You’ve finally launched your SaaS company, and you’ve been working tirelessly to make it perfect… But wait, your users are not staying long enough to see real benefits from your product. Why is that? It might have something to do with your retention strategy. New customers mean nothing if you have higher customer churn.

Retention is the ability to keep customers and their loyalty over a period of time. With a good retention strategy, you’ll be able to reduce customer churn and save money in the process. 

It’s easier to retain your existing customers than gain new ones, and customers that stay are the customers that make you more money. In fact, increasing your customer retention rate by 5% leads to an increase of as much as 75% in profitability! So what exactly is retention? Why is it important? And how can you increase it? Keep reading to find out! 

Today, you’ll learn all about retention and how to increase your SaaS retention rate, including 

  • What is Retention?
  • Why is Retention in SaaS important?
  • Tips on How to Increase Retention in SaaS
  • Customer Retention Strategies
  • SaaS Retention: Best Practices

Ready? Let’s go!

What is Retention?

In SaaS companies, customer retention is a defining strategy that consists of the different tactics and steps companies take to reduce churn in hopes to retain customers. 

But it’s important to know the difference between customer retention and customer engagement. Customer retention happens when your customers return to keep using your product after their initial trial. On the other hand, customer engagement measures how much time is spent actively using your brand or product – the percentage of customers you keep over a given period of time. 

You can measure customer retention using this simple formula: 

Pretty cool, huh? Now that we know what retention actually is and the difference between retention and engagement, let’s find out exactly why retention is so important in SaaS. 

Why is Retention in SaaS important?

If you want your SaaS company to be successful and avoid churn, you should keep customer retention as your top priority. To understand how important it is, let’s unpack what it will do for your business: 

  • Increase your customer’s LTV. Life Time Value (LTV) is the money a customer will spend using your product. The more retention, the higher this metric will be, which ultimately means you’re receiving more money from your customers.
  • Increase your revenue by retaining existing customers. Retaining customers is always cheaper than gaining new ones, so you can save money by focusing on existing customers and not on Customer Acquisition Costs (CAC). 
  • Don’t forget about account expansion opportunities. The longer the customer stays, the longer they will need your product = the more expansion opportunities. You can implement a premium feature or in-app messaging, making your product bigger and better!
  • Help brand loyalty and recommendations. Word of mouth is real – an engaged customer usually leads to potential customers. They inadvertently become brand ambassadors of your product and do some of the marketing work for you. 

Now that we know why retention is important, let’s learn some tips on how to actually increase it in SaaS. 

Tips on How to Increase Retention in SaaS

Yes, churn is inevitable – there are no magical paths to follow to really avoid it, but there are some ways you can try and reduce it. Here are some tips you can use to increase retention: 

  • Give incentives to your employees around retention. Design a strategy that leads to customer retention and, if every single one of the team players is working toward that, you’re set. 
  • Get to know your customers and craft a good customer experience. Always ask for customer feedback, and create FAQs, guides, and customer surveys to make sure they are satisfied. 
  • Make their onboarding experience easier. Optimize your onboarding with product flows and video tutorials that will reduce a user’s Time to Value. 
  • Stop them from churning by making the billing process seamless. Involuntary churn usually happens when the payment process fails, and they can’t access your product. You can make it a seamless experience by implementing product flows that will help them get from A to B without a hiccup. 

Customer Retention Strategies

Now that you know why it’s so important to increase customer retention, let’s see some actual strategies that will help your SaaS grow. 

1. Provide Proactive Customer Support

Customers would rather fix the problem themselves than reach out for help. So, having a self-service customer support that offers FAQs, help centers, and guides on how to onboard, is a great way to save money on your end, and to make your customers more independent. Platforms like FROGED are a great way to do this all in one go, by providing more proactive customer support thanks to its product flows, in-app messages, and self-serve and live support options. 

2. Retain Customers with an amazing Onboarding Strategy

Having a pleasant experience onboarding new users is a key factor in retaining customers. Change your onboarding game by setting out a clear strategy and implementing a solid toolkit including video onboarding, personalized demos, and customer feedback in order to optimize the onboarding experience for every single user. 

3. Reduce Churn 

There are many ways to reduce churn, even when a customer has decided to stop using your product. You can try to keep them from leaving with an exit survey, which plays two roles. It helps you know the problems a customer may have run into and allows you to fix them – and it also gives you one last chance to make the customer change their mind and stay. 

4. Provide the value of your Product for Growth (PLG)

There are other methods, like making your product entertaining and fun to use. You can do this by creating checklists for finished tasks, and giving discounts and benefits for when they reach a goal. 

5. Always Follow the Data by Using A/B Testing

You can keep providing value to your customers by upselling – getting users to upgrade to a premium version of your product, and cross-selling – offering a product that’s related to yours. The best way to do this is in-app, where you can gauge the needs of your customers more easily and offer them premium features with free trials. 

Let’s not forget about your most trusted friend: data. If you want to test different versions or new implementations of your product, use A/B testing to understand which one works better, and then use the one that gets the best results. That way, you’ll be sure you’re implementing the best version and are giving the most value to your customers.

SaaS Retention: Best Practices

Even though you can’t stop customers from churning, there are so many ways you can keep it to a minimum. Retention is a key strategy to keep your customers using your product, and you can do it by creating seamless onboarding experiences and providing excellent customer support or A/B testing. It’s super useful for keeping existing customers, increasing Life Time Value, and, ultimately, your revenue.  

Ready to start increasing your retention in your SaaS? Book a demo with FROGED today to see how easily you can implement all the retention solutions above, and more!