13 Best SaaS Customer Retention Strategies (2023)
No matter how strong of a customer acquisition stream you have coming in, your revenue will suffer and company growth with stagnate if you have higher customer churn. Eventually, you might even churn through your entire potential customer base – jeopardizing 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 and strategies software companies use to get customers to remain loyal subscribers of their product or service. It’s a key metric that can show current performance trends and forecast future revenue.
User retention vs. customer retention
User retention is often confused with customer retention. While similar, their differences matter.
While user retention looks at anyone who regularly interacts with your product or service, customer retention measures people who regularly pay for it. For example, retained customers frequently re-up a paid monthly subscription.
If you offer a paid subscription service, you’ll measure customer retention instead of user retention. It’s also crucial to look at if you’re working off a freemium model — comparing your user retention rate with your customer retention rate can offer insights into which features are the most engaging and are worth paying for.
Why Is Customer Retention Important?
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.
Customer retention also boosts customer loyalty, which reaps the following benefits:
- Loyal customers often recommend products to their families and friends. The more customers you retain, the more customers you get.
- 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.
13 Best SaaS Customer Retention Strategies in 2023
SaaS companies need to use different customer retention strategies to retain customers at various stages of product usage, such as:
Let’s take a look at the top 13 strategies to retain customers at all three stages of product usage:
Customer Retention Strategies for New Users
Users who have 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 ensure they can easily find any product information they need.
One Wyzowl report found that 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 contextual, in-app guided onboarding for new customers and users
In-app onboarding allows products to create interactive, guided content such as step-by-step tutorials, product tours, interactive walkthroughs, tooltips, pop-ups, and more – all embedded 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 the app. Through real-time guidance, in-app onboarding makes it easier for customers to get value from your app and remain a customer.
In-app customer onboarding tools like Whatfix allow you to:
- Create and publish step-by-step instructions, task lists, tooltips, product tours, and walkthroughs to explain how to perform complex actions in your app and showcase its core features – all in a no-code, simple-to-use editor.
- Analyze and test your product experiences and user flows with advanced user behavior and product analytics.
- Collect customer and user feedback with native and embedded surveys, allowing you to understand customer sentiment, if your users find your onboarding helpful, and what new help content you need to create.
- Drive adoption of new features with beacons, tooltips, and feature walkthroughs.
Take a look at how ICICI Bank uses Whatfix-powered in-app onboarding to educate customers about its corporate banking platform. Users who click on the Account Statement tab will see a walkthrough to complete the form fields and download their statements.
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 specific task in your app. Gamification is known to motivate users to complete routine tasks faster – rewards like badges and rankings on a leaderboard give a rush of dopamine.
Consider incorporating the following game-like elements 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 completing 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 particular milestone in product usage
- Give badges to users at different levels, such as beginner, intermediate user, and pro user.
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 on-demand 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 prefer solving problems on their own before contacting customer support for assistance, making customer self-help important.
You can add various self-help options to your website or app so customers can help themselves. These include:
- Self-help widgets in each section of your app.
- A knowledge base and/or help center with detailed how-to’s, tutorials, and troubleshooting docs.
- Chatbots that instantaneously respond to customer queries.
- A Frequently Asked Questions (FAQs) page.
With more customers preferring a self-service support model, adopting self-help options can be a huge driver in customer retention.
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, etc).
End-users are empowered to search the Self-Help menu for their unique issue, which is connected to a product’s knowledge base, support documentation, and more – which all prompt in-app tutorials that showcase step-by-step instructions to your customers.
Product managers, customer success teams, and more are empowered to capture behavioral data on how customers and end-users engage with their products, allowing them to make data-driven decisions to drive customer retention.
4. Ask customers for feedback
Customer feedback gives you insight into how each customer is (and isn’t) using your app. Using this knowledge, you can offer individual support to provide value to customers one at a time – helping to retain more customers.
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 the onboarding flow to make a more welcoming experience for new customers and 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 likely to use your product longer.
Ask new customers for feedback at critical points in their product journey: after filling in their profile, completing an important app task, and being 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 for creating in-app surveys.
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.
With Whatfix’s digital adoption platform (DAP), product and customer-facing teams can collect customer feedback by creating in-app messages and surveys that prompt users with alerts to submit feedback directly inside the product. Whatfix’s customer feedback tools include detailed, free-response survey prompts like the following:
As well as simple Likert-scale feedback features, as seen below:
Customer Retention Strategies for Inactive or Occasional Users
Users who rarely or occasionally use your product need regular nudges to return to your app. These users are also most likely to abandon your product, so it’s essential to watch 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 want to solve and connects your product to something inherently valuable to your customers.
Email is an excellent channel for sharing 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 on what other 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 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 will likely see your brand and product as trustworthy. You can also 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 for touching base regularly with existing customers.
Zapier is an excellent 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, leading readers back to the product.
7. Identify red flags for signs of customer churn
The best way to prevent customer churn is to identify which customers are likely to churn and proactively reach out to win them back. Your most successful customers likely perform specific actions in your app within a certain period of time, which keeps them invested in your product. When customers don’t complete these critical 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 key actions are they completing 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 will likely churn and reach out to it. For instance, two of its red flag metrics are the frequency of logins and the 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.
Customer Retention Strategies for Power Users
The definition of a power user may vary for different types of software. Still, power users generally 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 give them 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 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 ignore power users’ feedback, asking for their opinion can win you credibility and brownie points.
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.
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 since it’s easy to migrate information from a single app and learn a new tool.
On the other hand, if customers use multiple products or 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. As such, 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.
Power users may sometimes reach out to you asking for additional features and functionality, which is an excellent 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. In the process, communities help power users become more invested in your product and brand and make them more likely to stay with your brand.
Explore 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 social media channels.
12. Invest in customer success management
Customer success has become synonymous with SaaS. Even from the first contact, it’s time to start offering a hands-on, detailed customer success experience that helps each user contextually meet their outcomes and goals or risk losing that connection when it’s time to renew.
It’s critical to continually prove to your customers that they made the right decision doing business with you. By proactively addressing customer needs and helping them achieve their goals, your company can improve customer satisfaction and reduce churn. Customer success managers can also identify opportunities for customers to expand their use of a company’s products and services, leading to increased revenue.
13. Offer referral programs
Referral plans can help to drive new customer acquisition by incentivizing existing customers to refer their friends and colleagues to your service. Since referrals tend to come from people who trust the referrer, the leads generated through a referral program are likely to be of higher quality than those generated through other marketing channel.
By incentivizing customers to refer their friends and colleagues, you can create a sense of loyalty and engagement among your existing customer base, which can help to improve retention. Referral marketing can also be a cost-effective way to acquire new customers, as it relies on existing customers to spread the word about your service.
One example of a SaaS company with a great referral program is Dropbox. Dropbox’s referral program rewards users with additional storage space for every new user they refer to the service. This incentivizes current users to share Dropbox with their friends and colleagues, and also rewards them for doing so by providing them with additional value in the form of increased storage capacity. The program is also simple and easy to use, allowing users to easily refer others by sharing a unique referral link.
If customers have to pass through multiple hoops to use your product, it’s unlikely they’ll stick around for too long. To increase 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 quickly experience their “aha!” moment with your product—the moment they first derive value from it.
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.
Request a demo to see how Whatfix empowers organizations to improve end-user adoption and provide on-demand customer support