SaaS is incredibly unique when it comes to reducing churn and customer retention because, in theory, there’s not a true end to your customer's journey. There’s a ever-evolving customer lifecycle and the lifeblood of your company’s recurring revenue depends on that lifecycle.
If you want to retain more customers and increase the LTV of those customers, one of the best ways to do that is by identifying the most valuable parts of your customer’s lifecycle or journey. Keep reading to learn more about the steps of a SaaS customer lifecycle and how you can use that information to reduce your churn and increase customer retention.
How to Retain More Customers and Increase LTV by Identifying The Most Valuable Parts of Your Customer’s Lifecycle
When it comes to retaining users and increasing your customers’ lifetime value (along with customer satisfaction), it’s important to identify where users realize the most value from your SaaS product during the customer lifecycle.
Of course, in order to do that, you need to know what the exact steps of your customer’s lifecycle are so that you can analyze and identify where they’re deriving the most value — and where you may be losing them.
Steps of a SaaS Customer’s Lifecycle
The very first stage of the customer lifecycle is awareness, the realization on your customer’s part that they have a problem or an issue that your product could solve. This awareness is built through marketing (especially free resources like YouTube videos, blog posts, or social media), demonstrations, referrals, etc.
Think of this as the education element of this whole customer lifecycle. You’re not trying to sell anything to anyone at this stage — you’re just trying to provide information, build awareness, and demonstrate how your product addresses specific pain points or problems.
2. Customer Qualification
This stage is essentially where the customers who have become aware of your product venture in a little further, to see if this product really can do what it says and if it’s a good fit for them. This is the point where a customer would be perusing your website, downloading a free ebook or webinar, and signing up for a free trial or free version.
On the business side, this is the point where you want to really lean into nurturing a relationship, providing helpful educational and onboarding resources, and demonstrating your product’s value. Provide targeted offers relevant to the needs of these customers. Make sure the customers testing out a free trial are reaching key milestones in your product.
At this stage, your customers will pass their first major milestone. Your sales team has accomplished their goal and you’ve successfully converted a lead into a paying customer. It’s vital to thank your new customers, continue demonstrating and proving value, offer dedicated support and customer success management, and request customer feedback, so that you can make the previous steps easier for customers moving forward.
This is where the cycle starts to shift in a way that’s very unique for SaaS companies. After all, unlike some other business models, your goal isn’t for your customer to purchase this particular product once. Since the majority of SaaS products are purchased on a monthly basis, it’s very easy to lose paying customers. If they’re unhappy, find a better offer from a competitor, or even simply don’t see the value of your product, it’s very easy for them to cancel.
In order to increase the LTV of your customers, it’s essential to make the most of this activation stage. This is where training and educational materials will come into play. Your explainer videos, courses, demos, and other resources, along with proactive outreach, will likely make the difference between a one-time subscriber and a weekly/daily active user.
Once you’ve successfully made your product an important part of your customer’s daily or weekly routine, you need to ensure that you’ve actually made their routine better. That’s the most important focus, leading up to your customer’s renewal period. Whether it’s a month or a quarter or a year, there’s going to come a time when your customer has to decide if they want to continue paying for your SaaS subscription moving forward.
As you draw nearer to that time, it’s important that you remain in close communication, if you want to increase your customer retention. Ask for feedback and try to suss out whether they’re experiencing any issues or have any complaints that would cause them not to renew.
It may seem like, once you’ve gotten your customer to renew, you’re home free as far as customer retention and LTV is concerned. But if you stop with renewal, you’re missing out on major potential for growth.
By continuing to provide your customers with a consistently updated and enhanced product, ongoing educational resources, and loyalty benefits (like a rewards or affiliate program), you ensure that you’re not just retaining customers but also taking your most loyal users and turning them into salespeople. Through customer reviews, testimonials, and good old-fashioned word-of-mouth marketing, the customers that you’ve guided successfully through this lifecycle will bring even more paying customers to your product.
How to identify the value
Now that you understand the customer lifecycle, it’s time to figure out how you’ll identify the most valuable parts of your customer’s lifecycle. Because that’s the real key — to look beyond traditional customer success metrics and use the customer’s lifecycle to figure out which stages hold the most value for customers and which stages are the biggest churn culprits.
For example, let’s say that you notice a big drop in numbers during the customer qualification cycle. This offers you a clear indicator that your customers didn’t see enough up-front value in your product to make it to the purchase stage. If that’s the case, it’s time to reassess your educational materials and your free trial offer.
If, on the other hand, you’re seeing big numbers at the activation stage but losing a large percentage of those when you hit the renewal stage, then it’s fair to say that your product has stopped serving their needs somewhere along the way.
Using your customer’s lifecycle to retain more customers and increase LTV in your business
Now that you understand the customer lifecycle, try to move beyond vanity metrics and analyze in-depth reports like a customer cohort analysis, using them to identify at-risk customer accounts and to understand more intricately how customers are interacting with your product.
And with Churnkey, improving your strategy and boosting your company’s profitability is easier than ever. We’ll help you supercharge all aspects of customer retention and optimize your company’s growth.