Customer retention

How Automated Customer Retention Technology Supports Sustainable Growth

May 3, 2022

Customer retention technology is one of the most effective ways for subscription-based SaaS companies to manage churn. This solution – particularly when it’s automated – helps you easily figure out why your customers aren’t renewing and identify the best way to win them back. For example, are your customers:

  • Churning after a certain period of time? Or during a seasonal time frame?

  • Giving you early red-flag indicators that they’re considering canceling?

Automated consumer retention solutions help you look at the holistic life cycle of your customers, identify trends or commonalities on why your customers churn, and determine win-back strategies to deliver the right message to the right customer at the right time.

4 ways customer retention technology supports sustainable growth

When companies lower their churn rates, they improve their financials, customer satisfaction, and even their products – all of which are critical for overall business health. Here are four ways customer retention solutions support sustainable growth.

#1: Get clear metrics that matter

There are a few metrics that SaaS companies watch closely and most of them are related to customer acquisition and retention. For example:

  • If you’re a B2B SaaS, it’s going to cost you about $200 to acquire a customer (CAC) organically.

  • It costs you 7x more to acquire a new customer than to keep one you already have.

  • The average SaaS churn rate is about 5 percent.

  • A better cancellation flow reduces your churn by 10-30 percent.

  • When you increase customer retention by only 5 percent, your profits can increase anywhere from 25-95%.

In the fast-moving and highly competitive SaaS marketplace, these percentages quickly add up to big dollars. A customer retention technology solution helps you grow by providing real-time insights into the metrics that matter.  

#2: Create more predictable and stable revenue streams

Under a subscription model, customers sign up to pay at regular intervals. Therefore, as long as they don’t churn, you can count on that revenue ongoing.

When you address churn directly, you reduce your business’s overall volatility because your revenue is no longer tied solely to new customer acquisition. Even better, as you lower your churn rate, your overall profitability improves, and it’s easier to predict future revenue. 

#3: Increase customer lifetime value 

Lifetime value (LTV) is the projected revenue a customer will generate over their lifetime and it’s an excellent indicator for the overall health of your subscription business. An automated customer retention tool can help you increase your customer lifetime value by: 

  • Learning from cancellations - When you collect data from customers at the point of cancellation, you understand precisely why they’re leaving. 

  • Moving upstream to reduce churn potential -  When you know where your bucket is leaking, you can patch it. But when you understand why the holes exist in the first place, you can move upstream. Build long-term solutions and keep holes from forming in the first place.  

  • Segmenting offers - You can also segment your strategies based on factors such as how long customers have been subscribers, why they’re canceling, and the likelihood you can win them back.

  • Correlating MRR - When you integrate your customer retention technology into your existing billing platform and CRM, you’ll have a 360 view of your customers and correlate lost MRR to reasons for leaving. 

#4: Identify a better product-market fit

Many people believe that your customer retention number (i.e., the number of customers that do not churn) is the single best indicator of product-market fit. Why? Because if your customers continue to renew, it means they find continual value in your product. 

When you understand why your customers churn, you can identify opportunities to improve and refinance your product to meet even more of your customers’ needs. 

This is easier than you think

If you want to drive sustainable revenue growth (and who doesn’t, right?), consider adding customer retention technology to your stack. To make it easy, solutions like ProsperStack integrate seamlessly with the tools you’re already using – from billing platforms to CRMs, customer data platforms, and more. 

Schedule a demo and start reducing your churn today!

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