5 Strategies to Increase Online Customer Retention (Especially for SaaS)

Online Customer Retention: Keeping Customers Engaged


It’s a natural instinct to put your major marketing resources toward increasing your customer base. Acquiring new customers directly leads to helping your business grow, the core goal of most if not all marketing initiatives. Unfortunately, this focus on acquisition can easily ignore efforts to increase your online customer retention, a goal that should be just as – if not even more – important than gaining new customers.

Depending on your industry, and even for SaaS B2B and B2C businesses, customer retention is sometimes an afterthought. Even marketers who understand its importance often see it as limited to recurring revenue models (such as SaaS). In reality, all businesses should engage in customer retention, and the numbers bear out that statement.

Customer Retention: A Statistical Defense

Again and again, studies have shown just how much customer retention matters. One found that decreasing your customer churn, the rate at which customers turn away from your business, by just 5% will increase your profit between 25% and 125%, depending on your industry. That’s because, according to another study, it costs 5 times more to acquire a new customer than it would to retain a current one.

And that makes perfect sense. Customer acquisition involves in-depth marketing efforts, guiding your audience through each step of the buyers’ journey from attention all the way to decision. Retention, on the other hand, can be as simple as reaching a satisfied customer at a time when they’re most likely to repeat their purchase. Perhaps that’s the reason why 80% of your profits come from just 20% of your most loyal customers.

Of course, customer retention carries less tangible benefits as well. Any marketer ultimately seeks to direct and encourage word of mouth from influencers as a way to increase their brand exposure without spending a dime. Naturally, satisfied and loyal customers are much more likely to engage in this organic brand building than their one-time purchasers would be.

5 Ways to Increase Online Customer Retention

Now that we’ve established the importance of customer retention, it’s time to consider the options you have in raising your retention rates. SaaS marketers will already be familiar with some of the below strategies, knowing churn to be a crucial metric for their recurring revenue models. But businesses in all industries can benefit from them as ways to increase their retention and maximize their revenue.

As is the case with any type marketing, your customer retention efforts should above all be strategic. Knowing your current retention rates, as well as setting measurable improvement goals and benchmarks, should precede any actual tactics you use. But once you have set these goals, here are 5 ways you can increase your retention rate to benefit your business.

1. Post-Sale Nurturing

Most marketers think of lead nurturing as a pre-sale tactic. Your website turns visitors into leads, at which point you have enough information for targeted messages that slowly nudge them toward becoming customers. But in reality, these nurturing efforts can be just as effective after the initial sale. In fact, interacting frequently with your current customers significantly increases their loyalty.

Think about it from a data perspective. Once a lead has become a customer, you have more information about them than you ever did before. That means your messages can be even more targeted toward their needs, encouraging them to return for future purchases.

Of course, the message in these post-sale nurturing campaigns should be different than it was before your leads became customers. It’s a great opportunity for you to establish thought leadership, posting content relevant to your customers industry. Terming content like webinars or whitepapers ‘exclusive for current customers’ helps you generate both thought leadership and a feeling of exclusivity.

2. Personalized Messaging

As alluded to above, a key component in any retention effort is to personalize your messaging. Now that you have in-depth customer information in your database, it’s time to put that information to good use in making sure that each customer receives messages that are unique to both their demographics and needs.

Simply adding a customer’s first name to a nurturing email is not enough. Instead, offer segmented nurturing campaigns to customers of specific products that offer them the natural next product in line. Think Amazon’s ‘Customers who bought this item also bought…’ section, which has been immensely effective in increasing repeat purchases for the e-commerce giant.

3. Proactive Reciprocity

The reciprocity principle is a common tool used in marketing to generate leads and sales. Human beings are predisposed to return the favor if they receive something for free, which is the reason why gated content is so successful in generating leads.

But that’s not the only area in which this social psychology concept can come in handy. Reciprocity is just as important when marketing to your current customers, especially when it happens proactively and by surprise. Nothing engenders loyalty quite like a brand reaching out, and handing you an unexpected benefit of being a customer.

A prime example of this type of reciprocity is Zappo’s, which – without even mentioning it anywhere on its website – offers free upgrades to priority shipping to any of its customers. As a result, customers are routinely surprised and impressed by the company’s fast service, becoming more likely to return for future purchases as a result.

4. Loyalty and VIP Programs

We’d be remiss not to mention the importance of an effective loyalty of VIP program on your retention efforts. Naturally, customers who receive benefits simply by coming back will be more likely to do so. At its simplest, it’s a reward card: if you know that your fourth coffee will get you the fifth one free, you will become more likely to buy the first four.

But VIP programs can become much more in-depth than simple reward cards. For example, a tiered system with different membership levels allows your customers to gradually spend their way to increased benefits. If you are working to increase retention for your SaaS solution, the alternative is giving some software upgrades for free to your longest-standing customers.

Another option is to structure your benefits around your customers’ value. A system in which a portion of your loyal customers’ purchases go to a good cause, for example, can go a long way toward encouraging repeat purchases. 93% of customers are more loyal to companies who engage in corporate social responsibility, proving the effect of this type of loyalty program.

5. Customer Service Marketing

You may think that customer retention is only effective when targeting customers who were satisfied with their first purchase. But don’t forget about your dissatisfied customers, who are just waiting for a signal that helps them become brand loyalists.

It may seem counter intuitive, but customers who were not happy with their first purchase actually have untapped potential that’s worth exploring. An unhappy customer who receives a positive response quickly and efficiently will come back for more: 70% of consumers report they will engage in new business with a company that has resolved a complaint in their favor.

Much has been made about the necessary connection and congruity between marketing and sales, but the same general principle remains true about marketing and customer service: if your efforts in both areas work together, you have a much higher chance of turning a complaint into a repeat customer. Your marketing messaging not only needs to match up with your actual product, but you should also make sure that your service reps know about your marketing efforts – and that your marketing efforts are informed by the feedback your customer service receives.

Any of these strategies can help your customer retention. In combination, they are a powerful revenue-driving force to help your business grow and get the most out of your current customer base. To learn more about online customer retention, and setting up an effective retention strategy for your business, contact us.