Growth Hacking, Retention, Acquisition, Conversion: Growthmint

Day 17: Retaining Customers

Retention is the process of keeping your customers coming back month after month. For SaaS products, recouping your acquisition costs typically takes many months, if not years, so retention becomes that much more important.

The basic and most common retention metric is retention rate. In SaaS products, this is the month-to-month rate of how many customers stay subscribed to your product.

Pro Tip

Segment groups by the weeks and months they became a customer to watch for dropping rates and the effects of product experiments. Other segmentations include by channel and demographic segmentations.

Pro Tip

Tracking retention allows you to predict your financial performance much more accurately. Measuring retention accurately is an essential part of growth.

Churn

When you lose a customer, that's called churn, and something you’ll want to keep low. It doesn't take that high of a churn rate to wreck havoc on your revenue as it. In fact a good target range for churn is between 1-5%. It’s even possible to have a negative churn rate, but that takes the right pricing plan and product.

Churn doesn’t have to be that high to significantly threaten your business. If your number of customers stayed constant, a 5% monthly churn rate would leave you with only 56% of your customers after one year.

Pro Tip

It's not that commong to experience a 0% churn rate - there are many reasons a customer will leave your product and some are beyond your control. Budgets get reduced, the customer who loves your product leaves the company or the company even goes out of business are all examples.

Engagement

A key part of retention is engagement, which measures how much your customers use your product. The higher their level of engagement, the less likely they will leave.

Engagement metrics will depend upon your product and features. The engagement actions you choose to encourage should be tied to the core value of your product.

To build engagement, start by talking to your customers. Find out why your product is valuable to them.

Knowing this will help you design the product around the features that are important to them.

Some questions you can start with:

  • Why did they choose your product in the first place?
  • Why have they decided to stay with you so far?
  • Why have they chosen you over competitors and other solutions?
  • What were they doing before they started using your solution?

Example

While SaaS products have common engagement metrics, there are important metrics specific to each industry that should be tracked:

  • Invoicing - how many invoices are uploaded
  • Video Management - how many videos are uploaded
  • Analytics - how many charts and dashboards are created

Be proactive about at-risk customers

Just as there are different stages a customer goes through on the way to becoming engaged, there are different stages a customer will go through before the leaving your product.

You need to be proactive about at-risk customers and be able to spot the signs that they’re about to cancel. Don’t wait until the later stages to convince them to stay because it will be much harder at that point.

You’ll want to determine what at-risk customers look like here. Identify the point when they stop dropping off.

What do churned customers have in common? What features have they used heavily or not used at all? What are their processes? Once you have that picture in mind, you can start.

Take the churned customer profile you build and create a list of the most common actions and characterastics that you don't see in the profiles of your good customers

Once you’ve figured this out, set up a program to get them reengaged with emails and in-app notifications.

Pro Tip

Imagine you run a video hosting SaaS application. You see that your cancelled customers left on average after 65 days and only uploaded 3 videos. That’s about a rate of 1 video every 20 days. Set up a triggered email that encourages them back into the app if they’ve only set up 1 video after 30 days.