The product-led growth approach has meant a shift in acquisition and retention strategies for SaaS. If a product acquisition strategy aims to present the product as the solution for users, a product retention strategy should guarantee that they won’t regret it in a week, month, year, or lifetime. Product retention occurs when customers continue to use, buy, and experience your product over a period of time.
Is it more important to retain than it is to acquire? Well, if you’re starting out, then you have to start somewhere. But as your customer base grows, you can never lose sight of your current customers, especially those that have shown high engagement and loyalty. Product retention has proven to be 25 times less expensive than acquisition, especially if we’re talking about SaaS. Dedicating time and attention to existing customers will also reduce churn.
If product retention strategies seem like an option for your business, this blog post will tell you everything you need to know to improve it and the best practices to follow.
This article covers:
- What is Product Retention?
- Why is Product Retention important?
- How to improve Product Retention
- Checklist of Product Retention Best Practices
What is Product Retention?
Product retention is the ability your product has to retain customers over a specified period. In SaaS, if your product offers a high retention rate, it means that your customers or subscribers will continue to use your product by upgrading, renewing, etc. If the retention is low, it means that your customers are going elsewhere and have stopped using your product.
So, how is product retention measured? The standard way is to subtract the number of customers at the end of a given period from the total amount of new customers acquired throughout that period. The result obtained should then be divided by the number of customers at the beginning of that period then multiply by 100. This gives you your retention rate. Although there are different ways to obtain your retention rate, here is the standard formula:
customers at the end of the calculated period – new customers during the period
________________________________________________________________ * 100 = CRR
customers at the beginning of a period
Why is Product Retention important?
If you want your customers to see your product as the #1 solution to their problems, you’ll need to make sure that they experience it as such throughout their entire journey, not only during acquisition.
Research continues to show that “44% of companies make acquisition the priority, while only 18% focus on retention”, so we felt that a small reminder is necessary on why product retention is important:
- Less expensive and more valuable than acquiring a new one. As we mentioned in a recent article, “Statistics show that customer retention is 25 times less expensive than customer acquisition”.
- Reduces churn. We know that customer churn is the SaaS kryptonite since it directly affects your recurring revenue. Instead of using all your magic on new customers, make sure that your current ones complete their payment cycle.
- Upselling opportunities. Making your product part of their daily routine has probably meant a great deal of effort — on both sides. A customer who has completed their payment cycle is far more likely to pay for an upgrade than one who hasn’t.
And, well, who doesn’t want that?
How to improve Product Retention
If you are product-led like FROGED, then you know that it takes a whole village to reach sustainable product growth; not just the product team. Here are four key ways to improve product retention.
You had me at Onboarding
Well, you might not make them fall in love with your product, but you surely don’t want your sign-ups to be part of the 60%+ that never actually use it. And, yes, this is something that can be fixed by implementing a solid onboarding process for users, and this is particularly true for SaaS.
As a subscription-based company, you’ll need to follow product usage patterns very closely to ensure sustainable customer retention. Since your product grows in parallel to your customer base, every stage throughout the user cycle must offer product value. However, it’s in the onboarding stage when users will first find out about your product and what it can offer.
If they’re not convinced, they will find a solution elsewhere. And, don’t forget that nowadays, they can probably do it in a single click.
Go with the Product Flow
If you’re still unsure about what a product flow can do, just think of it as a tour guide for your customers about your product. In fact, product flows have become more dynamic and visual thanks to AI-supported features. It’s not just about showing off this technology, it’s about being able to make every touchpoint as dynamic and personalized as possible.
Product flows are a great way to engage and educate users on your product. Although not as engaging, you can also refer them to self-serve tools such as a Knowledge Base. Don’t forget that users are becoming more and more independent and like to customize their own learning.
The icing on the cake? It creates power users, so your customer support team will notice a reduction in support tickets.
Support customers like you mean it
To support the right customers, at the right time, and in the right way, you’ll need to gather data on usage patterns. This is also something that can be achieved through Product Flows, without users being aware of it.
Another way to gather this type of data is by simply asking them. In this case, you’ll need to make them feel heard by taking their feedback into account. This is nothing more than proactive customer support.
If you want to make sure you’re making customers happy, here’s an article where we cover the main characteristics of great customer support.
Find product groupies
As we mentioned before, it’s enough to acknowledge their pain points. They have to believe that you actually care and that you value their support. Although a SaaS referral program usually has customer base expansion as the principal aim, rewarding existing customers is very much part of the deal.
For example, you can provide existing users with a referral link or code to share with others. For every new sign-up derived from that sharable link or code, the existing user will get a reward, which can range from a free renewal to an exclusive trial of a beta feature.
Checklist of Product Retention Best Practices
Since we love to talk about retention, we’ve summarized our key points into a checklist that you can run through your current product retention strategies:
- Develop a solid onboarding process for users
- Make sure product value is defined throughout the user cycle, in addition to onboarding
- Use Product Flows to guide users throughout their whole journey
- Make product flows dynamic and visual, to make every touchpoint as personalized as possible
- Include self-serve tools, such as a Knowledge Base
- Gather data on usage patterns through Product Flows
- Gather feedback on the product by asking users
- Adopt fully proactive customer support
- Implement SaaS referral programs to expand your customer base and reward existing customers
Throughout time, this checklist is likely to grow, shrink, and change depending on your specific product and progress. The goal is to monitor retention threats closely and make sure you have the right tactic under your sleeve to transform it into a long-term opportunity. If you’d like to explore more retention strategies, here’s a list of 14 Battle Proven Strategies from Top Experts.