Customer retention can hold more weight than acquisition. It’s the leading indicator of your business’ health and key metric to determine its ultimate valuation. Retention shows that you are providing a valuable service that keeps your customers coming back. Not to mention acquiring new customers can be rather expensive yet retaining them well, it’s a lot cheaper.
An easy way to visualize retention is through the leaky bucket metaphor. Trying to build a business with poor retention is like trying to fill a leaky bucket. No matter what you do, you can’t gain traction to create a healthy business. But with the right tools in place, you can be on your way to a healthy retention rate and more predictable revenue. We’ll examine some of the best tools to help with retention.
Retention software is software that focuses on optimizing user retention and reducing churn. It helps businesses keep their customers, maintain revenue growth, and understand why and when customers are leaving.
The importance of customer retention
Customer retention reflects the ability of a company to deliver value within its competitive market. Retention is key for any SaaS company and it represents happy and satisfied customers, but most importantly it represents MRR. So what are the factors that lead to good retention?
Maintaining your customer base also means having less customer churn. Churn represents customers who leave your platform for a number of reasons. This can be for various reasons including, delinquent credit cards, unhappiness with the platform, or unfortunately, bad support. But pinpointing the exact problem and working to eliminate it will help reduce churn.
Higher retention also leads to lower customer acquisition costs, meaning you and your team are wasting less revenue and time. The more happy customers you have, the easier it is to attract new customers. Don’t underestimate how useful a strong customer referral program can be.
Higher customer satisfaction
Focusing on customer retention isn’t just about saving your revenue, it’s about keeping customers happy and willing to continue their subscriptions. A lot of this has to do with the frequency of engagement with the customer. Proactively, instead of reactively, reaching out to your customer will lead to better customer engagement and customer happiness. Listening to customer feedback and putting it to good use will also lead to higher satisfaction.
When you have a solid retention rate, you have an easier time forecasting future growth, revenue, and customer count. A consistent loss of customers due to churn and a dwindling MRR will make it extremely difficult to adequately forecast and plan accordingly, that can lead to some pretty disastrous outcomes.
The way in which you optimize your customer retention strategy will set your organization apart from the others. It can all be boiled down to four clutch factors: pricing, onboarding, customer experience, and service.
We know pricing. And we know that implementing a proper pricing strategy will set you up not only for retention, but also for potential expansion revenue. Whether it’s market-based pricing, value-based pricing, or even a per-user pricing model, selecting the right pricing model will start you off on the right foot, and also help you weed out customers that have the highest potential to churn. We have an entire pricing guide dedicated to nailing pricing, if you're interested in learning more.
Setting up a fantastic onboarding experience for customers gives them the tools to use your service successfully, drive higher retention, and even increase willingness to pay. Personalizing your onboarding and creating quick, easy wins for your customer will drive higher adoption and retention, and will also fortify the usefulness of your product.
Customer experience plays a huge part in retaining customers. If they struggle to use your platform, or have a less than optimal interaction, they will churn. It’s as simple as that.
The customer experience consists of the entire journey with your company. That journey includes all customer interactions through your channels, products, and any other touch points you have. Companies that focus on providing a great customer experience tend to outperform their competition on almost every metric relating to growth, including retention, leading to an increase in profit.
Proactive and personal outreach, great recommendations, and unwavering empathy are all integral to providing great and attentive customer service. Ensuring your customer’s needs are met is not an extra, it’s a necessity.
3 best retention software tools
Retention is not easy, but to help improve the process, the ProfitWell team suggests investing in a platform that will put retention center stage when growing your SaaS company. As mentioned before, without a good retention system in place, you will not grow.
ProfitWell Retain helps you stop churn at the source, making delinquent churn a thing of the past. Credit card failures are your largest single bucket of churn, but you're barely recovering any of these customers, because you're ignoring the size of the payment failure problem. And you only recover three out of 10 customers whose payments fail.
Retain combines world-class subscription expertise with algorithms (constantly evolving) that leverage millions of data points to win back your customers automatically using the industry's highest recovery rate. ProfitWell Retain is the only product on the market that's managed for you, allowing us to leverage data and expertise to constantly improve recovery rates.
Our pricing is 100% performance based. We charge you a commission based on the amount of revenue we’re able to recover for you in a given month. To show effectiveness in recovering past-due users, we will first establish a baseline, track its performance daily, and compare month-over-month.
Baseline performance: There’s a three-month average before Retain is activated to set a baseline recovery rate. This will serve as a benchmark when gauging Retain’s performance.
Recovery rate: This is based on the average of all months after Retain is activated. Retain will take credit for all users that see an in-app notification or recovery email.
Monthly performance: This is your recovery in the last 30 days with Retain visualized as a ratio compared to your baseline performance prior to retain.
Zendesk holds the highest rank when it comes to help desk software. They pride themselves on the simplicity of their retention platform claiming that it’s “not another roadblock to improving existing customer loyalty.”
The platform is very good at helping you segment your customers based on behavior or profile. It helps the user define audiences through behaviors, actions, and attributes to create a personal touch. It’s focused on continuing the strong relationship with the customer rather than salvaging it.
However, the platform works best when it is bundled together with the other features and tools. Known as Zendesk Suite, a bundle of four products in one package includes: Support, Guide, Chat and Talk. It’s certainly great to have a cohesive unit of products, but does getting one product silo your retention efforts?
Zendesk’s strategy for retention is all about messaging and connecting with the customer. Being able to intercept a customer before they churn is always a priority, but their platform comes off a bit reactionary rather than proactive when it comes to retaining a customer. The human element to the messaging is fantastic, but is it too late?
Zendesk prices their offerings based on the number of users an organization will message each month. They want you to pay for only the people you actively reach out to, so the baseline price factors in at 2000 monthly message users at $153.
The platform is a great vehicle for communicating with your customers, but Zendesk does not provide a course of action once you make contact. You’re paying for messages to customers, not actual results. With ProfitWell Retain you only pay for the results you want to see.
Gainsight offers a suite of products all dedicated to growing, delighting and improving your customer base. They are certainly a customer-centric platform claiming that customers have more power than they’ve ever had before. They not only have the power to select which tools to use, but they also have influence and will advocate for you if you deliver for them.
Gainsight approaches customer retention through their customer success platform, Gainsight CS. The platform aggregates data, such as product usage and support tickets, to create a customer health score that will alert account owners if there is a risk of churning.
Unlike Zendesk, Gainsight relies heavily on data to decipher customer health and happiness. Using data is always a great way to gain better insight into a customer. Through proactive customer checkups and candid conversations aided by relevant data, customer success teams can drive better results just by adding that human touch.
Gainsight doesn’t offer pricing for it’s customer success tool on it’s website, but instead prompts the customer to reach out to the sales team. Gainsight’s aim here is to get to know their potential customers, understand their pain and problems, and see if their solution can help.
They approach the customer in a consultative manner and rely heavily on data to help with retention. It certainly is a great combination of the human touch paired with the power of numbers. They’re approach is a lot like our approach with Retain, the human and data elements coexisting.
There is no way to run a sustainable business without a focus on user retention. Any degree of user churn will hold your company back and sink your revenue. Remember, it’s less expensive and more profitable to retain customers than to acquire new ones. Focus on retaining and monetizing the customers you already have.
White labeled service
In order to have your complete look and feel, Retain provides a white label service. The complete experience to your customers is your brand from end to end.
Implementing Retain is also a very straightforward and secure process. We made Retain easy for you by plugging securely into your billing system, maintaining complete PCI compliance, and ensuring you can keep the dev time low.
We worked incredibly hard to make this easy for you. We know how precious your team’s time is. Not to mention, onboarding is an essential aspect to retention, so that’s why we made it quick and easy—15 minutes, and you're ready to go.
Founder & CEO of ProfitWell, the software for helping subscription companies with their monetization and retention strategies, as well as providing free turnkey subscription financial metrics for over 20,000 companies. Prior to ProfitWell Patrick led Strategic Initiatives for Boston-based Gemvara and was an Economist at Google and the US Intelligence community.