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Customer Service Jan. 23, 2023

5 SaaS Customer Retention Strategies


While the first “software as a service” (SaaS) products were introduced in the 1990s, the industry has hit prime time since the pandemic caught the world off guard in 2020. Lockdowns increased the demand for cloud-based products almost overnight, and while savvy IT companies have jumped onto the SaaS bandwagon, the pandemic-fueled feeding frenzy has subsided and their future success hinges on their ability to implement a successful SaaS customer retention strategy.

The SaaS distribution model generally provides good value for money, which is important in today’s economy as companies look to streamline operations and reduce costs. However, with record inflation and the grim probability of a looming recession, it’s more crucial than ever that companies demonstrate their value if they expect to achieve optimal customer retention.

Why is SaaS retention strategy important?

Many businesses become so focused on acquiring new customers that they neglect to implement a SaaS retention strategy. Considering that some experts estimate that it costs six to seven times more to acquire a new customer than to retain an existing one, failing to implement a SaaS retention strategy is a surefire way to lose revenue. Increasing customer retention by just 5% can increase profitability by up to 75% while upsells and renewals contribute 75–90% of most companies’ revenue vs. just 5–30% from the original sales.

Simple math confirms that if a company acquires new customers at the same rate that existing customers churn, not only is their customer base remaining stagnant, but the potential lost revenue from missed upsell opportunities will negatively impact their end-of-year P&L statements. Failure to focus on SaaS retention strategies can cause real headaches in the long run, so read on to learn 5 key SaaS retention strategies that you can implement starting now.

How is SaaS customer retention measured?

To keep a pulse on how your company’s SaaS retention strategies are performing, experts recommend calculating your customer retention rate monthly or quarterly. This allows time to identify potential issues and adjust course before customer attrition becomes a full-blown crisis. A good target SaaS customer retention rate is 92–95%.

You can use this formula to calculate the SaaS customer retention rate for a specified period:

Ending Number of Customers – New Customers Acquired ÷ Starting Number of Customers

Before we move on to the five SaaS retention strategies, you might want to check out this article to learn ten ways to reduce customer churn, thereby improving your company’s SaaS retention – and this article outlining the 10 SaaS KPIs you should be tracking in 2023.

5 SaaS Retention Strategies

A company’s ability to retain customers hinges on everything it does after the sale has closed. The following five SaaS retention strategies are an excellent first step toward becoming more intentional in your approach to SaaS customer retention.

1. Use customer journey maps

One of the best SaaS retention strategies is to put yourself in the customer’s shoes. Segmenting your customers by persona and mapping their typical journey can help your company to anticipate their needs and react accordingly. A customer journey map visualizes the typical experiences a customer has with a company from the moment they become a prospect through the day they (hopefully) become a brand ambassador. It documents what should happen each step of the way while identifying potential pitfalls that could lead a customer to defect to a competitor, helping companies to proactively manage the experience.

Learn more by reading this comprehensive article about how to use SaaS customer journey maps as part of your overall SaaS retention strategy.

2. Set the right expectations and onboard effectively

Buyer’s remorse is real, and failing to set the right expectations about what your product can and can’t do all but guarantees that your product will fall short of expectations. In the pre-sales process, be crystal clear about how your product creates value, eases pain points, or otherwise benefits your customers.

If your sales and marketing strategies are on-point, you should be regularly onboarding new customers. This make-it-or-break-moment is your customers’ first experience with your software since exiting the sales funnel. More than 90% of customers feel that companies could improve the onboarding process for new customers while 86% say they’d be more likely to stay loyal to a company that provides a thorough and welcoming onboarding process that makes them feel confident in using the product. Providing a well-designed onboarding process is one SaaS retention strategy that could set your company apart from its competition. This article about 10 best practices for the best SaaS onboarding process is a great place to start!

Top-notch onboarding is an ongoing process. Once a customer is up and running, continue to add value by providing additional content to help them develop their skills, discover new features, and become even more proficient in using the software. This incremental onboarding approach sets up customers for success by not overwhelming them, and allowing them to experience quick wins along the way and get the most out of the software. This is easily achieved via tooltips and other in-app messaging that draws customers’ attention to the right features at the right time in their customer journey. This slow-immersion process is proven to help customers become more invested in the product, which in turn builds their loyalty.

3. Keep communicating with your customers

Many companies drop the ball once the conversion from prospect to customer is complete. But savvy companies know that the company-customer relationship is still in its infancy at this point. Don’t make the mistake of pursuing new customers at the expense of existing customers. This can give the impression that the company is no longer invested in the customer’s success now that they’ve made the sale.

Create a plan to keep the lines of communication open between the appropriate account management person (or at a minimum, the company in general) and the customer. Regular check-ins can help to ensure that the product is meeting expectations while addressing any challenges or concerns before the customer starts looking into alternative solutions. This is also a key opportunity to build a personal relationship with the customer and increase upsell potential, thereby increasing their loyalty and lifetime value.

Take it a step further by sending automatic emails containing relevant tips and tricks when the user performs a specific action or reaches a certain point in their journey. This is an ideal tactic to support your ongoing onboarding strategy by adding more value for your customers.

Customer service - saas retention

4. Release regular upgrades and new versions of the software

Customers who believe that they’re getting good value for money are more likely to remain loyal. Releasing regular updates and new software features based on customer feedback goes a long way in showing customers that you’re invested in helping them to achieve their goals. Customers who see the increased value over time see a company that provides state-of-the-art features at a fair price.

Don’t forget to capitalize on your investment by announcing new features via email (or even a phone call to high-value clients) and highlighting them via the sign-in page or other in-app messaging.

5. Provide best-in-class customer service

Covid-19 changed customer service forever, and the stakes are particularly high for SaaS companies providing products and services to customers who rely on them to keep their operations running smoothly. Only 27% of B2B customers feel that companies provide an excellent B2B experience, representing a huge opportunity for smart SaaS companies to differentiate themselves in an increasingly competitive market. As SaaS companies strive to provide world-class service, an obvious tactic is to use predictive behavior analysis to automate CRM, improve personalization, fine-tune customer segmentation, and better identify customers who are ready to churn. By leveraging AI, SaaS companies can automate redundant support tasks, improve response times, provide better self-service support tools, reduce support costs – and provide better service.

This article about the 5 trends shaping the future of B2B customer service is chock-full of tips to set you on the path to perfecting your company’s customer service. h

Plecto Can Help You Track and Manage Your SaaS Customer Retention Strategies

Customer churn is a fact of business, but identifying who’s about to churn and heading trouble off at the pass is one of the most effective SaaS retention strategies in your toolbox.

Plecto’s real-time dashboards can give you an up-to-the-minute overview of your support channels to help you identify customers who have had a less-than-stellar experience – and act before it’s too late!

Check out this article to learn how CX dashboards can support SaaS retention strategies and help reduce customer attrition. Then sign up for a free 14-day trial and discover firsthand how Plecto can help improve your SaaS customer retention rate by compiling your telephony, CRM, support, and campaign data – so that you can act quickly and deliberately when it matters most.


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