Let’s face it: Maintaining a customer’s satisfaction over time is far more difficult than selling them a single item. Terms in sales may differ. But in my opinion, the true effort begins once the transaction develops into a partnership.

You tell me which involves more effort: going on a first date or being in a relationship for 10 years. The effort is worthwhile, which is wonderful news. Additionally, the ROI for customer Retention is evident for e-commerce enterprises.

Frederick F. Reichheld and Phil Schefter showed that customer acquisition costs are relatively high for online businesses, costing 20–40% more than traditional retail outlets, in “The Economics of E-Loyalty.”

But as you keep clients, that dip more than makes up for itself.

After 24 months, repeat customers spend more than twice as much. They continue by saying that clients get more devoted to an online company and frequently recommend it to other people. Unquestionably, retention contributes to growth and income. When you become an expert at keeping customers as well as recruiting new ones, your entire business is built on a firm foundation.

Leverage ProofHub- All-in-one project management tool to boost your customer retention rate. Book a demo!

What Is Customer Retention?

The capacity of a business to keep clients coming back over time is known as customer retention. Retaining a customer’s business signifies that a brand, product, or service is appealing to the existing consumer to the point where they choose to do business with the organization rather than a rival.

What’s Your Business’s Customer Retention Rate?

You must evaluate how you’re performing in this department before you can concentrate on enhancing customer retention. You may have a gut feeling about how you’re doing, but you need an assessment that is unbiased and devoid of feelings. Measuring your customer retention Rate is one of the finest strategies to achieve this.

Although there are other methods for measuring retention, the typical formula appears somewhat like this:

Retention Rate = ((CE-CN)/CS)) X 100

It’s okay if that seems a little challenging. Once explained, you’ll see how easy and logical it is.

The meanings of those variables are as follows:

• CE = The total # of customers when the period ends
• CN = The total # of new customers that you acquired during the period
• CS = The total # of customers at the beginning of a period

Why Does Customer Retention Matter?

Selling to an established customer has a success rate of 60–70% while selling to a new customer only has a success rate of 2–5%.

It will be essential to power your company through the ups and downs if you can understand the part of customer retention that turns them into brand loyalists. Utilizing retention strategies and methods can have a major impact on your company in three crucial areas.

Image Source: Revechat

• Creating an experience that not only delights your customers but also engages them in deeper contact with your business, helping you cultivate customer loyalty, is possible with the correct client retention strategies.
• Increased client lifetime value (CLTV) results in 25% to 95% higher profitability when customer retention rates are raised by 5%. Therefore, for sustainable growth, any company that wishes to increase its bottom line must equally focus on client retention and customer acquisition.
• Create a positive word-of-mouth reputation — The greatest customer retention strategies let you create enduring connections with clients who stick with your company. They might eventually develop into advocates for your brand and spread the favorable word of mouth.

Other factors why customer retention is important for your business are:

• You don’t have to keep running on the hamster wheel of getting new customers while existing ones are churning out. the cost of acquiring new customers is much higher than retaining existing customers
• Existing customers buy more often from you and engage with you on social media more than just leads, or new customers
• Satisfied, loyal customers are more likely to refer their friends and family — bringing in new customers, without any cost incurred to you.

6 Strategies To Retain More Customers in SaaS Business

1. Build a loyalty program that keeps customers invested

If your company currently has a loyalty program, you may want to improve its return on investment. Or perhaps you’re just beginning to increase your retention efforts. In either case, an efficient loyalty program ought to have a minimum of these three components:

• Awards that support your primary business objectives: Whether you want to promote more trials, visits, or incremental purchases, make sure your program and rewards are set up to accomplish that aim.
• Create a tiered program so devoted clients who spend more receive more valuable rewards, such as quicker earning and unique promotions.
• Highly relevant offers and prizes that are specifically targeted: Utilize your MarTech stack’s capabilities to tailor your offerings and rewards to the preferences of your clients.

2. Invest into building a great customer support team

The majority of unhappy customers will simply stop using your product and won’t bother to notify you about it. According to one study, there are actually 26 customers who depart without saying anything to everyone which raises a concern.

Proactive customer care emails addressed to clients whose usage looks to be slipping are one approach to uncover those issues — and solve them before they turn a consumer into a former customer.

Find high-risk situations that frequently result in churn, such as shopping cart abandonment or ignored surveys. When you see the warning indicators, then start communicating with those clients. You’ll stand a good chance of stopping churn.

3. Implement a customer feedback channel

Businesses that make an attempt to comprehend what clients are genuinely seeking are better able to provide the appropriate good, service, or solution. A smart customer retention tactic is to cultivate a listening culture.

Listening intently to consumers can help you become more sympathetic. Customers respond well to statements that show empathy because they feel as though you can relate to their situation.

But it is really challenging for organizations to assist customers who are not really receptive.

So, what should you say to clients who are angry or unhappy?

The finest practices involve finding out how customers react to your goods and services. Determine their requirements by listening to them. Give your customer service staff soft skills training so they can treat consumers with patience, kindness, and pleasingness.

4. Educate customers about your product and use cases

Over the years, we have gradually moved away from “lowest common denominator” advertising. Consumers are more informed than ever. And it’s important to treat them with respect and honesty if you want to reel them in.

Educating your clients is the simplest method to put this into practice. Regardless of whether it relates to your product on a smaller scale (such as how you procure and package your materials) or how your firm operates as a component of a broader goal (i.e. reducing global food waste). Customers will value your advice and repay the favor by remaining loyal for many years.

Put all the responses to these and other questions in a knowledge base. It’s a simple method to publish all of your company’s information in one convenient location.

Count on the marketing and customer service teams to produce compelling and instructive text copies.

5. Build a community around your product

People like having a sense of community or belonging. Through community management or by building a user community that benefits your clients, your company can add to these favorable thoughts.

Your clients will have the chance to talk about significant issues and ask questions about your goods and services if you have a community.

Customers who identify with your brand are more likely to make repeat purchases and engage in word-of-mouth advertising, all of which support the development and expansion of your client base.

In the following ways, creating a community can be a great client retention strategy:

• You can develop a devoted bond with your clients, providing them with a platform to interact with the company and one another.
• It serves as a knowledge base where your supporters may exchange suggestions for improving the product.

Fostering a community where consumers can connect with each other and your staff adds more value to your customer experience and tends to please them, regardless of how it could be used — as a source for beneficial information exchange or as a platform for users to post customer feedback.

6. Personalize Your Offer & Communications

Utilize the client information you’ve gathered to personalize your marketing offers and communications for your target audience. Three different sorts of offers exist:

• No matter their other demographic characteristics, everyone in a specific program is eligible for a mass offer. It would be a broad offer if our home goods store gave all customers 10% off their upcoming purchase.
• Offer that is either segmented or targeted divide the customer base into groups according to a specific data point. Everyone in that group is eligible for the same deal, and there may be messaging customized to that group. This offers a minimal amount of customization but does not genuinely take into account individual preferences when creating the offer. For instance, in California, they might provide a 10% discount to anyone who resides within 20 miles of one of their stores.
• Personalized offer for the Consumer — This offer is tailored to the consumer’s interests and past purchases, with special actions and prizes. For instance, a home goods retailer may provide 15% off an interior design consultation to anyone who purchased more than $1,000 in the previous six months and tailor the designer based on the kind of decor the customer buys.

How Will You Know Your Customer Retention Strategies Are Working?

Look at your metrics. Here are the top 5 customer retention metrics and ways to calculate them

1. Churn rate

The amount of customers or subscribers who ceased utilizing your service during a specific time period is measured by customer churn. A customer churn rate of 10% MoM signifies that 10% of the total customers have unsubscribed over the last 30 days.

Understanding customer turnover as the element that results in leakage spots for your subscription revenue to drain is the simplest method to comprehend it and reduce it. You’ll realize that it doesn’t make much sense to keep collecting clients who will leave the typical way if you can see it this way.

Instead, it is more cost-effective and wise to employ tactics that will aid in keeping current clients rather than trying to attract new ones. Furthermore, growth is slower the more unhappy customers are.

You can predict churn and enhance the user experience for those who are current subscribers so they don’t churn by knowing why customers leave, when they end up leaving, and how they leave.

2. MRR

The obvious danger to your recurring monthly revenue is MRR churn (MRR). It calculates the amount of MRR lost as a result of client cancellations over a specific time frame. An MRR churn rate of 10% indicates that within the last 30 days, 10% of your MRR from the previous period was lost.

MRR churn is still a great indicator to gauge business health, even for SaaS organizations with several pricing tiers and contract lengths. You can only see the number of cancellations under customer churn. However, MRR churn reveals the overall effect and the amount of revenue lost. Additionally, growth is more rapid the smaller the MRR churn.

3. Repeat purchase ratio

You may get an indication of how many repeat customers you have by looking at your repeat purchase rate, which calculates the proportion of customers that made multiple purchases over a specified time period compared to your total customer base.

How many repeat consumers made purchases during a predetermined time period is considered the retention rate. The retention rate differs in that it does not take into account new clients who returned for more services. With retention rate, the computed consumers are required to be existing ones who stayed devoted to the business before the period began.

4. Customer lifetime value

Customer lifetime value is a projection of how much a customer will shell out for your product over the course of their relationship as a paying customer. This indicator displays the value of each customer as well as the potential revenue you might earn by keeping and collecting from existing clients.

Additionally, the average purchasing power of your current clients is 67% higher than that of new ones.

Various customers may have various customer lifetime values in SaaS where there are different pricing tiers. Therefore, it is advised to determine a customer’s LTV depending on the pricing tier to which they are subscribed. However, lifetime value may be easily determined by dividing the monthly average revenue from each consumer by the churn rate.

5. Net promoter score

The Net Promoter Score, a crucial metric for measuring customer happiness, gauges how satisfied your customers are generally and how likely they are to recommend your goods or services to others.

Tools To Help You Implement The Customer Retention Strategies

Here are the top 5 tools we recommend you can use to employ the customer retention strategies we discussed above:

1. ProofHub For Customer Management

ProofHub is among the most effective client management solutions. It offers efficient solutions for planning work schedules, organizing resources, and automating administrative tasks. This helps keep vendors and clients on the same page.

It offers features such as task management, file proofreading, notifications, file management, note-taking, and even in-built chat so that you can communicate with your most important clients from a single location. That’s why project managers are better equipped to build productive teams to achieve project goals

ProofHub eliminates the need for several applications to track client information, communicate modifications, collaborate, and manage assignments; it does everything in a single location.

The task management component of ProofHub enables you to create, manage, and monitor project tasks. The Kanban boards and Gantt chart enable you to visualize and arrange client management tasks for your entire team.

ProofHub also offers excellent file management that allows you to handle client file copies, versioning, and categorization in a single location. It provides a well-organized file structure and 100 GB of extensible file storage for all of your project material.

It enables you to upload all project files and organize them in folders so that clients and team members may readily access them.

With increased efficiency, organization, and collaboration, ProofHub assists teams and organizations in managing work from start to finish. An improved replacement for obsolete tools and laborious procedures is offered by an easy interface, extensive capabilities, and automated workflows.

Plan, collaborate, organize and deliver your projects all in place. Switch to ProofHub!

2. Hubspot For CRM

Your entire staff can easily learn to utilize and adapt HubSpot’s UI. An increase in adoption translates into better data, deeper insights, and a greater impact on the customer experience.

It is a single source of truth for all of your customer interactions because it is built on a single native codebase. The outcome? Better team cohesion and a seamless customer experience. You won’t have to choose between usability and power with HubSpot. Without requiring months of custom development and integration work, customize it to fit your company’s next stage of growth.

3. Zendesk For Customer Support

Zendesk improves customer support. This software for help desks called Zendesk brings everything together to assist you in customer experience further than others can. The following features are included to give your agents the tools they need to assist consumers proactively. You can use the Zendesk features regardless of the sort of business you run, including SMBs, merchants, HR teams, corporations, educational institutions, and IT teams, as it was created for a variety of users.

The help desk ticketing system acts as a central center for all of your communications, enables you to obtain insights, addresses issues quickly by getting the proper information from consumers, and sets your customer care system distinct from those of your rivals.

4. Appcues For App onboarding

With Appcues, you can use a no-code builder to create hassle-free onboarding experiences with in-app messages, NPS surveys, and customized flows. Utilize insights to track how your onboarding process affects product acceptance so you can keep making adjustments and enhancing your efforts.

5. OpenLoyalty For Customer loyalty

A set of adaptable building pieces are offered by Open Loyalty for creating customized loyalty programs. For international brands that want to succeed when it comes to customer retention, it’s a headless answer.

Any customer-facing application, such as e-commerce, mobile apps, digital e-kiosks, and others, can be integrated with the platform. It facilitates the creation of a distinctive and tailored user experience across all channels. Your loyalty program plan may be quickly implemented, tailored to your needs, and made to expand alongside your company with the aid of Open Loyalty.

Every reward program built on OpenLoyalty is distinct and precisely aligned with your business because of its components and headless approach.

Bottom Line

The key to sustainable growth is retention. The importance of customer acquisition is not diminished by this assertion. Every company needs a steady flow of new clients. Without a clear strategy for keeping the new hires, the churn yeti will probably eat away at your retention rates. Invest in a long-term plan to keep the clients you’ve previously attracted. Your efforts will be rewarded for decades if you follow this advice.

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Author bio:

Trevor’s career began as a freelance learning applications developer and designer. After finding success in the software he moved into SaaS consulting, and started the SaaS growth agency, Inturact. Over the last 10+ years, Inturact has helped many SaaS companies find scalability and get acquired. Inturact is now also an investment vehicle for Inturact Capital — a private equity fund that acquires grows and exits SaaS companies.

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Customer Retention: Tools, Metrics, and Strategies for Scalable Growth was originally published in ProofHub Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.