Practical SaaS Retention Strategies That Move the Needle (Part Two)
February 25, 2020
Editor’s Note: This article is Part Two of a two-part series outlining strategies to improve retention. You can read Part One here.
When you’ve exhausted every retention strategy possible and you don’t know what else will make a meaningful impact on churn, what do you do? Look for even more retention strategies? Run the same strategies again in a different way?
Not bad ideas, but did you know that there are actually ways you can improve retention that aren’t direct retention strategies at all?
We’ve got 7 “non-retention” strategies to help you move the needle to better retention for you:
- Position yourself with the right pricing
- Educate and teach customers with content
- Create product training material
- Reactivate churned customers
- Incorporate triggers to encourage habitual use
- Create loyalty with rewards, referrals and affiliates
- Show your face, advice and create relationships
1. Position Yourself With the Right Pricing
Believe it or not, pricing has a lot to do with your retention strategy. Bad pricing practices are easy excuses for customers to cancel.
First, choosing the pricing model that aligns you the best with the value you deliver to your customers will set you on the right path.
These are the major pricing models you’ll see in SaaS today:
You should also think about how you can use your pricing model as a competitive advantage. For example:
- Most project management apps charge per user, whereas Basecamp charges a flat rate
- Intercom’s pricing structure allows them to be modular and also provides many upsell opportunities
The concept of the Value-to-Price Ratio can also help understand how your pricing plays into retention.
With a 1:1 Value-to-Price Ratio, customers are getting just as much value as they’re paying for, and while this seems reasonable, that doesn’t actually help them. It gives them no reason to use you. Whereas with a 10:1 Value/Price Ratio, customers will practically feel obligated to tell others about it and they’ll also stick around for a long time.
If customers are canceling because it’s “too expensive,” that’s usually an indicator that the Value-to-Price Ratio isn’t high enough for them. But instead of defaulting to lowering the price, you can also look to find more ways to increase the value they’re getting.
Aspirational pricing is when you launch a product and people tell you it’s too expensive. Instead of charging less, figure out “What would my product need to do to be worth that?”
Dropping prices can be a short-term win. It’s rare that it’s the best long-term play.
— Rob Walling (@robwalling) September 23, 2019
We also wrote a much more extensive piece on SaaS pricing models and strategies for more information on pricing.
2. Educate and Teach Customers With Content
Believe it or not, the content you produce can help improve retention.
This is because customers don’t just want to use your technology, they want to learn from you. If you can be an expert to them, you’ll always have their business.
Ahrefs does a fantastic job exemplifying this.
They’re one of the only companies I know of who explain how to use their product in every single one of their blog posts—and pull it off without the sales aspect. When you can teach someone how to do something and then say “Here, use this tool to do it” that’s a powerful combination.
You can also see that they’ve covered virtually every topic under the sun about SEO, all while educating customers on how to use their product.
There’s never an excuse for “I didn’t know how to use it” or “I didn’t use it enough” because you’d have to be blind to not come across any of this content across the web or even in the app where they promote it.
Ultimately, by educating and teaching customers how to achieve their desired result using your tool, you’re making yourself an indispensable part of their success—thus improving retention.
3. Create Product Training Material
Similarly, you can take it to the next level by creating content specifically for training purposes. Customers are far more likely to stick around when they are experts at using your product and have invested time and energy on training.
Webflow is one of the best examples of this.
Their videos are hilarious, super high quality and do a fantastic job at teaching you web design along with how to use Webflow.
If customers had to choose between a web design tool that had tons of specific and entertaining training videos and a web design tool that had nothing, you know they’re going with the one with training videos.
And now, whenever someone gets stuck, they can go to Webflow University to get unstuck.
Glide creates tutorial style videos that help customers with hyper-specific needs.
It’s easy to disillusion yourself to think that the product can be so intuitive to use that users should never need training videos like this. But you’d be missing out on a large majority of users who need detailed instructions and examples to learn.
It’s almost never as intuitive as you think. You can’t afford to take that risk.
Product training material—whether it be through videos, courses, “manuals,” help docs, API documentation, etc.—not only makes your users more successful, but also gets them invested in your product.
Once a user is familiar with, trained and confident in their ability to use your product, switching costs become much higher. The anxiety of not knowing how to use or feel confident in their ability to learn how to use a competing product alone could be enough to keep them as a customer for a long, long time.
4. Reactivate Churned Customers
Here’s another novel idea: you can reduce churn by getting canceled customers to become customers again!
This is usually the one thing that no one is doing.
If you can create a strategy for reaching back out to churned customers to try to win them back, you will be far ahead of the pack.
One more quick plug: We help you do this with Baremetrics Cancellation Insights!
You can automate emails back to the customers who just canceled and personalize the message based on the reason they gave for why they canceled.
This makes it super relevant and also takes all the work out of doing it manually.
I find that just asking for a reply, rather than a link or a button, works best. The goal should be to simply start a conversation and really understand what’s going on so you can make an offer you can count on.
You may find that there was a misunderstanding, they had to cut back due to financial challenges, someone left the company, or otherwise. But at least you have an opportunity to get more information and try to win them back.
Technically, while this may not help you reduce your churn rate since it’s after-the-fact, it’ll still help retain more customers.
A simple email like this, automated or manual, can bring back customers and get you invaluable data.
Mind my typo in the first few words… but you’ll notice that it’s very short and direct. It’s achieved over 80% open rate and 60% reply rate because it’s straight to the point.
And while it’s hard to palate, the feedback is invaluable. While reactivating churned customers won’t undo history, it’ll help you improve net retention of customers.
5. Incorporate Triggers to Encourage Habitual Use
Habitual (read: NOT addictive) use will make your product far less likely to end up on the chopping block.
When was the last time you thought about how to make your product an indispensable part of someone’s work and schedule?
Nir Eyal’s hook canvas offers a good way to visualize this process.
It all starts with the trigger.
External triggers can come in the form of emails, in-app messages, web notifications, push notifications, highlights and tooltips and more. Internal triggers can come from an order from the boss, a checklist item, a desire for an outcome and an association with another process or system.
But if the triggers don’t exist, how can you expect users to come back to the product and continue as a paying customer? The action, reward and investment all come after the trigger. We’ve found email reports and our Slack bot to be great triggers to encourage habitual use for Baremetrics.
6. Create Loyalty With Rewards, Referrals and Affiliates
Rewards, referrals and affiliates are usually associated with acquisition, but they also make for fantastic retention strategies.
Notion rewards users with referrals and using the product in certain ways.
And of course, no talk about referrals would be complete without a reference to Dropbox’s classic referral program.
Rewards and referrals can come in the form of:
- Company currency (e.g. storage)
- Free stuff (e.g. merch, swag, event tickets)
- Coupons, discounts or credits
- Bundle of similar products
- Upgrade to next tier or feature
If you’re going to implement a referral program, follow these best practices to get the best results:
- Create multiple rewards that are attractive enough to different segments
- Double-sided rewards are far more effective than single-sided rewards
- Always use the bigger number (40% off vs $10 off OR $250 off vs 10%)
Affiliates can also be a huge driver for retention for two reasons:
- Everyone wants to use the tool that the “influencers” are using and recommending
- When customers become affiliates, now you’re a revenue stream, and they become much less likely to cancel
Transistor, ConvertKit and WPEngine are all case studies for how powerful affiliate marketing can be to both acquire AND retain customers.
7. Show Your Face, Advise and Create Relationships
While I can’t quantitatively prove that doing “unscalable” things like the examples below result in better retention, we can all agree that having a personal relationship with someone makes it a lot harder to switch.
At the end of the day, we’re all humans. And we like working with businesses we have real relationships with. There’s something to be said about having a personal relationship with customers instead of just a transactional one.
Something I’ve been doing for quite a while now is sending personalized demos of me walking someone through their own account. My goal isn’t necessarily to do a technical overview of our product, but instead to get someone to hear my voice, see my face and know that these are the lengths we’re willing to go to for our customers.
This can also come in the form of webinars, strategy sessions or even plain ole’ customer support.
People are baffled I do this, but it’s basically free. It just takes time. And I get an opportunity to get to know them and check in on their trial experience.
There’s no good excuse for not offering to personally help any one of your customers. Even if it’s not related to your product, you can charge someone’s trust battery with simple acts of empathy and service.
Create tripwires to start conversations and start building relationships.
Remember that there are many factors that contribute to SaaS retention. Just because something isn’t directly related or attributable to retention, doesn’t mean it’s not a factor.
Think outside the box. Look around. Are there any hidden opportunities to improve retention right in front of you?