How to Drive Customer Loyalty and Retention in SaaS
Are you satisfied with the customer loyalty and retention rates of your SaaS?
If you aren’t and want to boost these metrics, this article is for you! Today we explore what customer loyalty and retention mean for SaaS, how retention differs from loyalty, and tactics to help you boost both.
- Customer loyalty measures the likelihood that a customer will do repeat business with you because they love your brand. Loyalty is often measured through NPS and other similar surveys.
- Customer retention is a company’s ability to keep its existing customers.
- Retention isn’t the same as loyalty. Customers could renew their subscription simply because they haven’t found a better alternative. But loyal customers buy because they’re committed to the brand.
- Customer loyalty and retention lead to increased MRR and customer lifetime value. They’re also more cost-effective than acquisition.
- The first step is segmenting users based on their jobs to be done and personalizing in-app experiences to deliver the promised value to each user segment.
- Trigger onboarding checklists and drive users to their activation points. Checklists should include 3-4 steps to help users get started and reach their Aha moment.
- Gamifying the app and adding fun elements to your product significantly improves the user experience and drives repeated engagement. Repeated engagement in SaaS translates into customer stickiness and retention.
- Some users sign up and forget about your app. Use email to reach out to them and give them reasons to come back.
- Who says onboarding has to stop once users have reached activation? Use secondary and tertiary onboarding to keep educating existing customers and driving more value.
- Provide users with sufficient in-app educational resources they can always refer to when stuck. This will lead to higher satisfaction, retention, and loyalty rates.
- Your resource center should include multiple resources such as video tutorials, webinar recordings, knowledge base articles, etc.
- Track in-app engagement, study your loyal customers and try to replicate their path to success in the least engaged segment.
- Implement loyalty programs for your power users and reward them with different incentives to further deepen your relationship
- Assuming users will find your new features on their own is dangerous. Some of them never would. Instead, use UI elements to announce new features and increase your engagement rates.
- Run Voice of Customer programs, gather customer feedback and act on it.
- Use UX analytics to identify friction points and proactively address them before the rest of your customer’s complaints.
- Segment and reach out to detractors after conducting NPS surveys. Aim to address their needs and convert them into loyal customers.
- Upselling and cross-selling will both provide extra value to customers and make it harder to leave your app for a competitor as their investment in you grows.
- With Userpilot, you can segment users, create personalized product experiences and eventually drive retention and loyalty.
What is customer loyalty?
Customer loyalty refers to the continuous, profitable relationship between a company and its customers.
A loyal customer has experienced the brand for a substantial amount of time and loves it. These customers aren’t actively searching for alternative solutions.
It’s also not uncommon for loyal customers to be brand advocates without the company asking.
How to measure customer loyalty
There are many ways to measure customer loyalty, but the most common way of measuring is through NPS surveys.
NPS or Net Promoter Score is a standardized metric for measuring customer satisfaction and brand loyalty. The survey uses a 10-point scale as in the one below to ask how likely customers are to recommend you.
Your loyal customers are those who give you a score of 9-10.
What is customer retention?
Customer retention is the measure of customers that are willing to do repeat business with you.
How to measure customer retention
The primary retention metric is the customer retention rate. It measures the number of customers a company maintains over a given period and is calculated this way:
A high customer retention rate shows that many of your existing users are renewing or upgrading their subscriptions, and vice versa.
What’s the difference between customer loyalty and retention?
Think of customer retention as the stepping stone to loyalty. All loyal customers are first retained before they become loyal, but not all retained customers are dedicated to your brand.
A customer you retained could be with you for a while and switch to a competitor later. They’ve simply liked you enough to keep buying from you repeatedly, but that could simply mean they haven’t had a chance to try a competitor yet.
Loyal customers, on the other hand, aren’t concerned with competitors. They absolutely love your brand and don’t see themselves leaving you anytime soon.
Business-wise, customer retention is reactive; you’re merely trying to prevent churn. On the other hand, customer loyalty strategies are proactive and focused on creating long-term relationships with customers.
Why are customer loyalty and retention important?
Imagine how much your product will grow when you retain a good percentage of customers and turn many of them into loyal ones.
The benefits are enormous. Here are some:
- Increased MRR: This is a no-brainer. Loyal customers present a good account expansion opportunity. Some of them will even upgrade before you ask. This will naturally cause your MRR to skyrocket.
- Boosted Lifetime Value: The Customer Lifetime Value (LTV) is the total worth of a customer to your business. The LTV increases as customers stay committed to your brand and keep buying your products.
- More cost-effective than acquisition: It’s generally cheaper to retain existing customers than acquire new ones. Studies show that acquiring a new customer can cost five times more than retaining an existing customer. Another study indicates that increasing customer retention by 5% can increase profits from 25-95%.
Best tactics for driving customer loyalty and retention in SaaS
Now that you know how customer loyalty and retention are important to your growth, the next step is determining how to boost these for your brand.
This section addresses several tactics for driving retention and loyalty.
Use segmentation to offer personalized in-app experiences and support
Users have different needs and expect to achieve different goals with your app. You need to deliver them the promised value fast if you want to retain and turn them into brand advocates.
The thing is most SaaS products have multiple use cases and providing generic app experiences to all users won’t cut it. Many users will feel the tool isn’t for them, and churn sets in.
Avoid this problem by providing personalized product experiences. How? Start with collecting user data upon sign-up, then segment users by their jobs to be done and deliver tailored experiences for each segment.
Use onboarding checklists to prompt users to engage with your core features
A vital step to customer retention and loyalty is user activation and engagement. Customers won’t experience the value of your product if they don’t engage with it.
You shouldn’t assume they’ll find their way around your app on their own. Some will, but some won’t, and will just drop off instead.
Checklists are a great way to guide users and solve this problem. With checklists, you can break down complex tasks into smaller ones, show users their progress, and motivate them to engage with your app.
Utilize gamification to drive app engagement and retention
Gamification gives users a mood boost and motivates them to engage with the app over and over to experience those positive emotions.
Repeated engagement contributes to retention as users start getting the value they came for.
Identify disengaged users and reach out to them
There are many reasons for disengagement. Some people simply lose interest. But in many cases, users either signed up and forgot your app or found your product difficult and stopped engaging.
Segmentation helps you filter disengaged users. Do this and reach out to them via email, providing a reason to return to your app. The reason you give them could be anything from a new feature announcement to special promos for returning.
Retain existing customers with secondary onboarding
Onboarding isn’t only for new users, especially if your goal is to turn existing users into power users and loyal customers.
You should implement secondary and tertiary onboarding experiences throughout the user journey.
Provide in-product education with an on-demand resource center
Providing users with in-depth educational resources will ensure that they’ll be able to resolve any problems that might occur themselves.
This can be done by creating tons of educational resources and combining them in a resource center that customers can access at any time.
Understand what’s driving customer loyalty and replicate
Segment and analyze the behavior of your loyal customers. Seek to understand what they love about your app, the features they engage with the most, and how often. Then replicate their path to success to your least engaged user segments.
You can track user behavior with feature tagging and predict what features your customers may find valuable in the future based on their current needs.
Run customer loyalty programs and reward loyal customers
Loyalty programs provide limited deals, discounts on pricing plans, access to premium features, etc., to encourage loyalty and long-term business from the most frequent customers.
Evernote runs a point-based loyalty program and rewards customers with points for completing specific actions. Customers receive points for inviting friends and can exchange those points for the premium plan.
Drive repeated value by announcing new features
All SaaS companies constantly revolve, enhance their product, and add new features to stay competitive. If they don’t, customers will replace them within days with a new shiny competitor.
But adding new features doesn’t automatically mean users will see and use them. There’s a phenomenon called feature blindness, where users only stick to features they’re accustomed to using and are blind to the rest of the features.
You can overcome feature blindness by announcing new features with attention-grabbing modals. This way you’ll get users to engage with the feature and eventually experience value, which in turn will improve your retention rate.
Use UX analytics to identify friction points across the customer journey and eliminate them
Set and track the goals inside the app to understand how your users progress through each step of the journey.
In the next step, identify the drop-off points and what causes friction in the product.
Armed with this information, offer contextual help to users in the form of in-app guidance or a more simplified UI.
Implement voice of customer (VoC) programs to gather customer insights and act on them
There are many methods for collecting customer data. The common approaches include customer interviews, focus groups, and in-app surveys.
Proactively reach out to detractors and retain them
Don’t give up on people who gave you a low NPS score. The fact that they’re still on your app means you have a chance to retain and even turn them into loyal customers.
Firstly, segment users based on their NPS to filter out the unsatisfied ones.
Then, tag their NPS survey responses to identify common patterns and issues affecting your customers negatively.
You can also take your time to reach out to individuals and ask for detailed feedback. Or simply offer help if they mentioned a specific thing they’re having difficulty with.
Drive additional value with relevant upsells and cross-sells
The more customers invest in your product, the better—it becomes more difficult and requires more effort to switch to a competitor. This increases the chances of customer loyalty and retention.
Thus, always seize every opportunity to get customers more invested in your product. But keep it relevant and try not to come off as too pushy and salesy.
See how Loom contextually drives account expansion with modals when users reach their account limit.
Many factors go into customer retention. Not everyone who subscribes to your product is a good fit, so some of them are expected to drop off along the way. But your ideal customers will remain with the app for a long if you give them a good reason to do so. This is where the tactics we discussed in this article come in.
Start with ensuring each customer gets a personalized experience in your software. Then, provide in-app guidance and get them to experience the value of your app. And finally, continuously collect customer insights and act on them.
Userpilot can help boost your customer loyalty and retention. Our software enables you to create personalized experiences, conduct feedback surveys, and build resource centers, among other things. Get a Userpilot Demo to learn more!