For SaaS and subscription companies, metrics like customer retention rate — and the closely related churn rate — are critical for monitoring the amount of revenue you’re losing, as well as flagging trends that might be responsible for it. And the reality is that increasing customer retention and reducing churn is the key to sustainable business growth.

In this post, we’ll discuss five  customer retention strategies that help you keep customers around for longer, and give tips for accurately tracking customer retention and churn for your SaaS business. 

What is Customer Retention?

Customer retention is a metric that tracks the percentage of customers that stay with a business for a certain period of time. The opposite of this is the churn rate, which is the percentage of customers that end their subscription in a given time period. Both of these metrics significantly impact monthly recurring revenue (MRR), arguably the most important indicator of future business success.

A good monthly customer retention rate is generally above 90%, but the closer to 100% the better. It’s obviously impossible to retain every single customer, but if your retention rate is extremely low you know your business has a problem. These live benchmarks can help you understand where your customer retention rate (and other metrics) stand compared to similar SaaS and subscription businesses.

The success of most SaaS and Subscription businesses depends on their ability to keep customers paying them for a long time. For most companies, it costs more to acquire new customers than it does to keep existing ones, so it’s a more sustainable growth strategy to invest in customer retention. That’s why it’s important to conduct customer retention analysis, and then implement strategies for improving retention over time.

Customer Retention Strategies

Now that we’ve covered how customer retention impacts SaaS and subscription businesses, let’s look at some strategies for improving this metric.

1. Provide top-notch customer support

The quality of customer support your business provides can make or break a customer experience. Customers want to know that you’ll be able to help them overcome any issues they have, whether it’s a product bug, failed payment, or another problem. Effective customer support includes answering customer inquiries quickly, helping with onboarding (more on this later), and troubleshooting any problems in a timely manner.

In addition to providing reactive customer support, investing in proactive outreach can make a meaningful difference, too. By regularly checking in with customers – even if they’re not looking to leave – you can create more opportunities for engagement and value from your product. Here’s an example from our team: 

Our team sent an email to a customer who hadn’t logged into their Baremetrics account for 2 weeks. This prompted them to log into their account and pick up where they left off. 

Email incentivizing customer to log into their account after 2 weeks of inactivity,

In short, building an efficient and reliable customer support system will help your business increase retention, reduce churn, and in turn, improve MRR.

2. Implement a customer onboarding process

The customer onboarding process is another key aspect of your customer experience, so getting this right ensures you don’t lose customers early on in their subscription. A great onboarding experience involves showing customers how to effectively use your product to achieve what they’re trying to accomplish. 

An effective customer onboarding process includes an intuitive signup process, a compelling welcome email, and guidance during their initial login. By tracking the performance of your trials, you can also gain insights into the initial impressions new users have of your company, product, and overall onboarding experience.

You can use these insights to stop losing customers before they even sign up.

3. Build useful education resources

If customers don’t  get enough value out of your product, they won’t stick around for long. Through strong education resources and training programs, you can help customers maximize their ROI for your product more quickly. Getting started guides can help answer many initial questions, but a help center is also a great way for customers to resolve additional issues that might come up.

Over the years, Baremetrics has built a process for creating and updating content in our help docs to ensure the information is relevant and useful. For example, for our Recover feature, we cover everything from how to interpret the information Recover collects, how to set up your account, how to update specific aspects , and more. 

Baremetrics help docs

Similar to creating a strong onboarding experience, you also want to offer resources and build community around your product. 

Resources like workshops and webinars give customers even more value from their subscription, and in turn, increase their incentive to stay long-term.

4. Track and Measure Churn

By understanding which customers are leaving and why, you informed strategy to get them to stay. For example, tracking and measuring churn for different customer segments and performing cohort analysis can help you spot reasons that some customers might churn over others. 

Based on this information, you can alleviate mismatches in customer expectations, poor onboarding experiences, bad acquisition strategies, and other broader business issues.

User Churn dashboards in Baremetrics

Diving into the data about cancellations, downgrades, failed payments, and more will also help you identify overall customer behavior trends that are leading to churn. These insights can reveal if there are other factors that are contributing to either voluntary and involuntary churn. Measuring and reducing churn will lead to increased customer retention over time.

5. Make it easy for your customers to share their feedback

Getting customers to share their feedback is a great way to discover issues with your product or customer interactions that are pushing customers to cancel. 

To take this a step further, collecting cancellation insights and actioning them helps you mitigate disloyalty and improve customer retention in a lasting way. A convenient way to gather feedback is a timely email or in-app notification when customers decide to cancel their subscription. 

With cancellation insights, you’ll be able to identify and overcome pricing issues, lack of certain features, poor support, or any other factors that are contributing to customer churn. 

Various Baremetrics graphs
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Automatically Collect Cancellation Feedback 

Learn why your customers cancel, calculate lost revenue by cancellation reason, and send automated emails to bring customers back.

 Try Cancellation Insights 

How to Calculate Customer Retention and Churn

Another crucial aspect of increasing customer retention and reducing churn is accurately calculating these metrics. Here’s how to calculate retention rate and churn:

  • Retention rate is calculated by subtracting the number of newly acquired customers from the total customers at the end of the period.

    This gives you the number of customers that were retained for that period. Then you divide this by the total number of customers there were at the beginning of the period to get the retention rate.
  • Churn can be calculated in many ways, depending on whether you want to track revenue churn or customer churn.

    Customer churn is calculated by dividing the number of canceled customers by the number of active customers for a given period, then multiplying by 100 to turn it into a percentage.

Improve Customer Retention with Baremetrics

Retaining customers is the difference between business stagnation and growth. If you can implement some of these strategies for increasing customer retention, you’ll be able to build a loyal customer base that drives subscription revenue long term.

Baremetrics is a metrics, dunning, and engagement platform that can automatically calculate retention rate, churn, and dozens of other KPIs for you. It’s built from the ground up for SaaS and subscription businesses to not only track the most essential metrics, but also to take actions that improve their business performance. Start a free 14-day trial today.