In the SaaS world, the customer-acquisition-cost (CAC) is high and the initial payment is peanuts compared to the lifetime value (LTV) of the customer.
According to studies, the LTV value should be at least 3 times the CAC in order for your company to grow and be sustainable. That means the customer needs to renew their contract more than once.
Without a high customer retention rate, a SaaS company will shut down, no matter how great the other metrics are.
You may believe that if the customer does not have any problem, the customer will renew the contract.
This is a reactive approach and is NOT true.
In this age and especially in the SaaS space, you need to have a proactive approach. Otherwise, customers will churn and you will neither be able to find the reason nor do anything about it.
The SaaS customer retention best practices below will help you understand the needs of your customers so that you can act proactively and maximize renewals.
Customer Retention Best Practices
Step 0: Understanding your customer’s needs
According to Paul Reeves, CEO of Customer Kaizen, which helps tech companies leverage Customer Success profitably, the first step is to understand what the customer wants to achieve, how they measure that, and then ensuring the subsequent steps are designed to deliver and track that.
Understanding the customer’s desired outcome is key part of this process and this directly impacts the design of the success plan.
The Sales or BD rep can conduct this discovery as part of the pre-signing engagement process, or the CSM can do it as part of the closing process. It’s best when this information is available before onboarding so the CSM can have a recommended plan to present at kick off.
It’s always riskier to sign a customer if you don’t know whether you can deliver the desired outcomes.
Step 1: Improve the onboarding process
The highest churn risk happens during the onboarding process. So no matter how good your onboarding process is, there will still be opportunities for improvement.
The aim of onboarding should be to help the customer reach their first point of perceived value without having to put in a lot of effort.
The important thing here is that early value for different customers can be different based on their respective use cases.
Hence, based on different use cases, you may need to have different onboarding processes.
The other thing is to teach only those features in a well paced and thought out manner that will help the customer reach their early value ASAP.
All features need not be taught during onboarding. To help the customer onboard in a stepwise manner and make it a smooth experience for them, an onboarding framework is what you may be looking for.
Step 2: Define, monitor, and report continuously on customer KPIs