Retention is about getting new orders from the same clients . It's like getting new clients, but with people we already know.
Acquiring a new customer in SaaS always involves a cost : meetings, phone calls, setup, password transfers, user creation, misunderstandings, explanations, presentations, etc.
You can forget about all this with a new client : we already know who belize phone number library have to talk to, we already know how they like things, they already know our prices and they already know what we sell.
SaaS retention: new customers vs retention
That's why retention in SaaS is so important: it allows you to amortize the time and money invested in your acquisition, accelerate your sales and save you problems.
This example from Reforge is fantastic:
A company, let's call it One , gets a million new users a month. It retains 85%.
Another company, let's call it Two , gets twice as much, two million. It retains 65%.
At first it seems clear: Two gets twice as many customers and has 20% less retention, so they will have more customers. But that 20% adds up. In just 3 years, One will have a million more customers.
Now, you need to choose wisely how to measure retention .
In SaaS, measuring retention is complex . Imagine you have 20 customers and they all renew their services. The retention rate turns out to be 100%. But what if you check their accounts and see that half of them don’t use your product? You might ask yourself: How long will they keep paying for it? One more year?
Netflix is a great example of customer service - if you subscribe but don't use it for a whole month, they stop charging you and send you an email reminding you they're there when you have time.
It's better to measure usage. And without cheating , because that's deceiving yourself: if you count annual users, there are going to be a lot, but you need to know how many users visit you every day. Measuring retention in SaaS helps you know this, not to do the math.
And once you know what your SaaS retention rate is?
Here comes the tricky part: it's hard to pick the action that leads to higher retention. It's important to cover real issues and not sweep things under the rug. If you're fooling yourself or optimizing the metric that isn't the one that drives retention, by the time you realize it, it'll be too late.
What you need is for people to use your product. If they use your product, they will stay. And the more they use it, the more money you will make.
