Customer retention

11 SaaS Customer Retention Strategies For Growth

Updated October 12, 2023

Churn is the number one enemy of up-and-coming SaaS businesses. Not only is it way cheaper to keep current customers than to find new ones, but it can also grow your revenue. That’s why you need airtight SaaS customer retention strategies that keep your customers around for the long haul and help your business thrive.

Not sure where to start? We’ve got you covered. Below, we’re digging into the top 11 customer retention strategies that promote revenue growth — helping you boost profitability and expand your brand presence in your respective industries. 

What Is Customer Retention for SaaS Companies?

Customer retention for SaaS companies can be highly individualized depending on the business specialty area. In such a competitive field, SaaS businesses have to know their customer inside and out — finding new ways to anticipate and define their needs while making their product the clear-cut choice. This process has to happen before the sale, extending through the customer’s life cycle. 

Why Managing Churn Is Essential for SaaS Companies

Fullview estimates that the average churn for SaaS companies is around 10-14% per year. This can be incredibly costly from a revenue and business sustainability perspective, as more resources must be expended to maintain company stability amidst cancellations and lapses. 

Investing in churn management results in higher profit. Small Business Trends has noted that the average repeat current customer spends 67% more later on in their customer journey (approx. months 31-35) compared to the first six months of business. With the right strategies in place, you could be compounding profit further down the pipeline, which can facilitate your rapid expansion and growth to new customers and regions. 

Understanding Retention vs. Acquisition 

Acquiring new customers can be really expensive. By keeping your current customers happy and loyal, you can reduce the need for constant acquisition and save money. When they’re satisfied, they're more likely to keep coming back, tell their friends about your business and leave positive reviews. 

Key Metrics in SaaS Customer Retention

As a SaaS business, customer retention is a crucial aspect of your growth strategy. Measuring these key metrics can help you determine how well you're retaining customers and identify areas for improvement. 

Customer Churn Rate

Your customer churn rate is the percentage at which customers stop participating in a company’s offer, no matter what type of service it may be. Once you nail down this element of customer retention, it allows you to evaluate a few key points: 

  • How is our brand retaining customers? Take a second to see what’s currently lined up and missing. 

  • Where are you falling short? Perhaps you should consider starting a customer loyalty program to boost customer retention rates or an affiliate bonus package to turn your loyal customers into marketers and brand ambassadors. 

  • Where are people dropping off? Understanding the customer journey and dropoff points are vital to cracking your own “customer retention formula.” 

  • How will you continue to gather information? As you walk through this, work with the team to determine what SaaS retention metrics you need to track to successfully measure customer retention by your stakeholders’ definition. 

Answering these questions helps you keep an eye on your churn rate and take steps to address any issues.

Customer Lifetime Value (CLV) 

CLV is the value a single person brings to a brand over time. It’s quantitative, calculating all purchases made. 

Some businesses may take this a step further and manage projected benefits depending on how much of a brand loyalist a person is and how they represent the brand publicly. Companies are beginning to do this more as influencer marketing evolves on social media. 

The Importance of Sales Funnel Conversion Rates

Your funnel conversion directly impacts your ability to calculate net revenue retention. This calculation shows a brand how they are doing regarding retention, profitability and expansion — and it can be used to assess eligibility for investment in many cases. 

The general formula is Net Recurring Revenue (NRR) - Monthly Recurring Revenue (MRR from churned customers) - MRR lost from downgrades + Revenue from upgrades / Base Recurring Revenue (BRR) x 100.

SaaS Customer Retention Strategies

Now that we’ve laid the groundwork that forms solid, industry-leading customer retention strategies, we can start to build our own. 

Here are several strategies you can use to finesse your customer retention strategy, all of which have been carefully chosen from hundreds of aggregated SaaS retention strategies that have created a positive feedback loop of profitability and success. 

Strategy #1: Start With Onboarding

Clear expectations are paramount to customer success in any capacity. This begins in the onboarding process and extends to initial client-facing materials (such as the web and social assets, the pricing strategy and relevant materials related to the tool or product of choice). 

Taking the time to step into your customers' shoes as your team works to perfect these will pay off tremendously in the long run — ensuring all prospects and customers start with level-set expectations and understanding about what their brand experience will be, should they choose to engage with your company.

Strategy #2: Understand your churn

It’s surprising how many SaaS providers aren’t clear on their customer churn data. So, we always recommend using this simple calculation to learn yours.

Understanding your churn arms you with the knowledge that you need to fix the problem and reduce the churn rate. For many, the first step begins by digging into customer satisfaction surveys and working with the customer success team to determine common problems at different points in the customer journey. You can begin to refine from there.

(Lost Customers ÷ Total Customers at Start of Chosen Time Period) x 100 = Churn Rate

Once you have this baseline, you can build SaaS customer retention strategies and measure your success against this metric. Looking for even more detail? An automated cancellation flow with tailored customer questions at the point of cancellation can help you dig even deeper.

You can also collect actionable data from customers when they cancel, and it’s easy to customize your survey questions at any time.

Strategy #3: Add a Self-Service Cancellation Flow

Implementing a self-service cancellation flow increases user autonomy (and should subsequently boost customer satisfaction in feedback forms). People appreciate the ability to take charge of their experience — so giving them the option to cancel while offering perks to click through that could help them change their minds gives you the best of both worlds. 

You put the power back in their hands while working actively to make the service more accessible and successful for them, anticipating their needs or disruptions as you do so. 

Strategy #4: Segment users to prioritize your best customers

By dividing your customer base into different groups based on their behavior, demographics or other characteristics, you can target your marketing efforts more effectively. It creates a more personalized and engaging experience for your customers.

Once you start understanding why your customers considered leaving, you can use that data to segment customers based on factors like:

  • How long they’ve been a subscriber

  • The reason they’re canceling

  • Likelihood you can win them back

Your overall goal here is to identify which customers are the most profitable and prioritize winning them back first. Plus, you can craft more targeted win-back offers when you have clarity on why customers are canceling.

Say you have legacy customers who originally subscribed under an introductory offer. If these customers cancel, another SaaS customer retention strategy would be letting them know they’ll lose the chance to re-subscribe later at the same price. In our experience, this simple strategy is enough to deter about half of your legacy customers from canceling – an easy and direct impact on your bottom line.  

Using our custom properties to segment customers is easy and works whether the data is stored at the subscription or the subscriber level. In addition, we have integrations with HubSpot, Stripe and Chargebee that give you even more data to work.

Strategy #5: Implement a Retention Survey

Implementing a retention survey can empower you to better understand and support your customers. By gathering feedback on their satisfaction with your product or service, you can identify areas for improvement and take action. Regularly engaging with your customers in this way can help you build stronger relationships and inspire greater loyalty over time.

Strategy #6: Develop win-back strategies most likely to convert

Winning back customers who have stopped engaging with your business is essential for success. It's a process that requires a personal approach and a plan tailored to the customer's needs. 

Understanding why a customer has disengaged with your business helps you develop a friendly and effective strategy to address their concerns and provide solutions to win them back. This not only increases your chances of winning back their business, but it also helps to build a deeper level of trust.

Don’t be afraid to iterate and experiment with what win-backs work for your audience. Reference data and user feedback to give you a well-informed place to start. For example, you might offer new or extended discounts.

Or you could take it up a notch and use enhanced A/B testing, which allows you to really dig into the data. This SaaS customer retention strategy allows you to choose a control offer and test it against different variants: 

  • Test coupon discounts and durations to find the most cost-effective way to increase retention

  • Try out varying lengths of account pauses or trial extensions

  • Test out different plans (upgrades, downgrades) to find out which offer is the most enticing

It would be incredibly challenging to make sense of the data if you tried to administer and measure these offers by hand, especially in an A/B format. That’s why our solution handles everything for you. Automatically.  

Strategy #7: Remind Customers of Your Value

You’ve likely heard it before: If the brand doesn’t believe in their offers, the customers won’t either. It can be easy to get intimidated by churn rates and metrics. However, it’s vital to understand and project your inherent value in the brand and brand offer, respectively.

Strategy #8: Look for opportunities to add value

Value is an infinite variable that can always be expanded upon. At least a portion of your strategy should be dedicated to finding new opportunities to add value constantly across your user segments. This can proactively cut down your churn rate while boosting customer satisfaction. 

Best-in-class SaaS companies continually look for ways to add more value to their service. It helps them stand out from competitors and build stronger, long-term customer relationships. 

One of the major benefits of using cancellation surveys to gather customer data and insights is sharing timely feedback with critical internal teams. For example:

  • Product – could use qualitative and quantitative data to prioritize feature requests.

  • Customer success – could identify at-risk customers and proactively reach out to save them.

  • Marketing – could improve their messaging and timing.  

To put it into perspective, your cancellation surveys essentially create a prioritized roadmap for you to add more value. And that can be game-changing.

Strategy #9: Provide an Alternative to Cancellation

This is most commonly done with win-backs, as mentioned in previous points. However, many brands might use AI and other similar tools to connect with the customer before cancellation to attempt to delay or deter them from doing so. 

Strategy #10: Offer a Personalized Incentive to Stay

 Offering a personalized incentive shows customers you care about their individual needs and preferences. When you show people you value them as individuals, they're more likely to stick around for the long haul. 

Used sparingly and specifically across customer segments, these types of win-backs can be incredibly effective. They can also add an element of humanity to the brand. 

Strategy #11: Use Exit Survey Feedback to Improve Your Product

Data is king — always. Customers feel valued when they have brand buy-in. Feel free to insert communication opportunities at every point in the customer journey.

Ready to give one of these strategies a try?

Churn is one of the most prevalent risks to budding SaaS businesses today. The fix? 

A solid customer retention strategy that works across the demographics of your already-loyal customers. You can build your own with the tried-and-true points above — and then compound your success by increasing customer retention via feedback opportunities with your most loyal customers and segments, allowing their support to transform your offer. 

Don't worry if you need more help with customer retention. We're here to support you every step of the way.  

Connect with us today to learn how ProsperStack reduces churn for SaaS clients like you — and enjoy automated customer retention systems that deliver.

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