Retention as a Growth Engine

saas retention - mukil ganesan

Acquiring new customers is a challenging task. The marketing teams need to identify and leverage the right channel to bring in high-quality leads and convert them into paid customers. As we had discussed in a few of my previous posts, for a SaaS business, retention plays a crucial role in determining the continuity of the business. The lower the churn, the higher is the customer retention.

Obviously, to reduce the churn rate, you need to increase the number of customers you retain Month over Month. The importance of customer retention and how it behaves as a growth engine for your business can be understood from the self-explanatory example present in the image.

Companies with high retention rates can easily reap profits in the long run and accelerate their growth. A healthy retention rate would,

-Increase the lifetime value (LTV) of a customer and in turn the average revenue per account (ARPA)
-Decrease customer acquisition cost(CAC), Increase MRR and ARR.
-Generate more loyal customers who would stick to your product.
-Increase opportunities for cross-selling and up-selling.

In the next topic we’ll learn some strategies to boost customer retention.

View previous topic – The AARRR Framework

View next topic – SaaS Retention Strategies