The Seven R’s of Customer Retention

This article shares key insights from a Make More mastermind workshop  given by David Ongchoco in May 2021. 

Prior to joining Rutter as a Growth Lead, David started an international nonprofit, cofounded an overseas outsourcing business, and spent time working in venture capital and various startups. 

Some clients are destined to churn.

This is not a failure on your part. It’s a simple reality that a proportion of customers who sign up to your SaaS should never have done so in the first place.

These users tend to fall into one of the following categories:

• Circumstances changed

• Misjudged their own needs

• Aren’t willing or able to make the changes necessary to adopt your product

• Business went bust or had to downsize expenditure

In other words, a baseline number of churns is to be expected, no matter how good your service is. Attempting to retain customers in this bucket is likely to prove temporary, costly, and unsustainable.

But what happens if your churn rate is significantly higher than what your direct competitors are benchmarking? What can you do to reverse this trend?

Here’s a guide on boosting your customer retention rates through the use of positive habit creating techniques.

Identify who is churning

In order to boost customer retention, it’s crucial to conduct churn surveys and exit interviews on as many of these lost customers as possible, in order to determine the following:

• Were they going to leave anyway, regardless of any changes you could make?
• If they were unsatisfied with the product, what could bring them back?
• Would implementing those changes prove cost-effective? In other words, if you fixed the specific issue(s) that made customers in that bracket leave, would their collective LTV justify the additional costs in development and overhead?
• If these changes were an either/or for your product features, would making these changes lose you any business? If so, how much, and would it be worth it?

Not only will these questions help you boost overall customer retention, they will show whether you’re losing your highly valuable Ideal Customer Profiles.

To recap, your ICPs are customers who bring in a high monthly recurring revenue (MRR), high lifetime value (LTV), and require low maintenance once acquired.

If a significant proportion of churns fall into the ICP bucket, this could justify making some significant product adjustments in order to retain them, and attract more users like them in the future.

Cultivating a loyal ICP base is the foundation of sustainable business growth, so you’ll want to do whatever it takes to locate, convert, and retain them.

Developing your product so it best suits the needs of your ICPs is of course the best way to retain their business.

There is, however, a second aspect to customer retention that is equally as important: setting up the use of your service as a habit.

This entails making your product as accessible and essential as possible, so that its place in your users’ lives becomes as natural as their morning coffee.

Make the use of your product a habit

If you’re looking to build steady, sustainable revenue, and don’t necessarily have all the resources to put towards new customer acquisition, encouraging habitual use of your service in your existing customer base is especially important.

Investors also tend to look favorably on SaaS businesses with a loyal fan base, as this often speaks more to the long term quality of a product than a sudden spike in customer acquisition.

In order to cement the use of your service in the day-to-day life of your users, consider the 7 ‘’R’’s that underpin mindful behavioral change:

• Reminders

• Routines

• Restructuring

• Records

• Rewards

• Relationships

• Reflecting

Reminders

Setting up a regular notification system is a great way to remind customers to make full use of their subscription with you.

Getting the balance right for frequency, timing, length of message, platform etc is a bit of an art form. After all, you want to reach users at a time they’re likely to go on to actually engage with your product.

If you’re too persistent and the reminders become annoying, on the other hand, users might opt out of notifications – or eventually even the service – entirely.

It might take some experimentation to find the ideal parameters across the different user groups, and the more closely customized this is, the more resources this will take up.

If you need to nail this process quickly, software like Amplitude provides great tools for A/B testing. Their digital optimization system can help determine which features are most effective at reaching your users. With this information, you know exactly what to develop in order to increase your customer retention rates.

You can also push users to set their own reminders, for example in app or email form. Allowing customers to have active control over these reminders makes it much more likely that they’ll act on reminders when the notification pops up.

Routines

Habit pairing is another powerful way to build usage of your service into a customer’s existing life structures.

For instance, you could run a ‘coffee insights’ campaign on the dashboard. Imagine pressing a coffee-cup notification that leads to a broad overview of the business health at the start of the day. This would be presented in a simple, graphic format that is easy to understand, without the user having to necessarily be awake enough to digest the full brunt of number analytics.

Essentially, this works on building a link between coffee, and dashboard insights, in the hopes that every time the user has a cup of coffee they’ll start to think about their business through your service.

Restructuring

At the core of routines lies structure. In order to become part of your users’ routines, it’s critical that your product is structured to be as accessible as it can be.

Some of the aspects this could include are:

• Mobile software functionality: the ability to use your service’s full features on a smartphone

• Quick access to various levels of insight: the range to select options from ‘quick oversights’ all the way to ‘in-depth projections’

• Customizability to the individual needs of the user: the freedom to bring the most used tools to the forefront and declutter the user’s front page

The purpose of all three elements is to reduce bad friction, as any frustration attached to using your service carries the risk of losing you that customer.

Making your software highly customizable will require additional resources. This might seem like a sunk expense, however, it’s also an invaluable window into customer behavior that you will be able to use in the future for customer acquisition.

Records

Keeping well organized records is highly beneficial to both you and your users.

On the one hand, tracking detailed user records (with their consent, of course!) enables you to personalize your interactions with them.

On the other hand, allowing users to access their own records and view their progress inside your software encourages long term loyalty, as switching to another software would result in losing access to parts of their business’s history.

Rewards

Setting up a rewards system is a simple, positive way to keep users engaged.

This could be almost entirely automated, such as a ‘task completion check’, or a more personalized message of support at key business milestones.

Another form of reward is based on social interactions, allowing users to connect with each other to share in mutual successes.

That platform could be hosted for an additional fee within another service, such as Slack or Discord. Essentially, all this requires is an access link provided to users, and allowing tracking data to be exported in formats that have cross-compatibility with the hosting software.

Relationships

Alternatively, consider creating a social circle within your SaaS for users to connect with each other.

There are numerous modes of direct user-to-user interaction, each with their own benefits and engagement styles:

• Buddy systems fueling mutual motivation
• Team projects open to collaboration
• Leader boards encouraging a little competitive spirit

Like the rewards system, the relationship bonds formed on the platform are likely to keep users active and loyal to the system longer term.

An added bonus is that users are fully in charge of their own interactions, requiring little engagement (and therefore resources) on your end.

Reflecting

Finally, think about providing users with a space to privately reflect on their business, and the role of your software within it.

These could be completely private, or shareable with other team members.

Here are some ideas for formats:

• Checklists for tasks
• Open diary
• Annotatable graphics
• Blog / vlog recaps

Allowing users to make direct contributions on your SaaS platform is a great way to fuel organic engagement – and ultimately, that’s what customer retention is all about.

Habits are slow to form and hard to break

Use these 7 R’s to encourage long term, high value patterns amongst customers, and reap the benefits of a sustainable revenue stream achieved through a loyal user base.

If you’re looking into insights into your business health, Baremetrics has you covered. You can cross-reference over 26 different metrics to track various aspects of your SaaS.

Whether you want to know your quick ratio, track your total revenue against plan quantities, or view upgrades by region, Baremetrics has you covered. Start a free trial.