Looking for customer retention software? In this guide, we explore the top tools to use in your SaaS customer retention strategy.
The success of your SaaS depends on two factors: Lead generation and customer retention.
While we’re all obsessed with getting more customers, it’s just as vital (if not more so) to retain the customers that you eventually win.
First of all, it costs a lot of time, effort, and money to attract and then convert those leads into customers.
But once you’ve won them over, your customers are the most likely people to tell others about you, which makes them mini marketers and powerful advocates for your brand. And because your current customers already trust you, it’s easier to upsell premium services to them. You’ll generate even more revenue from your existing customer base.
Yet another benefit to retaining your customers?
Loyal customers are more willing to forgive you if they have a one-time negative experience, while new customers aren’t as gracious.
Without a doubt, creating a customer retention strategy is one of the best things you can do for your SaaS business. So invest in a retention tool that helps you hold onto more of your customers.
But what exactly is customer retention software and how does it work?
In this guide, we’ll discuss the basics of customer retention, including why it’s important, how to build a successful strategy, and what software to use to empower your retention strategy.
Let’s get started.
What Is the Importance of Customer Retention?
If you plan to stay in business for any length of time, customer retention must be your top priority. Here are the top three benefits you’ll gain by retaining your customers:
You’ll Both Save Money and Make Money
You may be thinking, Why does customer loyalty matter? After you’ve locked in a customer, shouldn’t you be on to the next?
Not so fast.
It’s cheaper to keep your existing customers than it is to convert new ones. If you increase your customer retention rate by as little as 5%, you can increase profits by as much as 95%.
Astronomical results, right?
And that’s not all. Research shows that you will spend, on average, five times more money to attract a new customer than you will to retain a relationship with your existing customer.
When you run on a subscription business model, your long-term success depends on customer loyalty. You’re not a one-and-done service, but a recurring service that must focus on retention. And, lucky for you, the longer your customers stick around, the greater their customer lifetime value. So loyal customers are financially more valuable than new ones.
Customers who stick around are also highly likely to buy more from you than your new customers. The success rate of upselling an existing customer is 70%, whereas your ability to upsell to a new customer is only around 20%. In other words, 7 out of every 10 of your current customers will buy an additional service or upgrade from you (on average). But only 2 new customers (out of every 10) will take the upgrade bait.
Not only are your existing customers more valuable, but they’re also more invested. For example, your current customers are more likely to try new services from you. So, if you plan to launch new offerings in the future, it’s best to retain your current customers and keep them happy because they’ll probably be the first ones to sign up.
You Will Improve Your Customer Satisfaction Rating
Unfortunately, a lot of businesses forget about their existing customers. All of their marketing attention goes to wooing new customers. But, as we mentioned above, you can’t afford to neglect your current customers—not if you want to be around for a while.
By focusing on retention, you actively invest in your current customers.
And when you look for ways to build trust with and reward your existing customers, your customers will appreciate it. They’ll feel like you care about their experience, which will cause them to stick around longer.
Customers aren’t just focused on price. Research shows that customers will pay more for a quality experience with a brand. When your customers feel like you care about them, they’ll care about you. And this leads to all good things: Retention, revenue, and referrals.
Customer Retention Will Validate Your Service
If you’re able to keep your customers around for a while, you’re doing something right. In fact, you’re probably doing multiple things right.
First, you’ve created a useful service and matched it to the right demographic.
Second, your service is sticky, meaning that it’s engaging enough for regular use.
Finally, you’ve won the customer’s trust.
Customer retention is the mark of a healthy and profitable company.
What Is Customer Retention Software?
We’ve talked about customer retention, but what is customer retention software?
For starters, there isn’t just one type of retention software. Customer retention software is any tool that helps you reduce churn and improve your customer’s experience with your company. That includes everything from new customer onboarding to failed payment recovery.
What Does Customer Retention Software Do?
Customer retention software gives you insight into who your customers are, specifically how they behave and what causes them to act. You can use this information to make smart decisions about your ongoing engagement with your customers.
Additionally, your customer retention software can help you:
- Understand why customers leave
- Identify trends in churning customer behavior
- Predict when your customers are most likely to churn
While no retention software will eliminate churn completely, you can use these tools to identify churn triggers and proactively reach out to customers when churn is near.
And with the above data, you can increase both your customer retention rates and your revenue. You’ll also successfully grow your SaaS by putting your insight into action.
Key Customer Retention Metrics to track
Here are three key metrics to track when focusing on customer retention:
1. Customer Churn Rate
How many customers leave or don’t renew within a specific period of time? It’s important to note that no business will have a zero churn rate because customers leave for various reasons, not all of which are negative. However, it’s ideal to keep your churn rate as low as possible (a 5% annual churn rate is ideal).
2. Satisfaction Rating
You can use Net Promoter Score® (or NPS) to measure how loyal your customers are to your company. This is a simple tool that allows participants to rate your brand, your product, your customer service, etc, on a scale of 0 (negative) to 10 (positive). Those on the higher end of the scale (the 9s and 10s) are promoters. Those on the lower end of the scale (The 0s to 6s) are detractors. The rest (7s and 8s) are passives. To determine your Net Promoter Score®, you’ll subtract the percentage of detractors from the percentage of the promoters (and ignore the passives). Any score above 0 is good, but the best scores are 70 and above.
3. Customer Lifetime Value (CLV)
This is the amount of revenue that you will receive from each customer. This number should increase as you sharpen your marketing and improve your product for your target audience. It’s important to track your CLV, especially when you reach the end of your relationship with a customer. If your CLV decreases that means that you’re losing your customers prematurely or you’re not targeting the right customers.
What Are the Best Customer Retention Software Tools?
As we discussed above, there isn’t just one type of customer retention tool. Think of customer retention as a strategy that focuses entirely on understanding your customers and creating a satisfactory experience for them.
Ideally, you’ll use more than one tool to provide a delightful experience for your customers. The following types of tools will directly impact your customer retention strategy:
Customer Onboarding Software
Customer onboarding software allows you to successfully introduce your product to new customers. Use your onboarding tool to provide a step-by-step guide to your service so that customers know exactly how your product works. Not understanding how to get value from your product is one of the top reasons why customers churn.
Customers churn for a variety of reasons. Sometimes, they leave because they’re dissatisfied with a service. Others leave for completely avoidable reasons, such as failure to update their credit card’s expiration date. Don’t let this happen to you. Use our churn software, Stunning, to prevent payment failure and eliminate passive churn.
Customer Feedback Software
It’s crucial to regularly gather feedback from your customers. This way, you understand what they need and how they view your product/brand. Survey customers at each important milestone. And don’t be afraid to reach out to those who’ve had a negative experience with your company. Their feedback can help you improve moving forward. You can also use this feedback to create certain incentives, like customer loyalty programs.
When surveying your customers, ask short, but meaningful questions. And limit the number of questions that you ask to 10 or below to ensure that most people participate.
Behavioral Analytics Software
A behavioral analytics tool (also known as product analytics) gives insight into how your users interact within your app. You can use this data to retain more of your customers.
Customer retention is one of the most important elements to your SaaS success story. Use the above tools to build an extraordinary retention strategy that transforms new customers into loyal customers.