Monitor account health and predict churn. Get real time risk alerts. Understand Who needs hand holding, When and Why. De-risk accounts with proactive interventions. Unlock value for every customers without waiting for the customer to raise a support ticket.
Net Retention Revenue (NRR) takes into account the total revenue earned minus any revenue churn (caused due to departing customers or customers who have downgraded) plus any revenue gained through upsells or cross-sells.
Gross Revenue Retention is total revenue earned minus any churn. The difference between GRR and NRR is, GRR does not take into account any revenue earned due to expansion and upsell.
Both the revenue are important during different lifecycle stage of the company. If you are starting out (growth stage) it is important you optimize your GRR as in long run, without getting a grip on churn you cannot grow. Whereas when you're in high growth stage, some amount of churn would happen, but instead of focusing on your RED customers, you would like to double down on your highly profitable customers. Thus, making NRR important at this stage.
Playbooks are your recipes of rules to follow. They summarize what to do in different scenarios like renewal and how to go about doing these things. It can help you standardise your process and be consistent with your customer experience. It will have the steps and processes that needs to be followed for a successful renewal
Few of the common Customer Retention metrics are -
1)MRR churn-summation of all cancelled and delinquent churn. The only way to reduce MRR churn is by finding why customers are cancelling your product and installing a better payment system so that you have lesser delinquencies. At times it can also happen, when a customer downgrades the plan or number of seats.
2) LTV- life time value-This is a measure of how much a customer will spend over the course of his entire tenure with a business. The LTV needs to be higher than your Customer acquisition cost to be profitable. It is calculated by dividing the ARPU(Avg Revenue Per User) by Churn.
3) Customer Acquisition Cost(CAC)- The cost that you incur in acquiring a new customer. CAC is important to understand that it doesn't help in getting newer customers if your churn is not in control.
4)Customer Retention Rate- The total number of customers who continue using your service after a certain period. It is opposite of churn rate. It is total number of customers who continue after a certain period divided by total number of customers at the beginning of the period.
4) LTV/CAC ratio-This is single best metric to measure your overall growth potential. If this ratio is high, you're winning. If it's not, it's time to make a change.
Some of the best retention strategies are-
1) Having a good and a thoughtful Onboarding plan in place- Most churn happens during Onboarding. It's important to understand the customer's business use case and create an onboarding plan that will help to achieve the business outcomes in the least possible time.
2) Identify signs of early churn- This is where a customer success platform can help you. keep monitoring the account health score to know how the customer is doing. Any decline in score is a sign of possible churn
3)Drive Product adoption- Ensure your customer is using your product and is deriving value out of it. Product analytics tool/Customer success software can help you identify the product usage. Create a risk alert for any drop in usage for proactive intervention. 4) Take periodic customer feedback- NPS and CSAT scores can let you know how happy your customer is with your product
The different types of churn are -
1) Revenue Churn- Monthly revenue loss that you incurred over your churned customers. This can happen when a customer downgrades a plan or reduces the number of users
2)Onboarding Churn-This churn happens when your customer never got onboarded properly and left midway. This is one of the most common types of churn . It is important that customer achieves the perceived value at the least possible time.
3)Logo Churn- The total number of customers (accounts) lost within a specific period
4) Missed Outcome Churn- When a customer churns as the customer is unsuccessful in getting the desired outcome for which he purchased your product.
5) Credit card churn- This churn happens when the payments do not come due to card expiry or other reasons.
6) Company got acquired or merged- Sometime churn happens when the customer gets acquired and the desired business outcome for which the customer was using your product changes.
Customer retention software is this tool that helps you to minimize Churn. It focuses on optimizing customer retention and expansion.It helps you to keep your customers by delivering least time to value, maintain growth, and study thoroughly why and when your customers are leaving.
The customer retention best practices to maximise renewals are -
1) Understanding the customer's desired outcome and the way they measure it is the first step in retention. Understanding what the customer wants to achieve using your product will help you then ensuring the subsequent steps are designed to deliver and track that.
2) Improving the Onboarding process- 40% of churn happen during Onboarding. The aim of Onboarding is to ensure the customer reaches the first point of perceived value at the least possible time. However, the perceived value will depend upon the use case the customer is trying to solve. You need to design the onboarding process based on the use case the customer is trying to solve and only show those features initially which will help them to nail the use case ASAP.
3) Drive Product engagement-Product engagement is key to driving retention. If the customer has stopped using your product, or is not using your key feature, s/he is not getting the actual value that your product can give and renewals becomes that tad bit difficult. Here is where customer success software helps. They can actual give you the product engagement data to let you know how your customer is interacting with your product and you can take proactive interventions to help the customer.
4)Set clear expectations- Expectation mapping is very important. You should never sell a dream which you cannot achieve. When chalking out a success plan, its important to talk to customer and understand what he is trying to achieve, what is possible using your product and then set the success plan with realistic timelines.
5)Consistent Communication- Not everything can be captured by data , somethings can only be known when you talk to the customer. Consistently communicating and taking feedback will not only help you develop stronger customer. relationship but will also help you get feedback that will be crucial in improving your product. 6)Measure the Key KPIs-- If you cannot measure you can never improve. There are quite a few customer retention KPI that you need to measure- Product adoption rate, Product stickiness rate,Customer life time value, Net Promoter Score, Time to value, ROI of value delivered.
The 5 types of customer retention are-
1)Situational Binding retention- Here the Product company has a monopoly and therefore the customer has no choice but to continue using it .
2)Legally Binding Retention- The Customer is bound by lengthy legal contracts and as a result have to keep using the product .
3)Technical Binding- The customer uses a technical product which has a lengthy implementation.
4) Economic Binding- The switching cost of shifting is very high. There is penalty involved.
5)Emotional Bonding- This is most common form of retention which SaaS companies yearn for. The customer is deriving value out of your product and is sticking to you on free will. In fact s/he is not only loyal but strong product and brand advocate
The SaaS business model is different from the traditional business where once the opportunity is closed -won, your job is done. But in SaaS, it's the beginning of customer journey. You spent anywhere between 1-3X times the ACV( Annual Contract Value) in acquiring the customer(CAC). So when the opportunity is closed-won, you've not earned anything but you intend to retain the customer and grow your recurring revenue in many years to comes. Retention is huge part of your SaaS business model. And without retention, no SaaS business model can be sustainable. Retention is to keep the customers ,guide them to value and nurture them till the time they become loyal and strong advocate of your product