SaaS retention — how it is done.

Mukil Ganesan - SaaS Retention

Acquiring customers for a SaaS product is one of the challenges the marketers and founders face. The marketing teams need to identify and leverage the right channel to bring in high-quality leads, who in turn convert into paid customers.

In one of our previous posts on SaaS metrics, we mentioned that “An increasing churn rate would paralyze your SaaS business and bring it to a permanent halt.” In order to reduce the churn rate, you need to increase the number of customers you retain Month over Month (MoM).

In this post, let’s know about the importance of customer retention and how it helps you to grow your business faster. Let’s look at a simple, self-explanatory example,


Source: Punchlime

Retaining customers is a whole new ball game. The retention rate defines the health of a SaaS business. Companies with high retention rates can easily reap profits in the long run. 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)
  • Increases MRR and ARR.
  • Generates more loyal customers who stick to your product and turn into advocates.
  • Higher opportunities for cross-selling and up-selling.

“A 5% improvement in retention results in a 25–95% profit increase.” — source: appcues

How to retain your customers?

Customer retention is a continuous process and it takes a lot of effort. As a marketer, you should be well versed with the audience you dwell with. Before initiating your retention activities, make sure to maintain a dashboard for churn/retention, and track it regularly.

Let’s dive into a couple of strategies to boost customer retention.

User Onboarding

An exceptional onboarding flow for your new users would help them understand the product. User onboarding facilitates product usage and stickiness. The higher the user engages with the product, the more the possibilities of retention. Onboarding can be handled by contextual emailtriggers, in-product notifications, and one-on-one sessions.


Source: trychameleon


The customer facing teams should be proactive in engaging with customer requests. Timely responses and faster troubleshooting makes happy customers. Frustrated customers eventually unsubscribe the product. It’s a proven fact that unhappy customers tend to share their bad experiences with their friends and colleagues. This takes a hit on the company’s credibility.

The account managers and customer success teams need to maintain a healthy relationship with the customers. Building user communities and regularly interacting with the customers is one of the key steps in creating a loyal customer base.


Source: 10forward

Timely feature updates/bug fixes

When the product fails to deliver, the retention rate decreases. Users sign up to your product and turn into paid customers since they’ve experienced the value you bring to their business. Bugs frustrate customers and so do prolonged feature updates. You need to,

  1. Be faster in innovating.
  2. Adopt top-notch technologies.
  3. Provide endless value.
  4. Deliver exceptional customer experiences.

to outsmart your competitors. That’s the only way a customer can stick to a product for a long time.

Perks and incentives

Apart from a solid product, providing incentives, special offers, and other perks nudge the user to use your product actively. The customer feels a sense of belonging to your user community, and their lifetime value gradually increases. Perks like closed beta access to your upcoming features, discounts on upcoming renewals works out great in retaining customers. Make sure you don’t overdo it and it doesn’t take a hit on your business. A strong understanding of your market and the audience is required to build successful customer loyalty programs.

Cut-off unnecessary churn

Delinquent churn, to put in simple terms, is the number of customers you lose due to their credit card failures. It usually happens when the customer’s credit card has expired or there are insufficient funds to initiate the transaction. A study by ProfitWell says that 20–40% of SaaS companies’ user churn is delinquent churn. There are multiple strategies to reduce delinquent churn. Most subscription management softwares have automated modules for handling credit card failures. Some companies use email marketing to tackle delinquent churn. Suppressing involuntary churn can aid you in retention.

Dedicated retention team

Hiring and scaling a retention team would help a SaaS company to have a strong anchor over the retention activities. In the absence of a dedicated retention team, the retention tasks and workflows would be fragmented across teams (marketing, support, pre-sales, sales, etc..). A retention centric team with the right strategies would soar the retention rate in a couple of months.

These are some of the proven ways to improve your customer retention rates. Stabilizing and maintaining high retention rates would be a daunting task. By following a systematic approach, any company can master retention.