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Feedback Management

Keeping Customer Retention for Your SaaS (or Digital Service)

May 30, 2023

The Software-as-a-Service (SaaS) business industry is one of the fiercely competitive marketplaces. No wonder the brands have to go out of their way to acquire customers. However, the challenge doesn’t end there.

Unlike other B2B or B2C businesses, SaaS companies are utterly dependent on recurring billing or subscription by customers. Hence, once you have acquired a customer, which is an expensive and challenging task in itself, you need to find ways to keep them. Customer retention is a constant hurdle faced by almost every SaaS brand in the business. Customers tend to leave a business after just one event of a bad experience. According to statistics, the average annual churn rate for SaaS businesses that make less than $10 million annually is 20%. The businesses that make more than $10 million in revenue have an average annual churn rate of 8.5%.

The increasing churn rate of businesses with SaaS applications establishes that customer retention should be the priority of businesses. If you’re someone who is struggling with maintaining the retention rate, this blog is for you. Here, we have listed the top strategies that SaaS businesses or digital services should adopt to sustain customer retention. Let’s dive in!

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5 Key Strategies for SaaS Customer Retention

1. Make Customer Onboarding Convenient

Let’s answer this real quick first - would you continue investing in service if you’re struggling with how to use it? Most probably, not!

Well, one of the reasons why a customer can discontinue using your services is they are finding it difficult to use. And no, we don’t mean it’s possible only when you have a complex registration process or have too many steps to follow. Customers have now developed a habit of getting everything most simply and seamlessly possible. So if your website registration or app sign-up has a lengthy demo or multiple steps, they may choose to opt-out from your service.

Therefore, SaaS businesses should adopt a practical and hands-on way to make customer onboarding easier. If you can show how your system works seamlessly and conveniently, it’ll be easy for customers to derive value from your work. They are more likely to keep being a customer of your brand. Depict step-by-step instructions or walkthroughs to explain complex processes or tooltips to know more about the platform features.

2. Motivate Customers to Complete Setup

Do you feel like retreating from a task or activity when you’ve invested a considerable amount of time or energy in it? No, right?

Well, the same goes for your customers. If you make the customer onboarding process more interesting and engaging, they are prompted to stay connected with your services. By introducing motivational elements in your customer onboarding process, customers will complete routine tasks faster.

One way to do so is by using the gamification process. It means adding game-like elements to your onboarding process so that the processes give customers a dopamine rush and they don’t get bored of doing it repeatedly.

Here are some quick ideas of how you can introduce gamification -

  • Develop a feature of creating avatars for customers after the sign-up
  • Offer rewards, such as badges, coins, or rankings, when the customers complete a certain task.
  • Demonstrate progress bars to show the users their activities
  • Provide badges to customers at different levels. For example, beginner, intermediate user, and advanced member
  • Celebrate when users reach a certain milestone

One of the examples is LinkedIn. The professional social networking platform motivates its users to complete their profiles by awarding them with different profile statuses.

3. Optimize Your Pricing Strategy

Needless to say, the pricing of your services plays a substantial role in customer retention and churn. However, it’s not just about how much you are charging but also about how often you are charging.

According to the SaaS Report 2019, the average churn rate for annual contracts is just a percent more than the average churn rate for monthly contracts. It reduces from 15% to 12% if you bill for two years at once and to 8.5% if it’s more than 3 years. Hence, you should promote annual subscription plans more to provide fewer opportunities for the customers to churn.

There’s also a misconception among SaaS businesses that lower the service prices, higher the customers. However, it’s not entirely true. While it sounds right logically, customers often associate the quality of products and services with the prices.

Therefore, don’t be afraid to raise your SaaS service plan prices to keep your customer retention intact. A higher price creates a perception of superior service value. It makes them more engaged towards the service. Moreover, if your customers have made a huge expenditure, they are most likely to use the product, reducing the churn rate,

4. Take Regular Customer Feedbacks

What is your company’s approach to customer feedback? Do you welcome them or do not take them seriously or pay no heed towards them?

Well, let us state the most obvious fact of entrepreneurship - feedback gives you direction. It provides you an insight into how your customers are using your services? Moreover, they also tell how customers feel about your brand and your services.

For example, a sudden spike in the negative reviews is a clear sign that customers are unhappy with your service and might head towards unsubscribing you if you do not take any mending action. If you’ve already lost a few customers, you can use the win-back customers’ strategy. Similarly, if your customers tell you that the onboarding process is not easy, you can implement gamification.

If you adopt a proactive approach in the matter of feedback, you gain an advantage over your competitors. Once your customer has been with you for a certain period, send in-app surveys or emails. Their replies will help you know what changes you need to make to keep customer retention intact.

5. Find Ways to Keep Users Engaged

In most cases, users need to be encouraged to engage constantly with your SaaS services. Hence, figure out early in your planning and marketing stages the ways you can motive user engagement. Draft an outbound or inbound marketing strategy that focuses on different buyer personas across all their stages in the buying journey.

One of the most common and effective means to enhance user engagement is incentivizing customers. There are countless ways to do this - once they reach a certain stage of platform usage, you can reward them with credit, offer a discount on the next round of payment, or an early entry to your upcoming feature.

Another way to do keep the user engagement intact is to produce and publish content that can help users overcome challenges.

Nir Eyal, the author of “Hooked: How to Build Habit-Forming Products,” explains the power of content marketing in his book. “Content helps potential buyers habitually think about your product or service. If you regularly share helpful content with current and new customers, they’re likely to see your brand and product as trustworthy. In addition, you can add calls to action within your content to drive readers back to your product.”

With each piece of authoritative and SEO-optimized content, you can bind customers and make them habitual of your brand. You can begin with weekly blogs, video tutorials, product guides, or entertaining content, depending on your domain.

For example, Australian Web Experts report that content that not only targets new traffic from an SEO perspective, but also engages customers, can contribute to substantially lower churn rates of customers and increase retention.

You can never eliminate churn rates. However, the goal is to attain a healthy churn that does not impact customer retention and your SaaS business revenue. Keep eliminating the frictions of the user journey and try to provide them the maximum value out of your service.

Guest Author

Written by Guest Author

Nov 10, 2021

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