Tracking the Customer Lifecycle – Customer Retention
This is the final part of a three-part series on the customer lifecycle of a SaaS product. After acquiring and retaining a customer, it is key for a business to keep the customer on your platform and reduce churn. Let’s take a look at how to succeed in this phase.
In this stage, you need to focus on customer success to keep customers on the platform. One thing to remember is that retention is cheaper than acquiring new customers, so don’t forget to keep existing customers happy with your product. Many companies focus too heavily on acquisitions and lead generation and forget to invest in customer retention. Customers can also become brand advocates and grow your product reach organically.
- Your customer is now a regular user of your product and has started requesting more features.
- What you should do: Ensure your customer recognizes all the available features in your product and understand their underlying problems. Engage them in conversation and allow them to voice their feedback. It’s important to show the customer that the product can grow with them.
- The customer’s current subscription has ended, and the customer has to decide whether they want to renew their contract with you.
- What you should do: Ensure that the renewal process is smooth and have a customer success team to secure renewals.
- Your customers love your product and have become product advocates in their own network.
- What you should do: Keep in mind that word-of-mouth referrals are one of the most effective marketing tools out there. To boost the number of referrals, you could provide referral programs so you could enlist new customers. For the new customers, they would again begin on the lifecycle at the top in the acquisition phase.
Key Metrics to Track
Successfully retaining your users mean reducing churn. Key metrics and behaviors to track include:
- Customer Churn rate – The percentage of your customers that leave the platform.
- Churn rate = (Customers at the beginning of the month – Customers at the end of the month) / Customers at the beginning of the month
- For example, you have 500 customers at the beginning of the month, and 450 at the end of the month. The churn rate is: (500 – 450) / 500 = 10%.
- Cancel Intent Behavior – Actions such as mousing over the cancel button, removing your widget from their website, and so on, which shows the intent of canceling your product.
- These behaviors should trigger intervention actions, such as sending Customer Success to help aid your customer with their concerns.
- Past-Due Accounts – Customers that have past-due payments, or failed payments, have a potential for churn.
- For past-due accounts, you would need to execute dunning communication strategies to collect payment before account cancellation.
- Example: “Your credit card is expiring soon”, “A friendly reminder that your invoice is now 7 days overdue”, etc.
As much as you plan to reduce churn, you can’t completely remove churn from your product. It is also valuable to get some information about leaving customers so you could prevent churn in the future. Some things that you could implement include:
- Cancel Flow – A off-boarding workflow that allows the customer to cancel within the app. This is a good time to reminds them what they’ll lose if they do and provide another compelling option to the customer besides canceling. Some options can include:
- Downgrading to a lower-priced tier
- Provide the ability to hibernate their account
- Offer customer success support
- Offer a discount (be careful – you want a plan to get them back and become a loyal customer, and not just ‘saving’ a customer for short term)
- Exit Survey – A survey during the cancel flow to ask cancelling customers qualitatively why they decide to leave.
- Example: “What made you cancel?”, “Tell us about your experience” etc.
Familiarizing yourself with the lifecycle allows you to understand and respond appropriately to your customer so you don’t fall into common mistakes other companies make. Also, by monitoring metrics related to acquisition, engagement and retention, you can analyze and identify problems and improve your product strategy.