It’s a jungle out there for SaaS companies. The marketplace is crowded; the competition is fierce. Once your business acquires new customers, you’ll want to do everything in your power to keep them.
And in the SaaS marketplace where a recurring revenue business model is at the core of profitability and growth, one thing is certain: customer retention is the key to long-term success.
So what are some marketing strategies that can help your SaaS company shift to a customer-first approach that boosts your bottom line?
Here we’ll offer six steps to ramp up retention and safeguard your business against its less-desirable counterpart, churn.
What is Customer Retention?
Customer retention is your business’s ability to retain customers over a specified period of time. The time period can be monthly, quarterly, or yearly — whatever makes the most sense for your SaaS business.
The primary metric that’s used to define retention is called customer retention rate.
Customer retention rate is the percentage of how many customers you keep within a specified time period, and it is calculated as follows:
Customer Retention Rate = ((# Customers at End of Period - # Customers Acquired During Period) / # Customers at Start of Period) X 100
In any subscription-based company especially, where your customers have regular opportunities to churn, you’ll want to pay close attention to both retention and churn rates.
From metrics to marketing tactics, here are some actionable steps you can take:
Alongside customer retention rate, there are several metrics that serve as valuable KPIs for companies looking to build loyalty.
For a deep dive into these metrics, you can learn more in our guide, Key SaaS Metrics and How to Track Them in HubSpot.
Some of them include:
Again, establishing KPIs and benchmarks is a sensible first step from which you can then shape and measure your marketing plans and tactics.
As more and more companies break into a highly competitive SaaS space, there is a strong tendency to focus on customer acquisition vs customer retention. The tendency is significant, too: 44% of companies have a greater focus on acquisition vs. 18% that focus on retention.
This is natural, especially among nascent businesses still in the growth stage. But for organizations who have shed their skin as a startup and have an established customer base, customer acquisition becomes exponentially easier and churn lowers dramatically.
For these companies, it’s time to balance efforts and think about both acquisition and retention. Those who do will see huge gains.
Consider the following compelling data:
Who is in charge of customer retention and churn for your SaaS company? The CEO? Customer service? Marketing? A task force of cross-functional teams?
If you’re not sure, you're not alone. The question of ownership is an important one -- so now’s a good time to settle this.
Typically, marketing is well-poised to manage churn, having access to and expertise in customer data, automation tools, and deep knowledge of the customer in general. If your marketing team does not “own” customer churn, make sure they are still involved to help adjust strategies accordingly.
Can you determine which factors are contributing to customer churn? Be sure you have a system in place to isolate and identify the triggers that may be causing churn.
One way to do this? Ask your customers! Using a Net Promoter Score (NPS) is a relatively quick and easy way to gauge whether your customers are satisfied with your product or service. Here’s how to do it.
Many companies also use software to monitor product usage and engagement, for example, and automation/analytics tools that provide further insights into your marketing tactics.
For SaaS companies, common churn triggers include:
These are just some of the many tactics to help evaluate churn triggers; oftentimes such strategies fall under the larger umbrella of Customer Success.
Now that you’ve established key metrics, identified triggers, and made a commitment to tackle customer churn, how do you tie it all together? Here are some steps to follow that will help you chart your course.
The anecdote for reducing customer churn is simple: engagement. In your marketing materials, you’ll want to focus on strategies to connect to your customers in personalized, meaningful ways. For example:
Is your SaaS organization in the startup phase? Don’t miss these tips on how to foster customer retention and customer success: How SaaS Startups Can Create Great Customer Success Strategies.
In a competitive SaaS marketplace, the importance of a customer-centric strategy is impossible to ignore.
By incorporating these strategies, you’ll ramp up customer retention, get ahead of churn, and lay the foundation for long-term sustainable growth.