Acquisition, Engagement, Retention: How to Drive SaaS Growth
Customer acquisition, engagement, retention are essential ingredients for growing a SaaS company.
It’s literally impossible to succeed without scoring decent points on all three metrics. This article throws light on what each of these metrics means, why they’re important, and how you can improve them for your SaaS.
- From buying to post-purchase, there are five customer lifecycle stages: Acquisition, Activation, Retention, Referrals, and Revenue.
- Customer acquisition is the process of getting new customers for your business. The goal is to increase brand awareness and your company’s customer base.
- There are multiple customer acquisition channels. The sweet spot is to find the channel where your ideal customers congregate the most.
- Customer engagement involves building a good relationship with your customers and helping them find their way through your product.
- Onboarding practices that lead to increased customer engagement: Personalize the onboarding process for each user segment, provide continuous onboarding (primary, secondary and tertiary onboarding), and use checklists and interactive walkthroughs to guide users to the ‘aha’ moment.
- Use in-app marketing to announce feature releases and keep users up to speed with changes you’re making.
- Customer retention is your company’s ability to turn one-time subscribers into repeat customers.
- Retention increases the LTV of your customers, providing ROI on the investment you made in acquiring new users.
- Self-service support, NPS surveys, and account expansion are great strategies for increasing retention.
- Including customer activation in your growth plan is important. You’ll have a hard time converting users who don’t experience your product’s value firsthand.
- Between activation and retention, which should your company focus more on? There are no hard and fast rules, but know that acquisition without retention will hurt your bottom line.
- Userpilot can help you build product experiences focused on the acquisition, engagement, and retention of customers. Book a demo call with our team to learn how.
What are the customer lifecycle stages?
Customer lifecycle stages refer to the stages that the customer goes through before making a buying decision and after paying for the product. Also known as the Pirate Metrics Framework, the five customer lifecycle stages include:
- Acquisition – customer finds and interacts with you and signs up for freemium.
- Activation – users reach their aha moments and start getting value.
- Retention – you provide continuous support via different channels to improve customer experience and make the customer a brand ambassador.
- Referrals – the user promotes your brand to others.
- Revenue – customer purchases additional products.
What is customer acquisition?
Customer acquisition is the umbrella term for all business activities focused on bringing in new customers.
The process typically involves generating brand awareness and moving prospects down the marketing funnel till they become paying customers.
What is the purpose of customer acquisition?
The main goal here is to bring in new customers and increase a company’s customer base.
But beyond that, customer acquisition aims to create loyalty programs that will make customers stay longer and even refer family and friends. The customer loyalty part is important because that’s what will validate CAC.
How do you acquire new customers?
There are multiple customer acquisition channels, but not all will be suitable for you. So, you need to test and iterate until you find your best options.
Below are the common channels:
- Display Advertising: Using display media like images and videos to put the word out on your product through Publisher Networks like Google.
- Social Media Marketing: Promoting your product through social media channels like Facebook, Twitter, etc.
- Search Marketing: This includes organic SEO and Pay-per-click advertising.
- Content Marketing: Creating content pieces that educate, excite, and attract your target audience.
- Affiliate Marketing: Asking people to promote your product in exchange for commissions. There are many affiliate networks that can help you do this.
- Email Marketing: Using email marketing tools like MailChimp to educate and acquire new users.
What is customer engagement?
Customer engagement is the process of building relationships with your customer base. The goal here is also to increase brand awareness, carry customers along and foster long-term loyalty.
Customers can be engaged through social media posts, marketing campaigns, website content, and much more. It’s also important to get this done in-app and through emails.
Here’s a good example.
Social media scheduling platform, Postfity made a feature update and decided to let users know about it (top right corner of the image below).
The average SaaS company will easily assume users will find out about the update, so there is no point in letting them know. But notifying users in this way is a great way to keep them updated and engaged as your app grows.
Why is customer engagement important?
Customer engagement improves the user experience and makes people want to keep using your platform. This means better ROI on your marketing spend.
How to improve customer engagement?
You’ve seen the importance of customer engagement and how it potentially affects your bottom line. The next question is, how do you improve your engagement game to match and even exceed customer expectations?
Let’s find out!
Make your primary onboarding flow personalized and interactive
People like being treated as individuals. They appreciate it when businesses acknowledge their desires, hence the need for personalization.
Segment users from the start based on their expertise and needs so you can offer personalized onboarding. Doing this will increase your engagement rates as users will have content tailored to their unique situation.
A welcome screen with a short micro survey is great for understanding and segmenting users. Again, Postfity makes a good example:
Provide ongoing onboarding across the customer journey
Who says onboarding has to stop when the user has signed up and begun using basic features?
Continuous onboarding helps remove friction from your product and turn ordinary customers into power users. It ensures that you’re always meeting users at the point of the need, no matter what stage they are in the customer journey.
So, go beyond primary onboarding to implement secondary and tertiary user onboarding.
Learn more about continuous onboarding.
Drive users to the aha moments with checklists
Checklists are great for making users experience the value of your product. As in the Loom example below, your checklists should include basic actions the user needs to perform to get to the activation point.
It’s good that you add a progress bar that shows users how far they’ve gone and how many steps are left to completion.
You could also employ interactive walkthroughs to further engage users and help them learn by doing.
Use in-app marketing to announce new features and drive engagement
In-app marketing involves using contextual and timely in-app messages to guide users through your product. This practice will boost new feature adoption and product engagement because you’re helping users where and when they need it.
A good way to practice this is to present users with a pop-up modal when they log in for the first time after you’ve released a new feature.
See how MailChimp did it:
What is customer retention?
Customer retention is the process of keeping existing users for long, turning them into repeat customers over and over again.
High retention rates indicate that customers are engaged and satisfied with your product and vice versa. It’s worth noting that quality customer service also plays a role in customer retention.
Why is customer retention vital for businesses?
Retention increases customer lifetime value (LTV), meaning you’ll make multiple times the money you’ll spend on acquiring new users. But when your retention rate is low, you’ll constantly be trying to get new users and spending more on marketing without generating much ROI.
Another advantage of customer retention is account expansion opportunities.
Your existing customers are only likely to upgrade their plans when they get value from your tool. So you’ll find that your retention strategies naturally lead to account expansion.
Retention also increases brand loyalty, making customers want to promote your tool on social media and other third-party platforms.
Customer retention strategies
Some of the most effective customer retention strategies used by SaaS companies include self-service support and listening to customers through in-app surveys. Upselling and cross-selling are also effective for customer retention.
The following sections go over these strategies in more detail.
Offer continuous self-service support using an in-app resource center
What do customers do when they get stuck using your product? Some will try to find solutions by googling and checking forums, few will contact customer care, while others might just abandon your app — especially if they’re new users and just testing your tool.
Googling for answers or contacting the support team seems like better options, but they’ll waste the customer’s time. You can solve this problem by providing in-app self-service support in the form of a resource center.
This helps drive product adoption, customer satisfaction and eventually, retention.
Turn detractors into promoters to retain more customers
The survey typically results in three responses:
- Promoters — those most likely to recommend your tool to friends and family.
- Passives — those that like your product but don’t love it.
- Detractors — those that don’t like your product enough to recommend it to others. Detractors are the most likely to churn.
Identify the detractors in your user base and reach out to them through personalized messages. Aim to discover what they don’t like about your product and offer immediate solutions to them if possible. Through this, you’ll convert detractors into loyal customers.
Apply the same approach to passives.
Contextually upsell and cross-sell to existing customers
Don’t wait for customers to upgrade by themselves. Most of them won’t do it unless they get a little push.
What’s more, a customer could be on a lower plan and getting frustrated, not knowing that some features of the higher plan are just what they need.
Take the screenshot below, for example. Slack sent this timely message to the user just when their team had reached 10K messages.
The user is likely to upgrade at this point because they’ve had interesting discussions on Slack and would want to keep that chat history.
Without this contextual message, the user probably wouldn’t know this benefit exists on a higher plan. If your tool is not priced by usage, you could offer to upgrade from one plan to a higher plan with benefits suited for where the customer is in their journey.
Bonus: Don’t forget about user activation
Activation is an important stage in the customer journey. It’s that point where customers experience your product’s value firsthand and decide that it’s something they want to stick with.
All your acquisition, engagement, and retention strategies won’t matter if you don’t get users to this point. So, while you invest in acquiring and engaging customers, also lay out a careful plan for getting them to the activation point.
Customer acquisition vs. retention: Which is better for product growth?
There’s no simple answer to this question.
The fact is that both acquisition and retention are important, and in many cases, the one you double down on really just depends on where your product is in terms of growth. But of course, you should always have acquisition and retention strategies in place.
Let’s consider four ways these two metrics are different/complementary so that you can have better context.
Acquisition grows your customer base, and retention grows customer lifetime value
An ongoing customer acquisition process allows you to grow your customer base and obtain even more opportunities to conduct business.
A strong customer retention strategy enables you to maximize the LTV of your customers by encouraging them to bring their business back to you, again and again.
If you’re acquiring customers and hardly retaining them for long, you may have to focus more on retention and vice versa. But no matter what side your focus is on, you don’t want the other metric to suffer — especially because you’re operating the SaaS model.
Acquisition metrics and campaign results are easier to track
The acquisition metric is easier to measure than retention. You can wake up tomorrow and want to know how many users you’ve acquired over the past four weeks, and the numbers will be there.
But you can’t know for sure that those users will stay with you for the next 12 months.
It’s easy to fall in love with vanity metrics and start tracking your new trial users over X period and keeping your eyes off retention because it takes longer to track. Don’t fall into that trap. Instead, use your past trends to make effective product decisions.
Acquisition is expensive, while retention is cost-effective
It generally costs more to acquire new users than to retain existing customers.
Your revenue grows faster if you retain a good chunk of the customers you acquire.
Retention has a better return on investment than acquisition
If you run a business model that profits more from a large influx of one-time buyers, you wouldn’t bother much about retention. But that’s not feasible in the SaaS model. Every SaaS company depends on retention to grow its revenue because retention is where the true ROI of customer acquisition comes to bear.
Customer acquisition, engagement, and retention all work together to help you serve customers and grow your SaaS.
Acquisition is all about getting new users to try your product. And it’s important because no SaaS company can exist without a user base.
Engagement involves building a relationship with customers and letting them know that you care. This motivates them to keep using your product.
But you can’t just stop at engagement. You want customers to stay with you for as long as possible, and that’s where retention comes in. The benefits of retention include loyalty, account expansion, and higher LTV.
Userpilot can help you build product experiences focused on the acquisition, engagement, and retention of customers. Book a demo call with our team to learn how.