For subscription and SaaS businesses, metrics like the customer retention rate and the closely related churn rate are essential for tracking how much revenue you’re losing and identifying possible trends.
The fact of the matter is that long-term business expansion requires reducing customer churn and increasing customer retention.
We’ll talk about five ways to keep customers coming back to your SaaS business and how to accurately track customer retention and churn in this post.
What exactly is retention of customers?
“Customer retention” is a metric that measures how many customers stay with a company for a predetermined amount of time.
The churn rate, on the other hand, is the percentage of subscribers who cancel within a predetermined amount of time. Monthly recurring revenue (MRR), arguably the most important indicator of future business success, is significantly influenced by both of these metrics.
A good customer retention rate is typically greater than 90% on a monthly basis, though the higher the number, the better. A low rate of customer retention indicates a problem for your business, even though it is obvious that you will never be able to keep every customer.
Your customer retention rate and other metrics can be compared to those of other SaaS and subscription businesses.
Because it costs more to acquire new customers than it does to retain existing ones, investing in customer retention is a more sustainable growth strategy for the majority of businesses.
Thus, prior to executing techniques to increment client maintenance after some time, directing an analysis is fundamental.
Strategies for Retaining Customers Now that we have discussed the effects of customer retention on SaaS and subscription businesses, let’s take a look at some ways to enhance this metric.
- Excellent customer service
The level of customer service provided by your business can make or break a customer’s experience. Give excellent service to customers.
Whether a problem with the product, a failed payment, or the network, customers want to know that you will be able to assist them.
Quick responses to customer inquiries, assistance with onboarding (more on this later), and prompt troubleshooting are all components of good customer support.
Investing in proactive outreach can have a significant impact in addition to providing reactive customer support.
Routinely checking in with your clients can build the open doors for commitment and worth from your item, regardless of whether they aren’t wanting to leave.
2. Establish a procedure for the onboarding of new customers
Because the onboarding procedure is a crucial component of the overall customer experience, it is essential to get it right to avoid losing customers early.
Demonstrating customers how to use your product to achieve their goals is an essential part of a successful onboarding process.
A straightforward signup procedure, a persuasive welcome email, and assistance during the initial login are all components of an efficient customer onboarding process.
You can also learn about new users’ initial perceptions of your business, product, and onboarding process by monitoring the results of your trials.
Using these insights, you can avoid losing customers before they sign up.
3. Produce useful educational materials
Customers won’t stick around for long if your product doesn’t provide enough value. You can accelerate the rate at which customers reap the benefits of your product’s ROI by providing educational materials and training courses of high quality.
Using getting started guides and a help center, which are excellent resources for resolving any additional issues that may arise, customers can also obtain answers to many of their initial questions.
You should provide resources and start a community for your product in the same way that you want to create an excellent onboarding experience.
Workshops and webinars are resources that give subscribers even more value out of their subscriptions and motivate them to stay for a longer period of time.
4. Track and Measure Churn
By figuring out which customers are leaving and why, you can come up with an informed plan to keep them.
You can, for instance, ascertain the reasons why some customers may churn more frequently than others by carrying out cohort analysis and tracking and measuring churn for various customer segments.
You can address customer expectations that are not met, bad onboarding experiences, unsuccessful acquisition strategies, and other broader business issues using this information.
If you delve into the information regarding abrogations, minimize, canceled installments, and other related topics, you will also be able to identify generally customer conduct deviations that are causing agitation.
These insights may reveal whether additional factors are to blame for voluntary or involuntary turnover. Over time, customer retention will rise as a result of reduced churn and its measurement.
5. Make it simple for your customers to provide feedback to you
Getting feedback from your customers is a great way to identify issues with your product or interactions that cause customers to cancel.
To take this one step further, getting cancellation data and acting on it helps keep customers loyal over time and prevent disloyalty.
A quick email or in-app notification is a convenient way to get feedback from customers who decide to cancel their subscription.
You will be able to identify and address issues with pricing, a lack of certain features, poor customer service, and any other factors that cause customer churn using cancellation insights.
Calculating customer retention and churn
Customer retention and churn are calculated by dividing the number of new customers by the total number of customers at the end of the period to determine the retention rate.
This tells you how many customers stayed with you over that time period. The retention rate is then calculated by dividing this number by the total number of customers at the beginning of the period.
Depending on whether you really want to follow revenue churn or customer churn, there are a few different ways to look at churn rate.
To calculate customer churn, divide the number of canceled customers by the number of active customers over a given time period. After that, multiply by 100 to obtain a percentage.