One of the most powerful growth engines is net negative churn. When you have net negative churn, the additional revenue generated from existing customers month over month outpaces the revenue lost through cancellations and downgrades. This is certainly difficult, but not impossible, and should be the main focus of every SaaS company in order to scale.
Keeping clients onside is something I should know about. Recently, our automated bundling service, Swogo, celebrated one year of 100 percent client retention. Here are the dos (and perhaps, more importantly, the don’ts) of client retention.
Client retention: What you should do
Keeping customers is all about keeping them happy – and this comes down to great service. Businesses must first understand their customer journey and obsess over every detail to make sure it is as frictionless as possible. It is crucial not to be afraid of spending extra time in the onboarding process because this will pay dividends over time.
Communicate early and often. Setting expectations and consistently updating clients with their goals is a surefire way to succeed. This means understanding customer points of view and communicating deadlines, progress toward goals, company process and more. Confirming this from the outset is essential to making sure expectations are met and, in turn, prolonging the relationship.
Doing this is not possible without one unified team. Departments must align to serve client needs, meaning that everyone from product to sales to client services must collaborate from day one. Customer success is a team effort and it is important for businesses to include this in their team culture.
Lastly, consider what client communication actually looks like. It’s easy to become sucked into only meeting online and, while convenient, plenty can get lost over video and email.
Consider meeting with clients in person when you are in their neighborhood. It’s the smallest details that make the biggest differences in customer satisfaction.
Related: 6 Simple Hacks for Building Loyal, Long-Term Clients
Client retention: What you should not do
On the other hand, there are important things to not do when it comes to retaining customers.
First, make sure to not think short term when it comes to clients. Customers will never commit to you if your plans do not commit to them. Startups must plan for the long term and ensure their client needs come first. This can take the form of client road maps, which explicitly state what the next 12 or 24 months will look like.
Second, do not forget the exit journey. Understand why customers leave if they decide to do so. One of the best ways to understand the customer journey is to see things from their perspective – so be sure to put yourself in the client’s shoes and truly see why they have not decided to renew. Learning from one failed contract renewal will help to plan for the future.
Third, customer success is not only, well, customer success. Retention can be impacted by multiple business functions. Importantly, it can signal that there are larger business problems to remedy.
For example, increases in churn could signal that the business is drifting from product-market fit or that your product faces increased competitive pressure.
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Why it matters
Your customer’s decision to renew is vital.
Why? Because for any growing SaaS company, retention measures not only how successful they are at acquiring new customers, but how successful they are at satisfying existing customers.
Further, it is also easier and more cost-effective to retain customers than to acquire new ones, as returning customers spend more and buy more often, and refer friends and family. Plus, boosting customer retention rates by just 5 percent can increase company revenue by 25 percent to 95 percent. Keeping the customer happy is holistically healthy.
Retaining customers can make a massive difference, since startups need sustainable growth and this is all the more likely from maximizing customer lifetime value.
The best advice for any startup SaaS is to go above and beyond to retain clients. Build a company culture of going the extra mile for customers, one which learns from its mistakes and grows with its success.
It is integral to do what is right for your customers above all else. Increase your customer success budget because this is what ultimately will deliver you long term success.
Originally published Jan. 8, 2020.
