Did you know that boosting customer retention by 5% increases profits by up to 95%? Or that B2B companies that successfully engage their customers reported a 63% lower churn rate? Crazy, right?
Engagement and retention are two of the most important metrics in the SaaS industry, especially regarding customer satisfaction. Sometimes, however, they are both misunderstood or confused. Although they’re very similar, there are clear differences between them, and if you’re interested in the SaaS industry, you should learn to distinguish these. So, what is customer engagement vs. customer retention? How can I improve both metrics? What’s the relationship between them?
In this article, we’ll cover all these questions and more, including:
- Customer engagement vs. retention
- How to measure/track both metrics
- Relationship between engagement and retention
- How to increase customer engagement and retention
- Engagement vs. retention
Let’s get started!
Customer Engagement vs. Retention
Customer engagement and retention are two similar metrics. However, there is one significant difference between them.
Customer engagement refers to how much time a customer spends on a product, such as completing actions or using certain features. Alternatively, retention is the process of getting users to return to your product or service, even if they don’t take any action.
The main difference between retention and engagement is the purpose of each metric. Engagement is based on meaningful interaction with the product, whereas retention refers to the act of returning to it. Although we could say that addiction is a key element in both, engaged users are driven by enthusiasm/trends whereas returning ones are also driven by a sense of utility.
Let’s explore how to track and measure these two concepts now that you know the difference between them!
How to measure/track both metrics?
Metrics have different formulas and methods of calculation, but both help illustrate what’s happening in your company more clearly.
Engagement
To calculate your business’s engagement, you have to count the number of interactions your customers have with your product, and the method depends on the platform. For example, the total engagement on Facebook would comprise the total number of shares, likes, reactions, and comments. Instead, the total engagement of a product would be the total number of interactions with the website, comments, shares, activity, or referrals.
The correct formula to calculate the engagement rate is:
Engagement rate = (Total Engagement / Total users or followers) x 100
Retention
To calculate the retention rate of your SaaS company, there are two metrics: Daily Active Users (DAUs) or Monthly Active Users (MAUs). These metrics can give businesses a better understanding of who uses their app regularly, which is more insightful than vanity metrics such as total installs.
For example, someone who downloads your application to try it is not the same as someone who uses it regularly, installs it on their computer, and uses it daily.
The correct formula to calculate the retention rate is:
Retention rate = (Number of active users that continue their subscriptions at X time period / Total number of active users at the beginning of X time period) x 100
Now that you already know these two concepts, their main differences, and how to calculate them, let’s dive into the relationship between them and how they influence each other.
Relationship between Engagement and Retention
Though retention and engagement are two different metrics, they’re directly related. Generally, the more engaged your company is, the happier your customers will be and the more likely they will stay with you (retention).
Conversely, the fewer users interact with your product, the less engaged they will be, so the higher the likelihood of churn. But how can a SaaS company increase customer engagement and retention? Let’s discover some of the best tactics in our next section!
Increase Customer Engagement and Retention
Increasing engagement and retention can be done in many ways. However, it’s important to note that you should focus on increasing user engagement more than retention. But why? Because engagement encompasses everything from retention to referrals to revenue.
Think about it, highly engaged users lead to higher retention, which, in turn, leads to higher revenue and referrals. Fantastic, huh? Here are some of the best ways to increase engagement and retention.
1. Onboarding
First impressions matter, right? If you think about it, onboarding is the user’s first impression of your product; it highlights its key features and benefits. That’s why it’s crucial to design it correctly since it directly impacts adoption rates. The better designed your product is, the faster your customers will recognize its value.
2. Personalization
Always personalize the messages as much as you can. Users feel more attached to a company that listens to them how they expect and listens to their needs and concerns. Giving users a sense of ownership makes them more likely to be loyal to the company.
3. Offer great customer support
You need high-quality customer support to have a strong and consistent customer base. That means being proactive, analyzing your customer’s behavior, and helping them through their needs to strengthen the relationship.
4. Provide omnichannel support
Did you know that purchase frequency is 250% higher when a company offers omnichannel touchpoints vs. offering a single channel? On top of this, the average order value is 13% higher for omnichannel businesses.
Omnichannel customer service refers to customer assistance and advice across multiple devices and touchpoints. Providing it improves customer insights, resolves issues faster, simplifies customer journey, and more benefits you will discover in our last blog post, The importance of offering Omnichannel Support in SaaS.
5. Create a customer community
Creating a customer community is a way for a company to foster a relationship with customers; it can facilitate interaction, knowledge exchange, customer education, product support, and feedback. This way, users feel they are part of a community and their opinions are valued.
6. Content Marketing
Content marketing aims to create and share relevant articles, videos, podcasts, and other media to attract engage and retain audiences. This increases user engagement by creating a community that finds your information relevant.
These strategies will help boost customer engagement and brand awareness around your company. Consequently, this will increase your retention rate and reduce churn.
Engagement vs. Retention
User engagement it’s a process that happens throughout the lifecycle of a customer, while customer user retention results from customer satisfaction strategies. Both concepts are vital for SaaS growth, and these results can provide an overview of how your company is doing, how your users respond to your updates, and what needs improvement.
To improve both metrics, you first need to increase user engagement, which can be done in many ways, including a successful onboarding experience, personalized communication, great customer support, omnichannel support, customer community, and carefully tailored content marketing. Are you ready to boost your customer satisfaction?
Are you interested in learning more? Check out our Retention features or Book a demo to learn more about how using our FROGED solutions can improve your product’s Engagement and Retention metrics!