Your 5-Step Guide to Improving Your Customer Retention Rate

Your 5-Step Guide to Improving Your Customer Retention Rate
December 7, 2016 Brian

Your 5-Step Guide to Improving Your Customer Retention Rate

Holding on to the customers you’ve worked tirelessly to attain is a top priority for every business, but for companies that provide software as a service (SaaS), customer retention is even more critical. A high customer retention rate is a core trait among successful SaaS companies, mainly because they rely on recurring revenue (i.e. customers renewing their subscriptions each period, or making repeated transactions.)

The SaaS business model thrives on capturing revenue from existing customers. Maximizing each customer’s lifetime value to the company and minimizing customer churn becomes essential, especially considering that it’s about 6-7 times more expensive to acquire a new customer than to retain an existing one.

To keep existing customers onboard, SaaS companies need to prove to them that they are providing tangible value. This doesn’t equate to simply offering customers a lower price than competitors. If a customer’s needs aren’t being met, a lower price quickly becomes an afterthought in the eye of the consumer.

A consistent, great overall customer experience is what ultimately delivers value to the consumer, and keeps them coming back month after month.

According to Harvard Business Review, when looking particularly at subscription based services, a member who rates as having the poorest customer experience, has only a 43% chance of remaining a member the next year. On the other hand, members have a significantly higher chance (74%) of remaining a member for at least another year if they rate their customer experience highly.

For providers of SaaS, building a great customer experience plays a vital role in ensuring a high customer retention rate.

Here are 5 simple, cost effective steps SaaS companies can follow to build a positive, fulfilling experience for their customers, and ultimately, improve their customer retention rate.

Draw a customer success map.



To make sure you’re on the same page as your customers, define what a successful experience with your service looks like from their perspective. It’s nearly impossible to meet their expectations when you haven’t even figured out what exactly those expectations are.

Put yourself in the customer’s shoes by pinpointing each step that they may take throughout the customer journey.

Ask yourself the following questions:

  1. What action does the customer take leading up to their decision to either go with your service or a competitor’s?
  2. What occurs while they are on-boarding and learning how to use your service?
  3. Down the road, will customers’ use of your service and their expectations for it change?
  4. How will they react to updates?

Once you’ve established where confusion or dissatisfaction may arise, you can begin to fix problems and design the ultimate path to success.

Remember that success is often defined differently for new customers than for long established ones. Figure out where along the journey that definition changes, and how to help the customer achieve the success they are looking for.

Provide an effortless, but thorough on-boarding experience.



Losing a customer is disappointing. Losing a customer that is the right fit for your solution is catastrophic. All too often it comes back how you on-board your customers.

A customer will give up very quickly on a service that’s confusing, isn’t working for them, or doesn’t meet the expectations they had coming in.

SaaS companies can drastically increase their customer retention rate by simply improving the on-boarding process.

Installing the software is just a tiny part of the process, but many SaaS providers leave new customers high and dry once they’ve gotten up and running.

Try to put yourself in the shoes of someone who has never used your service before.

Is using each function really as intuitive as you thought? Measure for the places where a new customer would most likely to become tripped up over and provide resources like guides and webinars to help smooth over those areas that can’t be immediately fixed.

Be sure to walk new customers through each step, teaching them through how to use each of the features that will lead to their own success.

Hubspot does this exceptionally well. They sketch out a custom on-boarding plan for their customers, complete with a timeline and breakdown of exactly what you will cover over the span of your on-boarding. This helps to align expectations and has allowed them to retain 99% of their customers.

Setting new customers up for success doesn’t require you hanging over their shoulder. Use webinars, guides, video demos, or workshops to educate new customers with the skills they’ll need. Choose the training method that best suits your service and your customers.

Track customer engagement.



The beauty of SaaS is the ability to see how customers are using your service, and equally important, how they are not using it.

Customers who have diminished their usage of your service, or those who aren’t using it all, are likely struggling to realize the value that your service provides. Or that they’re not thinking of you much at all.

This is the strongest indicator that the customer is in danger of abandoning your service.

Reach out to at-risk customers to find out where the problem lies. Help to solve any issues or confusion that could be blocking them from reaching the success they were hoping for.

Tracking the engagement level of customers allows you to flag those who have a high chance of abandoning your service. You will be able to step in and attempt to remedy the situation before it’s too late. This is especially important when the customer has a significant life time value to the company.

In addition to tracking customers with low or slipping engagement, seek out those customers that are most engaged. Who are the customers that are not only getting the most use of your service, but also interacting with you on Twitter, reading the newsletter, or recommending your service to their network.

Tracking engagement allows you to identify and reward your best customers.

Monitoring your customer engagement in turn can also help you understand what needs to be improved with your service and what customer verticals to target, and steer clear of, in the long run.

Filter your feedback.



At some point or another, you’ve probably heard an existing client say something along the lines of, “Hey! you know what you should add is…”

If a customer likes your service, there is a good chance they will ask you to add more features that can help their business. While it’s definitely a great habit to listen to customer feedback, trying to please everybody usually ends up pleasing nobody.

Understand your limits and stick to your service’s core competencies. Be realistic in the problems that your service can solve for your customers. To provide the best customer experience, it’s better to deliver amazing results on just one task than decent results on a handful.

This doesn’t imply that you shouldn’t listen to customer’s complaints and suggestions. There is obviously a ton of insight to be had from consumer feedback.

In fact, you should encourage and reward customer feedback. Just remember that your team is full of experts, and that the customer doesn’t always know what they want (even when they tell you they do).

Steve Jobs put it perfectly, “A lot of times, people don’t know what they want until you show it to them.”

Differentiate by using the human touch.


The Internet has transformed all corners of business. The most widely used communication channel for customer service is now web self-service, according to Forrester. Yet, building a human connection between brand and consumer remains as relevant as ever before.

Whether a consumer is just discovering your service, has just purchased it, or needs help figuring out how to use one of its features, the opportunity to receive real-time guidance from a support team member can go a long way in providing a seamless, enjoyable customer experience.

Brand loyalty is hard to come by these days, but brands can differentiate themselves from competitors by adding the human touch to foster better relationships with their customers. Throughout the entire customer journey, a friendly face should be available to guide consumers through questions, confusions, and concerns.

Technology has made it easier and easier to connect with customers. Whether it’s adding a live chat feature to your site or meeting face-to-face with real-time web video chat, helping customers and fostering lasting relationships has never been so simple.

By following these 5 steps, SaaS providers can create an enhanced experience for their valued customers while simultaneously improving customer retention. The result is renewed subscriptions, more repeat purchases, and a steady stream of recurring revenue.

Check out this post for more ways you can increase your customer retention rate by making your customers happy.


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