“Acquiring customers without a focus on customer retention is like filling a leaky bucket,” says Moz founder Rand Fishkin in his book “Lost and Founder: A Painfully Honest Field Guide to the Startup World.”
No matter how many new customers you acquire, your revenue and retention will suffer if you have higher customer churn. Eventually, you might even churn through your entire potential customer base, putting your business’s survival in jeopardy.
Customer retention is necessary for your business’s survival. The right customer retention strategies help you convert your hard-won users into longtime customers and longtime customers into strong product advocates.
What is SaaS Customer Retention?
Customer retention in SaaS refers to the tactics software companies use to get customers to remain subscribers of their product or service. One ProfitWell study found that customer retention is a better way to grow your business’s revenue than customer acquisition because retaining customers is cheaper than acquiring new ones.
Additionally, customer retention builds customer loyalty, which offers the following benefits:
- The more customers you retain, the more customers you attract because loyal customers often recommend products to their family and friends.
- Loyal customers are more likely to provide helpful product feedback since they’re more invested in it.
- Loyal customers are likely to spend more with a company, which makes them more profitable for your business.
11 Best Customer Retention Strategies for SaaS Companies
SaaS companies need to use different customer retention strategies to retain customers at different stages of product usage:
Let’s take a look at the following 11 customers strategies to retain customers at all three stages of product usage:
Users who’ve just signed up for your product need to find immediate value in your app, so they have a reason to stick with it. That’s why you need to offer a great SaaS customer onboarding experience for new users and make sure they’re able to find any product information they need easily. As one Wyzowl report found, 88% of buyers are more likely to remain loyal to a business that provides welcoming, educational onboarding content.
Here’s how to better retain new customers:
1. Offer in-app onboarding for new customers
In-app onboarding means embedding content like step-by-step interactive walkthroughs, tooltips, and pop-ups within your app, so users can learn how to use it in a practical, hands-on way. In-app onboarding allows you to “show” customers how your app works while they use it, rather than tell them what to do via a lengthy demo or a knowledge base outside of the app. Through real-time guidance, in-app onboarding makes it easier for customers to derive value from your app and thus remain a customer.
- Step-by-step instructions or walkthroughs to explain how to perform complex actions in your app
- Tooltips to help customers use each app feature in the best way possible
- Task lists to make your customer onboarding more organized
Take a look at how ICICI Bank uses Whatfix-powered in-app onboarding to educate customers about its corporate banking platform. If users click on the Account Statement tab, they’ll see a walkthrough to complete the form fields and download their statement.
The ICICI Bank app also includes Smart Tips and task lists to take users through different activities within the app.
2. Use gamification to get customers to complete setup and onboarding
Gamification means adding game-like elements to your onboarding process, like rewarding customers when they complete a certain task in your app. Gamification is known to motivate users to complete routine tasks faster, as rewards like badges and rankings on a leaderboard give them a dopamine rush.
Add game-like elements such as these to make your product onboarding more interesting:
- Let users choose an avatar when they sign up for your product
- Use progress bars to indicate how close users are to complete onboarding
- Offer a checklist of tasks users need to complete the unlock the next “level” in your product
- Provide perks for completing each step in the onboarding process
- Celebrate when users reach a certain milestone in product usage
- Give badges to users at different levels, such as beginner, intermediate user, and pro user.
For instance, take a look at how LinkedIn motivates users to complete their profile:
When users log in, they’re prompted to enter more information about their educational and career-related experiences, so their profile can reach the coveted “All-Star” status.
3. Offer Self-Help Options for customers
Self-help options allow customers to troubleshoot product problems on their own, without waiting in long customer service queues on the phone or another customer service channel. Interestingly, 81% of customers actually prefer solving problems on their own before contacting customer support for assistance, which makes self-help important.
There are various self-help options you can add to your website or app, so customers can help themselves. These include:
- Self-help widgets in each section of your app
- A knowledge base with detailed tutorials and troubleshooting guides
- Chatbots that instantaneously respond to customer queries
- A Frequently Asked Questions (FAQs) page
The Self Help menu is contextual, which means it only displays information related to the section of the app a user is in and relevant to the user’s role (admin, manager, and so on).
4. Ask customers for feedback
Customer feedback gives you insight into how each customer is (and isn’t) using your app. Using this intel, you can offer individual support to provide value to customers one at a time – helping to retain customers.
Additionally, new customer feedback also reveals insights that may boost your overall retention efforts. For instance, if you consistently hear that onboarding is confusing, your product team can use that feedback to reassess onboarding flow to make a clearer, more welcoming experience for new customers to increase retention. Or, if certain customers tell you your product isn’t a good fit for them, you could refine your marketing messages to attract the right kind of users that are likely to use your product longer.
Ask new customers for feedback at critical points in their product journey: after they’ve filled in their profile, after they’ve completed an important task in your app, and after they’ve been a customer for a certain period. Send in-app surveys, so customers can respond when your product is top of mind. Tools such as Chameleon are good options to create in-app surveys.
For instance, take a look at this quick survey Privy uses to get new customer feedback on its product:
PandaDoc uses a similar survey, but it also asks users what they find difficult to do within the product, so it can help the current customer and improve its onboarding process, too:
For new customers who don’t use your app frequently, send a quick note asking about their experience so far and how you can help them get more value out of your product.
Users who rarely or occasionally use your product need regular nudges to come back to your app. These users are also most likely to abandon your product, so you’ll have to keep an eye out for signs of churn.
Here’s how to better engage and retain inactive users:
5. Send regular progress reports to your customers' end-users
Your app, product, or service may not always be top of mind for your customers, but their goals and pain points are. Sending updates reminds users of the important problems they wanted to solve and connects your product back to something that’s inherently valuable to your customers.
Email is a good channel to share progress reports with users. Progress reports usually list the most recent activities a user has performed within an app and any significant achievements they’ve made, like money saved or calories avoided. If different groups of people use your app, the report may also include updates of what different team members are up to within the app.
For instance, Grammarly sends a Weekly Writing Update email to users with insights about their writing: the volume of new words they used, how many words users wrote per week, and the top mistakes they made.
On the other hand, Tettra sends a daily digest email listing all new documents that were created and updated in the app and the total views received for pages in Tettra.
6. Use content to keep customers engaged
As Nir Eyal, author of “Hooked: How to Build Habit-Forming Products,” explains, 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.
To engage existing users, create content that helps them overcome challenges they face regularly and get better at their job. Tutorials, product guides, ideas for projects, and original research are good options to touch base regularly with existing customers.
Zapier is a good example of a SaaS product that harnesses content to engage customers. It publishes a ton of helpful guides on automating work with Zapier, as well as general guides on productivity and wellness.
Within each piece of content is a quick call to action for users to try a given feature or process with Zapier, thus leading readers back to the product.
7. Identify red flags for signs of customer churn
The best way to prevent churn is to identify which customers are likely to churn and proactively reach out to win them back. Your most successful customers likely perform certain actions in your app within a certain period of time, which keeps them invested in your product. When customers don’t complete these key actions in your product in a given time, it may be a red flag for churn.
To identify red flags for churn, first identify product usage patterns for your most successful customers such as:
- How many sessions do they complete in your app in the first week or month?
- What are the key actions they complete within your app within their first week or month?
- How often do they log in to your app in a given period?
Once you’ve identified usage patterns for regular users, use them as benchmarks to compare user activity for all customers. Product analytics tools such as Mixpanel and Heap can help you track usage data for different customers.
GrooveHQ uses red flag metrics to identify which customers are likely to churn and reach out to it. For instance, two of its red flag metrics are frequency of logins and length of the first session in the first 30 days. Users who leave after 30 days have short first sessions and log in less often. Thus, Groove’s customer success team keeps an eye out for these red flags and reaches out to at-risk users by email.
The definition of a power user may vary for different types of software, but generally power users are users who know the ins and outs of your product better than the average user.
This deep product knowledge makes them more invested in your product, but power users are generally more adamant about what they want in a product and what they don’t. You need to show power users how much you appreciate their support and feedback to get them to stick around.
8. Offer add-ons and upsell discounts to power customers
Add-ons and discounts are a good way to show your appreciation for power users. Additionally, the more add-ons a customer opts for, the more they use your product, so it’s a win-win for both you and the customer.
Define what a power user means for your product: customers who use the most features, customers who make the most number of referrals, customers who are most active in support forums, or customers who are all of the above.
Once you’ve decided who qualifies as a power user, let these users try product add-ons for free for a limited period. You can also provide them with a discount on your subscription when they hit a milestone, like their first anniversary or making the most product referrals.
One of the well-known collaboration tools Trello offers a free month of Trello Gold to customers who invite the most users. This makes sense for Trello, as the best way to use the maximum of Trello’s collaboration features is to use it with other team members or collaborators.
Trello Gold is an add-on pack that provides additional features for individual Trello users, like custom backgrounds, the ability to attach large files, and the use of more Trello automations.
9. Give customers early access to new offerings
Giving power customers early access to new features has two main benefits:
- It gives you helpful feedback from someone who knows your product well.
- It makes power customers and users feel like they have a say in your product development roadmap.
As software developer Nick Bradbury points out, “power users want to be in control of the software they use.” Even if you choose to ignore power users’ feedback, asking for their opinion can win you brownie points, too.
Create in-app surveys or emails asking power users if they’d like to beta test new features and answer a few questions. If you run an online community or forum for users, post your request there, too. Tell users what the new tool or feature will help them accomplish and how they can contribute to its improvement and avail early access.
See how Moz asks beta testers from its community of power users to try its new marketing tool.
It emphasizes both early access and a chance to contribute to the product to get users excited about beta testing the new tool.
10. Cross-sell and upsell to power customers
When customers use a single product from a company, they could switch to a competitor if they want to, as it’s easy to migrate information from a single app and learn a new tool.
On the other hand, if customers use multiple products from a business or use a wider range of product functionality, they may find it difficult to migrate data to different platforms, create multiple new accounts, and learn various new tools. Thus, cross-selling and upselling increase the likelihood of power users becoming long-term customers.
To identify upselling and cross-selling opportunities, track power users’ activity inside your product. Check which features power users use most often and which additional features would make their job easier. If power users regularly use third-party integrations, see if any of your plans offer those integrations as a native feature. Use these insights to pitch relevant upsells and cross-sells to power users.
Don’t push upgrades or related products to power users every time they log into your app. Instead, ask power users to try advanced features for free for a limited period when they click on a premium feature within your app, or send them a periodic email reminding them about additional product functionality.
At times, power users may also reach out to you asking for additional features and functionality, which is a good time to pitch higher-value subscriptions.
See how Dropbox prompts users to upgrade to a business account when users run out of space:
11. Build communities around your product
A product-focused community allows power users to share their experiences with other users, learn about features and benefits they may have missed, and help other users troubleshoot problems, too. In the process, communities help power users become more invested in your product and brand and thus make them likely to stay with your brand.
Use these ideas to build virtual and in-person communities around your product:
- Host virtual and in-person events and conferences
- Start a community newsletter
- Allow power users to host online and offline events
- Start an ambassador or referral program for your product
- Distribute product goodies and encourage users to share them on social media
For example, take a look at the different ways Notion builds and nurtures a community around its product:
The tool allows users to create and share creative ways to use Notion, teach classes on using Notion, and run virtual events. Notion also promotes these events to its customers through its website and on its social media channels.
If customers have to pass through multiple hoops to use your product, it’s unlikely they’ll stick around for too long. To boost customer retention, make your customers’ product journey frictionless. A frictionless customer journey usually starts with effective onboarding.
As soon as users log in to your product, they should understand how to complete key tasks in your product without referring to your knowledge base or contacting customer support. If possible, provide users with step-by-step cues to perform critical tasks and help them experience their “aha!” moment with your product quickly—the moment where they first derive value out of your product.
Next, allow customers to gradually learn about different features of your app at their own pace, instead of forcing them to watch a 12-step product tour at once. Offer help and tips based on the user’s role within an organization and their app usage, so your onboarding remains relevant. Create self-help widgets throughout your app for users to quickly find tutorials and guides.
To create a frictionless customer experience and retain more users, try Whatfix, a contextual, in-app onboarding tool for SaaS businesses. Sign up for a free demo to see how it works.
Discover how Whatfix’s Digital Adoption Platform allows your organization to create frictionless user onboarding experiences for your customers, with in-app guidance, tooltips, and self-service knowledge bases.