How to Increase Customer Retention and Get More Profit From Your SaaS

The SaaS market is highly competitive. Many companies are constantly improving and entering the market. This has led to high churn rates as customers demand a more valuable user experience. Imagine spending countless hours and resources to attract new users and then watching them leave. It's frustrating, right? This is where effective SaaS retention strategies become your weapons. These strategies can turn dissatisfied users into loyal customers. And they will help you reduce churn and increase revenue.  

At Arounda, we have rich experience in the SaaS industry and can help you find the key to sustainable growth. Let's find out how to turn fleeting visitors into loyal clients and increase profits.

In this article: 

• Find out why user retention in SaaS is important, its benefits, and key metrics.
• Learn about and choose the best SaaS customer retention strategies.
• Discover practical examples and get our expert insights. 

What is Customer Retention? 

SaaS customer retention is the ability of a company to maintain user subscriptions and purchases over time. It focuses on regular income over one-time sales (unlike traditional businesses). Retention involves developing loyalty, ensuring customer satisfaction, and continuously delivering value to users for long-term success.

Key Metrics

Here, we provide the most important metrics and show how to calculate them. They will help you measure SaaS retention and keep your finger on the pulse. 

1. Churn Rate: This is the percentage of customers who cancel their subscriptions during a certain period. A high churn rate indicates potential problems with your product or customer satisfaction.

Formula: Churn Rate = (Number of customers lost during a period / number of customers at the start of the period) x 100

FYI: If you have less than 5% monthly - it's a good rate. If you see more than 7% monthly, choose another strategy or think about a UI/UX audit to identify the problems.

2. Retention Rate: This is the percentage of customers who continue to use your services during a specified period. Higher retention rates indicate successful SaaS retention strategies.

Formula: Retention Rate = ((Number of customers at the end of a period - New customers acquired during the period) / Number of customers at the start of the period) x 100

FYI: If you have over 90% monthly - great job. But if less than 80% monthly, it's time to find the reasons and take action. 

3. Customer Lifetime Value (CLV): It shows the total revenue you can expect from a single customer over the entire period of his/her relationship with your company. A higher CLV means that each customer receives more value, boosting overall SaaS retention.

Formula: CLV = Average revenue per customer x Average customer lifespan

FYI: A good rate is when CLV is 3 times higher than the Customer Acquisition Cost (CAC). Bad CLV is less than 1.5 times the CAC. 

4. Monthly Recurring Revenue (MRR) Growth: Positive MRR growth indicates effective customer retention strategies of SaaS. It reflects the increase in revenue from existing customers, including renewals and upsells.

Formula: MRR Growth = ((MRR at the end of the period - MRR at the start of the period) / MRR at the start of the period) x 100

FYI: The good rate is over 10% monthly, and the bad rate is below 2% monthly. If you have low rates, consider choosing a new SaaS retention strategy, UX audit, and/or redesign. 

Are you interested in why most SaaS products fail and what you can do about it? Read our article to find out.

Well, we've explored customer retention and its importance, and now we know how to calculate the key metrics. If all those rates are high, that's perfect! But if not? You need to change something. We invite you to explore the benefits of implementing SaaS retention strategies and choose the best for your business. 

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Best SaaS Customer Retention Strategies

How to increase customer retention in SaaS and get more profit? Choose the right strategy. Effective customer retention strategies for your SaaS business are crucial to ensure customer loyalty and satisfaction. And, of course, increase revenue. We are experts in the SaaS industry, so our team gathered the most useful tips to share with you. Let's go!

Enhancing Customer Onboarding

Customer onboarding is the initial interaction with a SaaS product. It's like a first date, where the first impression is really important. An effective onboarding process can establish a long-lasting relationship. It directly influences your SaaS retention strategy.

What you need to do: 

• Create personalized experiences that can improve the onboarding. In other words, tailor the process based on user profiles and needs.
• Provide clear, step-by-step instructions to help users navigate the product effortlessly.
• Give proactive support, such as live chats, emails, and scheduled check-ins. This can prevent confusion and frustration. 
• Think about quick wins. Helping users achieve quick wins early in onboarding can boost their confidence and satisfaction. Identify key actions that show the product's value and guide them to complete them. 

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Source: SaaS Capital

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Remember, your product must be enjoyable and easy to navigate! We had an excellent HR project for this task: Gradwork. We improved customer reach by 35% and achieved 80% user satisfaction. 

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Do you want to know how we did it for our SaaS client? Explore our case to get interesting insights from our designers.

Coming back to strategies, let’s explore the next one.

Using Data and Analytics

Data and analytics are very important in developing effective SaaS retention strategies. They provide insights into customer behavior, preferences, and pain points that can help you make informed decisions.

What you need to do: 

• Track customer behavior and usage patterns to identify valuable features and prevent frustration. For detailed insights, use tools like Google Analytics, Mixpanel, and Amplitude.
• Foresee customer churn by analyzing historical data and identifying trends. It is called predictive analytics, which allows you to implement targeted SaaS retention strategies.
• Personalize customer interactions and increase relevance and engagement. Create personalized emails, product recommendations, and targeted offers based on your user behavior.
• Segment customers according to usage patterns, industry, or subscription level. It will help you tailor retention strategies to different groups and provide customized support.

We understand how challenging it could be to analyze all those numbers, detect the problems, and find the right solutions. You don’t need to worry! Take a deep breath, and just tell us. Our expert team is happy to help you! We offer well-proven design solutions for your SaaS product: CRM, analytics, automation, AI data tools, recruitment, ATS, HRM, marketing MAS, and many more. 

Creating Customer Success Programs

Creating useful customer success programs is one of the B2B SaaS customer retention strategies for increasing product value. This approach includes dedicated teams, strategic initiatives, and constant engagement to understand and achieve desired results.

What you need to do: 

• Form a team focused on customer success that will work closely with customers. Aims: to understand their needs, set goals, and guide them through the product journey.
• Ask your customer success managers (CSMs) to do regular check-ins and proactive outreach. It can significantly improve customer relationships and show commitment to clients’ success.
• Offer customers extensive educational resources, such as webinars, tutorials, and certification programs. This will enhance the value of your product.
• Track users’ well-being with customer health scores and start proactive measures to prevent customer churn. 
• Customize success plans and outline clear objectives, milestones, and actionable steps. 

Examples

Zoom's customer success program emphasizes personalized onboarding, regular check-ins, and training resources. The end outcome is better satisfaction and retention rates. Adobe's success team offers tailored plans, proactive marketing, and educational materials. They also identify at-risk accounts for retention and revenue.   

Source: Forrester

Delivering Exceptional Customer Support

Successful customer retention strategies in SaaS require effective customer assistance. Of course, users will have questions, problems, and demands. Providing expert support can make a significant difference in retention. Your customers will feel appreciated, understood, and happy. This leads to long-term loyalty, right?

What you need to do:

• Provide 24-hour support using several channels like email, live chat, phone, and social media to guarantee people can easily reach out for help.
• Prevent customer frustration and reduce churn through proactive communication. For example, automated emails or in-app messages can offer tips, reminders, or notifications about potential problems.
• Offer a comprehensive knowledge base with articles, FAQs, and tutorials. In this way, users can find solutions themselves, reducing the load on the support team.
• Adapt your customer service interactions using client data to significantly improve the user experience. For example, always address users by their first name. You can also identify usage patterns and offer solutions accordingly.
• Answer user questions and solve their problem quickly and efficiently. Harvard Business Review emphasizes the importance of timely and effective support. Quick response times and first-contact resolution (FCR) rates are key indicators. Remember that fast solutions increase customer loyalty.

Sources: Microsoft, Gartner, Salesforce

Regular Communication and Engagement

Effective SaaS customer retention strategies need regular communication and engagement. You will preserve brand connections, keep customers informed about product updates, and express gratitude for their loyalty.

What you need to do:

• Pay attention to client feedback. It provides useful information about customer satisfaction and areas for improvement. You can gather feedback using tools like surveys and NPS.
• Send regular newsletters with tips, feature updates, and industry news. You will keep customers informed about what’s going on in your business and industry. They will feel a sense of belonging in your community and raise the chance of a new buy. Mailchimp can help you with regular sending.
• Build community. A product-focused community through forums, social media groups, and user events can foster a sense of belonging. Engaged communities offer support, share best practices, and advocate for your brand.
• Don’t forget about personalized communication based on user behavior, preferences, and feedback. It will improve relevance and effectiveness.
• Offer educational content like tutorials, webinars, free courses, blog articles, and posts. It empowers users and establishes your company as an authority in the field.

Our Arounda design team wants to share a practical example of a user-centric redesign for WordPress, which is the industry leader in content management systems.

Our results include improved website design and branding, better-quality marketing materials, a new visual style, an individual marketing approach to each product, retaining more customers through email marketing, and many more. Discover our WordPress case.

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We hope you are as motivated and passionate as we are when starting a new project. So, don’t stop and keep reading to get more insights. 

Providing Value Through Product Development

Continuous product development is essential for high SaaS customer retention rates. Focusing on ongoing upgrades keeps products relevant and attracts new clients.

What you need to do:

• Continuously update and refine your product based on customer feedback and market trends. Use agile development methodologies like Scrum or Kanban.
• Provide innovation! Strategic features can boost user engagement and satisfaction. They address customer issues and provide significant value.
• Create a user-centric design. Your product should be intuitive and user-friendly. Thorough user research, usability testing, and adherence to UX/UI best practices will assist you. 
• Scale your product with customer growth. It means that its software can handle increased loads and deliver consistent performance.
• Integrate with popular tools and provide customization. This will make your product more adaptable to different customer needs. For example, Slack's integration with other software tools has made it a great hub for team collaboration. This step improved the value proposition and retention.

More examples

Spotify, Netflix, and Atlassian are companies that are constantly updating their platforms to keep users interested and satisfied. Spotify offers extra functions such as customized playlists, podcast integration, and social sharing options. Netflix invests in infrastructure to support its growing audience. Atlassian regularly adds new features to its Jira software depending on customer feedback.

Now, let's look at the practical aspects of development and design. We have another successful case: MYSO. It’s a Web3 financial platform that provides innovative decentralized web applications with a seamless user experience and robust security.

Services provided: UX/UI design, web design, and development. Explore our project and get insights into what and how we did it. 

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Arounda has helped SaaS businesses develop effective strategies for years. We focus on regular improvements, innovative features, and user-centric design. Our team ensures product relevance, user satisfaction, and long-term growth. Find out more about our MVP design service for startups or product redesign service for existing companies. 

Implementing Loyalty Programs and Incentives

Loyalty programs and incentives can significantly boost customer retention rates. Reward loyal customers! It fosters a strong emotional connection between customers and the brand. Agree?

What you need to do:

• Offer discounts, exclusive features, early access to new updates, or non-monetary recognition in the community. A reward system that acknowledges and appreciates customer loyalty is very important for people. It's an amazing psychological trick.
• Integrate a tiered loyalty program to increase customer engagement with a product. Offer higher tiers with enhanced benefits. By the way, HubSpot effectively uses this strategy.
• Encourage customers to refer new users. This can improve retention efforts, attract new customers, and strengthen loyalty.
• Provide exclusive offers and content for your loyal customers. People are happy when they get special deals. For example, early access to new features, special discounts, or exclusive webinars and events. Use this strategy for a SaaS boost.
• Use gamification. Adults also like playing! Gamification can enhance the engagement and fun of a loyalty program. Incorporate points, badges, leaderboards, and challenges for customer participation. 

Examples

PayPal offers cash rewards for referrals, boosting both acquisition and retention. Duolingo uses gamification to keep users motivated and encourage them to continue learning. Amazon provides free shipping and customized deals. Slack rewards active users with exclusive features and community spaces. What about your business?

Do you want to choose the best customer retention strategies for your SaaS and become a business shark like those companies? We are experts in SaaS design issues and can help you reach this goal.   

Final thought 

In the business world, customer retention is a must for sustainable growth and increased profits. Well-chosen SaaS retention strategies can convert customers into fans, friends, and top marketers. And, of course, more users equals more revenue. Remember, every effort you make to keep your consumers, rewards in the long term!

Our main tip is to imagine yourself as a user. Get into the customer's shoes! But if it doesn't help, then we have another solution. At Arounda, we understand all the nuances and know secret tricks to build strong customer relationships. We are your caring design partner, and we will implement effective B2B SaaS customer retention strategies for your business. And when your product succeeds, we will continue to support you to grow higher, bring happiness, and celebrate together. Contact us today to begin this journey!