For SaaS companies, getting new customers can be challenging — but keeping them can be even harder. We all know that churn is public enemy number one in the SaaS industry and that retention can often feel like an uphill battle. In fact, statistics have shown that 50% of consumers will switch to a competitor after one bad experience… just one. That’s all it takes. Competition is fierce in the SaaS world, and there’s always another option waiting just around the corner — an option that likely boasts competitive price tags and excellent customer support.
That seems like a lot of bad news. But here’s the good news. Retention may be a marathon, but that doesn’t mean it’s a lost cause. It is entirely possible to build a happy and loyal customer base and maximize your company’s growth. You just need the right strategies. Let’s take a deep dive into some the best long-term, sustainable SaaS retention strategies that you can start putting into action.
Optimize your onboarding
A truly effective SaaS retention strategy has to begin with onboarding. After all, onboarding is the first moment in the process where a customer could decide to abandon your product altogether. The onboarding step is the very first stage in your customers journey. In order to make that first step a good one, a step that excites your customers, you need to demonstrate value — and quickly.
Focus on education
When a customer signs up for your product, they don’t want to have to stumble around, figuring out how to set up everything all on their own. And they also want to see the value and benefits that you promised. That’s why it’s so important to make sure your product is intuitive and that you effectively educate your new customers on how to fully take advantage of all of your product’s features.
Make it impactful and personal
By offering an easy, concierge-style onboarding, you can preemptively solve new customer’s potential issues. Try to identify your product’s “aha” moment, the thing that makes it truly special, and then lead your new customers there during onboarding as quickly as possible. You can also try to make onboarding more personal. Superhuman, for example, uses unique 1-on-1 onboarding techniques that inclue a personalized video call.
Communicate with your customers
In the SaaS industry, much of a company’s success is determined by customer success. And customer success is based largely in the communication and engagement between your company and your customer. From the very beginning of the customer journey, it’s vital that your customer not feel like they’re solely interacting with your product. You want this to be personal for your customer. And, in order to do that, your customer needs to be interacting with actual human beings.
As early as possible in the customer journey, start building authentic relationships with your customers and aim to maintain that connection throughout the entire customer lifecycle. As soon as customers sign up, reach out to them to introduce yourself. After they've used your product or software for a while, interview them about their customer success story and how your SaaS product has helped them. Don't be afraid to get personal.
Ask for feedback
Whether your product is hitting all its marks or needs some improvement, your customers already know… so ask them! Customer feedback is one of the biggest keys to SasS retention, churn reduction, improving your product, and even developing future products. So ask for it, often, and treat it like gold. You can solicit feedback during onboarding, through in-app surveys, with quarterly emails, and even in your cancellation flows (more on that soon).
Leverage multiple channels
Communication doesn’t have to be isolated to check-in emails. If you want to truly engage with customers in an effective way, then it’s important to communicate across multiple channels. Send targeted email campaigns providing value, use in-app notifications and prompts to encourage reach-outs to customer service — you can even use SMS text messages to send reminders about renewals or time-sensitive information.
Set up exit surveys
Like we discussed before, customer feedback is always vital. But it’s never more important than when a customer is attempting to cancel their subscription. And that time between the moment when a customer hits the cancel button and the moment they officially finish the process of cancelling their subscription is one of the most crucial periods in the customer journey.
By simply asking a customer why they’re leaving, you not only have the chance to potentially fix whatever the problem is and retain that customer before they ever leave — you can also take the information you get from them and use it to improve your product moving forward and reduce future churn.
Here’s a great example of a simple exit survey from Click Funnels 👇
Track your NPS
We’ll talk more about SaaS metrics later, but we’re actually going to start with NPS right now. That’s because your net promotor score (NPS) is vital when it comes to customer satisfaction. Your NPS is used to assess customer loyalty, advocacy, and contentment toward your business, and it’s measured by asking existing customers how likely they are to recommend your product to a friend.
Reduce your involuntary churn
There are two main types of SaaS churn: voluntary and involuntary. Voluntary churn is pretty straightforward and self-explanatory — it happens whenever a user actively intends to cancel.
But involuntary churn is a little less clear, initially. After all, why would someone cancel if they don’t want to? It may be surprising, but involuntary churn is actually extremely common, and it could be a major problem for your SaaS business. For most SaaS companies, involuntary churn can account for anywhere from 20-40% of overall churn.
Involuntary churn, or delinquent churn, happens when a customer’s subscription lapses unintentionally It’s most often caused by failed credit card payments or technical failures by card processors. Involuntary churn is especially upsetting because the customer likely didn’t even want to cancel. They may love and use your product, and yet you’ve still lost their business. That’s why involuntary churn is such an important issue to target.
Payment failure reasons
As we said before, the most common cause of involuntary churn is payment failure. In fact, according to recent research, almost 35% of all credit card payments fail. And one of the most frustrating parts is that most failed payments probably aren’t the result of an issue on your end. Here are a few of the most common reasons for payment failures:
- Credit card expiration: A customer forgets to update a card that’s about to expire, resulting in a failed payment.
- Incorrect card information: If a customer inputs even one number incorrectly when they’re adding their payment information, then the payment will end up being declined.
- Insufficient funds: A customer’s account doesn’t have enough funds to cover the transaction. This can be a huge problem for SaaS companies, especially if your customer base regularly uses prepaid debit cards as a method of payment.
- System-related errors: Sometimes failed payments don’t have anything to do with the customer’s card. Instead, it’s an issue with the system. There could be a system malfunction or error or a temporary communication error.
Most often, payment failures are the result of simple errors that can be easily fixed. But if you don’t have a payment recovery method in place, then you won’t even get the chance. That’s why automated dunning management is so important. You’re always going to have payments fail, so you need a system that’s going to automatically attempt to recover those payments for you.
Focus on customer support
Competition in the SaaS space is higher than ever, and so are customer expectations. That’s why delivering exceptional customer support isn’t just a nice perk… it’s a necessity if you want to reduce your churn, improve your SaaS retention, and maximize your company’s growth. Providing your customers with the best possible customer support will translate into improved customer success rates and customer satisfaction levels, which, in turn, will lead to lower churn.
One of the keys to great customer support is being proactive. Don’t wait for customers to start churning because of a recurring problem or complaint within your product. Instead, pay attention to red flags and look for the signs of growing problems within your product. Every time you receive a customer support ticket or any kind of communication from a customer with customer service, you’re getting data that can not only be used to identify customers at risk of churning but also provide insights into overall issues or gaps within your product. Look at that data and notice what trends, if any, you see. You can use that information to improve your product or the education about your product that you’re providing to your customers.
Make it simple
The harder you make it for customers to get support, the more likely they’ll be to simply cancel instead of trying to figure out the solution to whatever issue they’re having. That’s why it’s important to make it simple for customers to access support in a variety of ways. Try to offer multiple channels and formats for your customers to take advantage of.
For simple, common issues, you could create support guides and content that customers can access on their own. You can create chatbots that lead customers through simple troubleshooting. Provide email, phone, and live chat options for customers who need to speak to an actual human. And, most importantly, make sure you resolve customer issues quickly. A quick response time and speedy troubleshooting is essential for customer success.
Optimize your pricing model
One of the best long-term SaaS retention strategies that can help skyrocket your company’s success is to optimize your pricing model. Your pricing model is central to your SaaS business — it's the foundation that allows you to build out repeatable sales processes and generate recurring revenue. Creating a pricing model that is consistent and easy for customers to understand can help take the friction out of purchasing decisions.
Base your pricing on a value metric
In order to increase your customer retention, you need to ensure that customers see the value in what they’re paying for. And that’s why it can be so impactful to design your pricing so that it’s obviously aligned directly with the actual value you’re providing to your customers. When you price along a value metric, you charge customers more as they receive more value from your product. With a clear value metric, you'll find greater alignment with your customers for what they’re paying for and how they receive more value at the higher priced tiers.
Consider tiered pricing
Speaking of tiers… a tiered pricing strategy is another great retention strategy simply because it reduces the chances that a customer will churn. If they have the power to downgrade, many customers will choose that rather than cancelling altogether. And it’s always better to have a customer downgrade and pay less than it would be to lose that same customer to churn. You can prompt at-risk customers with the option of another tier during your cancellation flow, even offer them a discount on one of those other tiers.
Plus a tiered pricing model doesn’t only allow customers the option to downgrade, if necessary. It also allows them to upgrade. The best way to execute a tiered pricing model is with usage-based pricing. If you use more of the product, your bill goes up; if you use less of it, your bill goes down. While this pricing strategy certainly makes it harder to predict revenue and may even decrease your overall revenue-per-user, it can be a very effective SaaS retention strategy. Another plus side is that it allows you to make more money off of heavy users than a fixed-price model.
Create a seamless user experience
In order to maximize your growth and increase your retention, you need to maintain a happy, satisfied customer base. And a seamless user experience can help cultivate that. Creating a seamless user experience hinges mainly on two factors: ease and power. A happy customer finds both the product itself and their overall customer journey easy and enjoyable — and they also experience a sense of personal agency.
Some of this is accomplished through strategies we’ve already discussed. For instance, a seamless user experience should include robust, effective customer support systems that the customer can access across a variety of channels. It should also involve easy payments (including the assurance that accidental failed payments will be remedied) and the option to switch to different plans. But there are a couple of other strategies that you can use to create a seamless user experience.
Offer subscription pauses
Here’s the short-and-sweet explanation for why subscription pauses should be in your SaaS retention strategy arsenal: A pause is always better than a cancellation.
Churn is everywhere. Churn is a reality. There will always be customers who need to cancel, even if it’s just to reduce spending during a tough economic time. From our data, if you don’t provide an option to pause subscriptions, you could permanently lose customers who might still need your product one day but simply can’t (or don’t want to) keep paying for it right now.
By offering a pause option, you give yourself the time to identify the root causes of churn through qualitative and quantitative measures (e.g. question surveys, identifying cancellation intent, etc) and consequently find ways to win them back (for example, through discounts and credits). This can help with reducing marketing costs of winning customers back and increased customer satisfaction in the long term.
And maybe most importantly, especially since we’re talking about creating a seamless user experience… customers want the option to pause their subscription. 51.8% of participants in a study said they would be very or extremely likely to pause a subscription if the option was available. Plus, you can always provide targeted offers or discounts to paused customers to entice them to re-activate their subscription, if they’re now in a position to do so.
Make it easy to cancel
This may seem counter-intuitive. After all, you don’t want subscribers to cancel. But remember what we said about personal agency being a major facet in a seamless user experience? The fact is, making it difficult for a customer to cancel isn’t actually going to stop them from cancelling. It’s not going to improve your retention and it’s certainly not going to lead to satisfied customers.
At the very least, if you make your cancellation flow difficult, you’ve already increased the odds that customers will never come back and re-subscribe to your product. Worst case, irritated and dissatisfied customers could turn to social media or review sections to air their grievances about your unnecessarily complicated cancellation flow.
That’s why it’s vital to create an intuitive cancellation flow that makes it easy for customers to actually cancel their subscription, if that’s the decision they make in the end. It should create as little friction and take the minimal amount of time possible. If your subscribers leave happy, they’re more likely to re-subscribe in the future (especially if you’ve created effective winback campaigns) or, at the very least, recommed your product to others.
Understand your metrics
You can’t improve your SaaS retention if you’re not measuring it. That’s why customer retention analysis is so important. If you don’t have a clear understanding of where your retention stands currently and how much progress you’re making towards your goals, then you can never truly maximize your growth. But how exactly do you measure your customer retention?
Customer retention rate
Your customer retention rate is the percentage of your customers who use and resubscribe to your service over time. There are a few different ways to measure your customer retention rate, but the easiest method is to use this retention formula:
Other customer retention metrics
If you want to break down your customer retention into data you can analyze, then it’s important to track and analyze valuable customer retention metrics. Metrics you should track include revenue or monthly recurring revenue (MRR) churn, customer lifetime value (LTV), user churn, reactivated MRR, customer acquisition cost (CAC), etc. For a deep dive into these customer retention metrics, along with the equations to calculate them, check out this guide ("The SaaS KPIs You Really Need to Track").
Choose the right tools
Tools alone can’t fix your churn problem or increase your retention. But the right tools can be a valuable part of an effective SaaS retention strategy. Depending on the software, you can use customer retention tools to track customer behavior, analyze preferences, identify at-risk customers, deploy retention strategies, and more. Here are a few to consider:
- Churnkey: Churnkey is the only platform that fixes every type of churn for you, automatically, so you can focus on product and growth. By focusing on all aspects of churn—not just failed payments or only cancellations—you can supercharge all aspects of modern retention.
- ChartMogul: ChartMogul is a subscription analytics platform that teams use to measure and understand their SaaS revenue.
- Exakt: Exakt is a simple customer satisfaction survey platform that’s figured out how to improve response rates, getting your team more honest feedback while keeping your brand image in a better light.
Maximize growth and increase SaaS retention with Churnkey
When it comes to customer retention, SaaS companies often feel like they’re fighting a long, arduous battle. At Churnkey, we help you win the retention battle with our personalized offboarding experiences, powerful metrics, granular customer timelines, free dunning management, at-scale feedback extraction, seamless integrations, and more.
Sign up for a free trial today and see firsthand how Churnkey is helping SaaS businesses improve their retention strategies, reduce churn, and maximize their growth.