3 User Retention Strategies for SaaS

by Carmen Apostu
Blog Post

User churn is one of the great enemies for all SaaS. SaaS Churn

While an average churn rate of around 5% annually is expected by most, many are facing numbers much higher than that and are looking for strategies to bring them down.

Of course, retention rates go hand in hand with churn. Every SaaS that wishes to stay in business needs to be giving some focus to user retention and ensuring they aren’t pouring all of their resources into acquisition.

Your customer numbers might look good for a while, but that is of absolutely no use to you if the customers you already have are rapidly exiting. Let’s look at some strategies for slowing that exit and boosting retention rates:

#1. Gamification

One of the absolute paramount factors in increasing user retention is to boost the engagement levels of users. This also happens to be one of the biggest challenges for SaaS.

A typical scenario happens where an enterprise might have purchased a SaaS product at quite some expense, then finds that there is little uptake of it among their teams. Without the levels of user engagement existing, the company doesn’t see the benefits promised by the app and cancels their contract.

The same thing happens with SaaS selling to smaller businesses or solopreneurs. Without engagement, the end result is cancellation and loss of the customer.

“Extracting business value from SaaS investments requires solving the larger problem of how to increase end-user adoption and usage.” (Kris Duggan)

Of course, there are many ways you can go about boosting engagement with your SaaS, but one strategy which is gaining in popularity is gamification. A Giga information study showed that gamification can really bring results as far as boosting engagement. Customer activity online increases by an average of 68% and social sharing increases by 22%.

Those kinds of numbers can mean everything to the SaaS which is needing a good boost in user engagement. Gamification works by entertaining and rewarding customers, adding an element of goal achievement and bringing in the fun factor.

When you think about how games usually work, there are rules or actions for the participant to observe, followed by them achieving some kind of reward, or “level up.” In the SaaS world, that might be as simple as achieving badges for completing certain actions or even attaining some kind of extra reward.

Dropbox is an example of a semi-gamified idea for engagement. While they don’t use a game in the traditional sense, they do reward users with free space for completing certain actions. One of the particularly clever parts of their system is that users are rewarded for doing the “getting started” tour, giving Dropbox a good “in” to ensure that people are aware of how they work (which is probably half the battle when trying to foster engagement!).

Cisco devised Cisco Social Rewards to encourage users to engage with their blog by commenting and sharing. Users can earn reward points, badges and they point out, a reputation for participating. It’s a gamified concept which SaaS could easily implement too. Think about your own blogs or forums, or possible in-app rewards.

#2. Know Why They’re Leaving

When Groove sat down in early 2013 to figure out what they could do about their 4.5% churn rate, they quickly realized that they had little insight into why customers actually were leaving. It was decided that they needed to systematically study churn and get down to its source/s.

This lead to the birth of Groove’s “Red Flag Metrics.”

What they found was that there were clear differences in the behaviors of those who left as compared to those who stayed. Those behaviors became the markers or “Red Flag Metrics” which they use to predict whether or not someone is going to stay and whether they need to be proactive about reaching out with extra pointers.

For example, some of their red flag metrics include:

  • the length of the first session.
  • the frequency of logins.
  • Time taken to complete tasks (those who took significantly longer than average tended to be on the churn list).

Identifying those red flag metrics allowed Groove to take a proactive approach when they saw those behaviors happening. For example, they would segment customers and send out emails to those who spent less than two minutes on their first session and to those who logged in less than twice per day over their first 10 days.saas-churn

Source: Kissmetrics

They used various other email approaches, depending upon which red flag metric the customer fell under. The net result was impressive. Through understanding those metrics, segmenting customers and being proactive about approaching them, Groove was able to reduce churn by 71% overall.

#3. Improve Support

How many times have you either struggled to find how to get support or answers to questions? What about those times where you do use support options, but find you wait a significant amount of time to get an answer?

You can create the best app ever seen, but if there is too much friction around your support systems, customers will become frustrated and leave.

So many SaaS are falling down in this area and it can reach the point where their customers’ businesses are impacted too, which is where you’ll really end up with complaints. We heard of one ecommerce SaaS platform recently who were taking three or more days to get back to customers with queries such as shipping on their customer orders not being charged correctly. This kind of example is where customers say “forget it” and find another option. They’re genuinely losing money while the SaaS fails to get back to them in a timely fashion.

As part of an overall strategy for boosting retention, Mention overhauled their support system. They were able to halve the average time taken to respond to support queries and reduce average time spent on each user.

Mention’s strategy involved segmenting customers, giving good service to all, but spending extra attention on paying customers. They also batched support tickets so that they were looked at every four hours instead of as they came in, which can create fragmentation. This freed up their time to look at other important tasks and give them some focused time. Overall, customer satisfaction went up after these measures, but they weren’t finished yet…

Another part of Mention’s strategy was similar to Groove’s “Red Flag Metrics” in that they took note of what actions lead to full conversion (and retention). For them, the more features activated, the more “stickier” their customers were likely to be, yet their automated nurturing program ended once a trial member moved to being a paying client.

Extending their automated nurturing program to paid users to encourage feature activation, plus sending out “pro tips” helped them to further improve overall retention.

Final Thoughts

For any SaaS, getting retention figures up as high as possible is a priority and there are many strategies you could look at for improving them.

Boosting engagement is key for retention and finding ways to captivate the customer through gamification is becoming a huge strategy for apps.

Understanding your “red flag metrics” and why customers are leaving is also important so that you are able to take measures to address them, while reducing any friction in your support system goes a long way toward keeping your customers.

There’s no sense in putting a lot of focus on acquisition if you’re needing to plug “leaks”, so find those strategies which will reduce your churn and keep you growing.

Need to gamify or build a more engaging app? Find out how Koombea can help you here today.

by Carmen Apostu
Blog Post