Software as a service is a brilliant business model because it allows you to make profits over the long-term with something that was created in the past. There is no physical limit to the number of people or businesses that can use it and if handled correctly it can be extremely profitable.
While SaaS can be a great business model, if you can’t keep customers, it won’t last long. A high customer churn rate reflects negatively on your business and makes it difficult to succeed. If you can’t keep customers, it really doesn’t matter how perfect your platform or product is.
Successful SaaS companies have essentially mastered the art of both acquiring and then retaining their customers. It is much cheaper to keep your existing customers than it is to go out and acquire new ones. You can also resell new products and services to your existing customers over time better than you can make the initial sale to new customers.
By avoiding some of these common mistakes that SaaS companies make, you can improve your customer retention rates and succeed over time.
1. Lousy Customer Service
One common mistake that SaaS companies make is that they come out with a potentially amazing product, but then support it with terrible customer service. In reality, your customer service is just as much of a part of your product as the software itself.
In most niches, the customer has many different options to choose from. If they aren’t getting the support that they need from you, why wouldn’t they go somewhere else? They can cancel their subscription and move over to a new platform in no time at all.
It’s also important not to look at customer service as just talking to customers. It encompasses everything from the user experience and functionality of your website to the access to your customer support staff. Having user forums, help guides, and other online resources also play into this.
The most successful B2B companies created an all-encompassing customer experience that helps them from every angle. The ones that fail provide great service until they get the sale. Then it goes downhill from there.
Using proactive customer service methods is typically the best approach. Teach your customer service reps to reach out to your customers to check in and see how they’re doing. This will help you identify small potential concerns before they become overblown problems. You may also want to link up with your customers on social media to follow them and communicate with them easier. Buffer does a great job of using social media to engage its customers.
2. Disregarding Inactive Users
Another common mistake that SaaS providers make is to disregard the activity level of their users. Totango surveyed 1 million SaaS subscribers about their experiences and found that almost every cancellation is proceeded by a “period of non-use.”
If most customers are inactive for a little while before they cancel, why not reach out to those users to see if there is any way to help them become active again? Track the usage rates of your customers to see who is actively using the product and who isn’t. Identifying those that go inactive is essential to improving your churn rate. Looking at login frequency is a great way to track their engagement.
One of the red flags to look for is someone who logs in and then immediately logs back out, usually because they’re frustrated. If you see this, contact the customer to see what the problem is. Sometimes it’s just a miscommunication or something that can be easily fixed.
3. Not Keeping Track of Customers’ Credit Cards
Staying on top of credit card information is critical to avoid cancellations. Many cancellations with SaaS happen because someone’s credit card expired.
Be proactive about this and send your customers email reminders far in advance of the expiration date. Make it easy for them to update the credit card expiration date in your system. Take them immediately to a single field to update the date and then hit submit. If it’s much more than that, you might experience unnecessary cancellations.
4. Not Rewarding Loyalty
Personalize your business and treat your customers like friends. Too many SaaS products come off as just a “software and user relationship.” Research shows that people love to be considered “VIP’s or Premium Members.” Give them something that they didn’t expect to get and they’ll be more loyal.
Consider giving customers points or referral fees when they refer someone to your service. People are much more likely to believe a friend than they are to believe a stranger selling them something. Offer customers free features and showcase some cool “hacks” that they can use your software for.
Consider giving a discount for a certain period of time. If a customer is using a free trial on your software, think about extending the trial for another month. It may be the difference between getting that customer and not getting them. MozPoints is a great example of using a loyalty program with your clients.
5. Slow Service
In the business world, time is money. Companies cannot afford to have a slow implementation when they switch to your product. That is one of the reasons that they’re going with a SaaS product, to begin with. They can access their information quickly and efficiently. If it takes you a long time to implement a new customer, work to improve that process and speed it up.
Also, focus on keeping response times down. Have hard and fast rules for your customer service support people responding to inquiries. There is nothing worse than being frustrated with a software program and then feeling like no one is responding to you.
Focus on being scalable and growing with companies. If you make it hard to grow, customers will leave you when they outgrow your platform. Focus on making the customer experience better and improving that initial implementation process.
6. Missing Sales by Not Upselling
In the SaaS industry, it’s critical to always be upselling something. Instead of just making your core product and leaving it at that, offer your customers something else to buy and you’ll be surprised how many of them will.
Offer premium features, add-ons, and complementary products to your customer base. Many successful SaaS companies are offering something new every month to keep their customers from hitting the cancel button. Find out what your customers want and then offer it to them. Consider offering tiered pricing for your core product as well. By checking with your customers, you can find out which features are really important to them and which ones are not that great.
7. Short-term Customer Strategy
Successful SaaS companies realize that customer retention is a marathon and not a sprint. You need to take a look at the entire customer lifecycle early on in the process and think about how things will affect your customers.
Your customer retention team needs to think about adding value to your customer experience and nurturing those customer relationships. Focus on building a community of like-minded people. People enjoy being a part of something and if they feel like their voices are heard, it helps your chances of retaining them significantly.
Overall, your focus as a SaaS provider should be to improve the customer user experience from every angle. Address customer service issues and increase brand loyalty. Hiring a great retention team is critical and spend some time analyzing churn rates. Once you hire a quality team and take the time to analyze what’s happening, you’re going on the offensive. You will increase customer retention by identifying problems before they even happen.