Top SaaS Customer Retention Strategies to Boost Loyalty

Compared to companies that offer software as a one-time purchase, SaaS (Software-as-a-Service) companies have multiple advantages, but they also face immense competition. As the world moves toward SaaS businesses more often, rivalry becomes a natural part of the industry. The global size of the SaaS market in 2024 was $251 billion, and the numbers continue to grow. While this is a promising fact encouraging more startups to tap into these possibilities or switch to this model, it also signals that the area of competition grows. In such a case, SaaS customer retention becomes one of the key goals in SaaS companies’ survival because they depend on customers continuing to use their software. 

The long-term success of a business depends on its ability to retain customers and ensure that they are satisfied with what the SaaS company offers. However, these SaaS customer retention strategies should balance financial benefit for the company’s sake with the value it can guarantee. This article will explore the advantages of measuring customer retention and tips to keep it high. 

Improving Customer Experience to Increase SaaS Customer Retention

SaaS should prioritize customer experience as the key contributor to their success and retention. While many companies focus on the advantages of SaaS customer retention, few realize why it is the driver of progress. 

• Higher customer satisfaction. Customer experience is central to boosting satisfaction. Statistics indicate that almost 90% of organizations worldwide in diverse sectors view customer experience as the key to customer satisfaction. Customer experience is a representation of how a company can increase retention — and if it pays attention to how customers operate the software and how they are treated on all levels, they are less likely to switch to competitors. 
• Reduced churn. Even though churn is inevitable, it’s a crucial metric to minimize if possible. Whether a company adopts SaaS support best practices or improves the product directly, it can reverse or minimize the trend. SaaS companies rely on churn as cancellations lead to financial loss. Constantly improving the product’s quality and service will contribute to fewer cancellations and spread the information about the brand through word-of-mouth marketing, online reviews, and better ratings.
• Higher monetization opportunities. A positive experience creates trust in the brand and customer retention for SaaS. The clients are more likely to purchase upsells or additional services from it. They can upgrade to better subscription plans or explore complementary products. 
• Unique value. Unique value can be a great customer retention tool SaaS companies should explore. Mapping out a customer journey and combining customers’ needs with the right proposition allows business owners to outline what makes their SaaS product so attractive and how they can build upon it for improved results. A company doesn’t just invent the best software — it understands what is needed to make it happen. 

SaaS Customer Retention Rates

Calculating the SaaS customer retention rates (CRR) is crucial to measure before planning any strategies — so let’s explore how it works. Customer retention rate is the critical metric to analyze how well the company retains its users within a particular length of time. If your company has a high retention rate, it demonstrates business health and your ability to match clients’ wants with what you have. If your SaaS customer retention rate fails, it means it’s time for you to take a pause and re-evaluate what you have. 

Here’s what it can give you a glimpse into:

• Key gaps in service. By analyzing what did not work for your customers, you get to explore the potential areas for improvement. A declining CRR signals potential issues with the product, pricing, or customer experience — all the things a company should aim to maintain on the highest levels.
• Customer loyalty state. Do your customers find value in the product? High CRR will allow you to learn whether they will continue using the product and how you’re doing. This, once identified, gives the information on whether a business should continue its current practices and how it should contribute to better loyalty. 
• Reduces acquisition expenditures. Reclaiming the attention of the customers and finding new trusting audiences interested enough to try a product already known is more expensive than managing to keep the client around. If you follow CRR and evaluate your SaaS success regularly, you act to prevent, not address the challenge, and this significantly cuts the costs. 

SaaS Customer Retention Strategies

Customer retention is complex and requires systematic adjustments for the maximum result. Retaining the already existing subscribers is a combination of the soft skills of one’s agents and the long-term value proposition. Below are the B2B SaaS customer retention strategies you should implement. 

Enhance Your Onboarding Experience

Business owners ignore the value of customer onboarding, but it takes the main step, which is encouraging the user to try a SaaS product and get hooked. It shows how the app works and creates the first impression that will linger with your brand. Give more information about the company, create a flexible and reliable knowledge base, and offer support team contacts. Onboarding helps a new subscriber build the habit of opening up your software and using it, which is one of the main predictors of success. Usually, using a new service can seem too forgettable, which can be countered with the help of onboarding and regular notifications and reminders. 

Build on Exceptional Customer Support

Customer support is one of the primary attractive — or troubling — factors when retaining customers. Communication is immensely valuable for subscribers, and in SaaS, interactions are much more regular than in other situations. According to Zendesk, long waiting times (58%), automated systems without an inability to escalate to a human agent (42%), and the need to repeat the same information many times (41%) are the signs of bad customer service. 

In SaaS businesses, communication should be fast and empathetic because it cannot be separated from the product’s functioning. Companies should invest in a reliable team and train it rigorously. If you need outside help, SaaS customer support outsourcing can be a practical alternative. 

Provide Timely and Transparent Information

Customers hate being lied to, and they will find out the truth — for subjective reasons, some companies falsely believe that if they don’t talk about mistakes in their products, the clients will stick around. In reality, 31% of customers can switch from one brand to another if the company lied about product performance. 

When your customers express dissatisfaction, reach out to them and listen. If they report a bug, fix it. If they ask about pricing, explain how it has turned out to be. When you provide reports, make them publicly available. These steps empower your customers and give them insights into your company, which they will now perceive as trustworthy. 

Offer Continuous Value and Add New Features

SaaS companies should constantly improve and provide new upgrades to keep their customers subscribed. Those who want to keep up with their competitors’ successes should collect customer feedback and examine the changing trends in opinions and customer expectations. Once you’ve launched the new features, announce them through emails, in-app messages, and webinars. The continuous lifetime value of your SaaS product will ensure a strong brand position. 

Measuring Customer Retention

The customer retention rate (CRR) we mentioned above is easy to monitor and evaluate. It is calculated like this: 

In the formula, the letters are these: 

S — number of customers at the start of the period

E — number of customers at the end of the period

N — number of new customers acquired during the period.

The following formula evaluates solely the new customers by focusing on the ones who were retained during the particular period. 

Regularly monitoring CRR is essential for long-term efficiency and tracking performance of product quality. 

Monitoring and Improving SaaS Customer Retention Metrics

Aside from the customer retention rate, businesses can utilize other SaaS customer retention metrics to examine additional factors in developing customer retention. Below are the SaaS customer success metrics to add to your company’s evaluation. 

• Churn rate. Monitoring churn is like tracking the blood level in one’s veins — but for business. Companies will undeniably be aware of customer churn even if they don’t track it, but having specific numbers will give them more practical elements to rely on. 
• Its formula is the (C/S) x 100, where C is the number of customers lost during the period, and S is the number of customers at the start of the period. 
• Customer lifetime value. This metric estimates the total revenue a business can expect from a single customer throughout their relationship. This value is calculated by taking the average revenue per user and multiplying it by the average customer lifespan. 
• Net promoter score. This simple metric evaluates how likely the users are to recommend the company to others. During a survey, customers are asked how likely they are to recommend the business from 1 to 10. Usually, the users are categorized into three groups based on their responses: promoters (9-10), passives (7-8), and detractors (0-6). The formula is then calculated as follows: % of promoters—% of detractors. 

Real-World Examples

Few companies readily share the secrets to customer retention, but learning from examples of those who face customer churn and overcome it is immensely valuable.

Ron Carson from Thridside studied the factors that could help reduce churn. When sharing his opinion with Forbes, he states that many companies don’t understand the underlying causes before it’s too late. Carson shares a story of the company that overlooked the signs: 

“Take the story of a digital adoption platform provider… Their dashboards showed strong product usage… Yet… Even their most active customers grappled with onboarding hurdles and found notable gaps between sales promises and day-to-day realities.” 

Amazon Prime can serve as an example of a company with a successful customer retention strategy. 97% of its users renewed their membership for a year — the numbers rose to 99% for the second year. Its competitive pricing and use of data to leverage better customer outcomes have made its effectiveness apparent. 

Amazon is another company that has gained its customer base through diverse propositions and personalized recommendations. It constantly invests in improvements and product promotions by tapping into industry trends and customer needs. This has made the company grow not just through advertisements but even customers’ recommendations as a reliable promoter channel. 

Summary

Customer retention is a crucial determinant of business longevity, and measuring it provides valuable insights into customer attitudes and needs. Companies should move beyond just creating a good product; they should rely on competitors’ experience and knowledge of their strong features to reduce customer churn. Metrics, openness, and a strong human touch all ensure that your subscribers remain. Maybe they have come for the great product, but they will stay for more than that — humans and strategy both. 

FAQ 

What Is SaaS Retention?

SaaS retention is the ability of the SaaS company to retain its customers and keep them subscribed over time. It is usually assessed through customer retention rate (CRR) and depends on product value, customer support, and customer experience. 

Why Is Customer Retention Important for SaaS Companies?

Customer retention is central to SaaS companies because it affects their income, fosters brand reputation, and determines long-term success. Plus, it’s cheaper to retain old customers than to find new ones. 

How to Structure a SaaS Support Team?

A well-structured SaaS support team typically includes frontline support for common inquiries, technical support to fix bugs and crashes, and customer success managers to proactively enhance user experience. 

What Is the Average Lifespan of a SaaS Customer?

Every industry and company has its specifics, as customers behave differently based on diverse criteria. But an average lifespan, details aside, can be between twelve months and several years. 

What Is Good Net Retention for SaaS?

Any number above 100% is considered a good retention for SaaS companies that use subscriptions. 

What Are the 8 C’s of Customer Retention?

The 8 C’s of customer retention are Clarity, Consistency, Communication, Customization, Care, Community, Convenience, and Commitment.

What Is the Rule of 40 in SaaS?

The rule of 40 in SaaS states that a SaaS company’s revenue growth rate and profit margin should be at least 40%. This benchmark is useful since it indicates whether the company grows sustainably or lags behind. 

What Is the Benchmark Retention Rate for SaaS?

Although every industry has its own “normal,” an average successful annual retention rate is 85-90%. 

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