyal Customers
Your loyal customers are your biggest advocates. A simple thank you card, an anniversary surprise, a free upgrade, or a VIP customer portal are excellent ways to show your appreciation. Set and celebrate milestones centered around product usage, similar to how MacPaw does here:
They also indicate that you care about their businesses and want them to succeed, which adds a touch of personalization. Make powerful impressions and win them for the long run.
4. Ask for Customer Feedback
Treat customer feedback like gold. When customers take the time to answer your surveys and provide constructive criticism on your software, it shows that they care. Use this feedback to improve your services and showcase that you listen to their requests. Open up a dialogue with your customers and make sure you implement their wishes.
Tools like Canny will help you analyze your customer’s feedback and improve their experience. You can also use Churnkey to collect and interpret insights gathered from the point of cancellation.
5. Communicate Constantly
Keep customers in the loop with all the progress you make on your product. It creates a “winning team” vibe and could solidify their bond with your company. In parallel, this could create upsells and cross-sell opportunities.
For example, you can use automated email campaigns to welcome your subscribers, educate them on your software, offer dates for calls, and help with their onboarding process.
6. Craft Better Relationships With Customers
Churnkey’s personalized offboarding experiences and dynamic discounts keep customers subscribed, while collecting insights on why they decided to churn in the first place. These customized cancellation flows can reduce churn by up to 42% and increase customer lifetime value by up to 26%.
7. Promote Annual Contracts
As a B2B business, your main focus should be to onboard as many customers as possible with annual contracts. Annual contracts create more solid and meaningful partnerships that last for at least a year, creating lock-in for both parties.
In addition, most of the time, clients that opt for annual subscriptions would rather update to premium packages than change a software.
They are usually more loyal as they’ve tested and approved your product and are likely to suggest it to others. Highlight the benefits of an annual subscription in your pricing tiers and employ email campaigns to offer your current customers discounted annual plans.
Increase Customer Retention With Churnkey
When it comes to customer retention, B2B SaaS companies face the great challenge of maintaining high-quality customer service and active engagement to avoid losing their subscribers. Their customers are businesses that have their own struggles and milestones to reach. Therefore, they set higher standards and expect premium services.
In the churn vs. retention battle, retention should prevail. At Churnkey, we help you win the retention battle with our personalized offboarding experiences, encouraging customers to accept discounts or to pause their subscription instead of cancelling it.