What is customer retention and how can you improve it?

January 15, 2024
9 min read
Customer Success

As a business, it's normal to get excited over new users in your product, but keeping your existing customers in mind is just as crucial. You must have a sharp focus on new customers, but customer retention is essential to your growth.

The chances of an existing customer to make a purchase is 60-70%, while the case is different with new users, only 5-20% of them would make a purchase.

Unlike your current customers, attracting new customers to your business needs a massive chunk of marketing budget. Keeping track of the needs of your existing customers is easier and economical than trying to impress a stranger.

HBR's research shows that acquiring new customers is 5 to 25 times more expensive than retaining existing ones.

The greatest advantage your customers have over the new ones lies in the fact that they have already purchased from you, so they trust your product.

Let's talk about this in more detail and  how you can retain customers and make themselves your marketing envoys.  

What is Customer Retention?

The basic concept behind customer retention is to turn your customers into repeat buyers and prevent them from churning.

It concentrates on nurturing long-term clients rather than chasing new customers. Loyal customers mean more opportunities for upsells. Spending time with loyal customers and creating new connections will help you in earning a customer for life.

Long-term customers are unarguably the most crucial factor in success because they spend more money and share their experiences with new potential customers. One of the reasons they are likely to spend more is that they are familiar with the product and enjoy their previous experience.

To improve customer retention, you have to provide them with a better customer experience and increase their satisfaction with each purchase, which eventually boosts brand loyalty.

The best customer retention strategy is to maintain a personalized communication and experience with them— it can be through emails, social media updates, or in-app messages.

Customers often get attracted to those businesses that possess reliability, authenticity and are also aware of their customer's needs.

Building a sense of loyalty in customers towards your brand is essential because they will continue to use your product even after being pursued by other brands in the market. They will also make people around them reach out to you. Hence you can trigger customer acquisition indirectly through customer retention.

And to have such an impressive customer retention rate, it’s crucial for you to follow certain strategies and techniques. Customer retention techniques are a must for you to increase customer loyalty and lifetime value.

Why is SaaS Customer Retention Important?

Customer Acquisition is Expensive

As mentioned before, the average cost of customer acquisition is 5-25 times more than customer retention.

So you don't want to lose your new customer soon after spending a tremendous amount of money just to make them visit your site.

Most of the startups collapse in one year after being set up because they fail in converting their existing customers. A customer's lifetime subscription cost is just three times the amount of money you spend in acquiring him.

So working on your customer retention strategy is more feasible than acquiring new lead generations.

Decreases Churn Rate

Churn rate is a measure of dissatisfaction and less interaction from your customers. Higher the churn rates mean the deeper your business is in the grave.

Studies show that regular customers' churning rate is relatively much lesser than new ones.

In Saas businesses, it's essential to differentiate the clients whose churning activities are above average.

Then you should reach out and re-engage with them, and that's where retention management comes into play. With a good customer management strategy, you can decrease your churn rate drastically.

Customers are the Source of Revenue

Existing customers are willing to pay 33% more money than a new client. Because your customer has already purchased from you and loved it, they have an idea of what they are buying.

On the other hand, new clients don't have a precise idea of the quality of services you offer, so they will not spend a considerable sum of money on their first visit. It is much easier to sell products to a devoted customer, someone who values and trusts your brand.

It's a fact that only 20% of your customers make 80% of your business, which means having one regular customer is better than ten visitors.

5 Step Strategy to Increase your Customer Retention for SaaS

Understand the Needs of your Customers

Customer retention systems revolve around optimization. Your customer will not be sticking around your brand for long if you don't provide them with the correct value.

Put yourself in the shoes of your customer. You have to decipher not only your customer's needs but also their expectations from your products to fit their needs.

Gather information on your customer's needs—you can directly ask them through a survey about their needs or changes they would like in the future.

This will help you in crafting a plan that helps you tackle the needs of customers.

Optimise your communication channels

The way you onboard your customers says a lot about the organization and how you work. Make your onboarding process smooth and simple. Remove all possible friction in your sales process.

To make your communication with your customer more compelling, set your data and analytics up to the trend and present your offer at the right time.

The actual communication work starts after a successful onboarding process—when your customer has successfully signed up for your services. A quick follow-up is the key to supporting your customer, so they can clearly understand your product usage guidelines.

Evolve your product

The probability of retaining customers gets higher if the product evolves with their needs.

It's essential to increase the functionality and mold your SaaS product according to your clients' needs. Satisfying users is good, but offering them satisfaction beyond their expectations can stimulate customer success for your business.

Remember, exceeding customer expectations is far more important than closing the deal. Always keep surprising elements in your offers. It will also help you acquire new customers in the market with undeniable offers.

Keep CAV and CLV in mind

Analyzing data is the best way of knowing if your customer's retention strategies are working well or not.

Primarily it is used to know the customer retention rate optimization. Implementation of customer retention techniques is more vital here than observing conversion because you are stressing on existing customers than new ones.

Before you dive into the pool of countless metrics, you need two important checkpoints —customer acquisition cost and customer lifetime value. Keeping track of CAC and CLV is a must because, on average, CLV is three times the CAC, so if your CLV is higher than three times CAC, you are on the right track. It will generate more revenue.

Keep an eye on product usage metrics

Product usage metrics can give you a better idea of what you have achieved and how far you are from the set business goals.

The SaaS customers metrics you need to keep track of are at all times are:

  • Monthly Retention Rates
  • Monthly Growth in revenue
  • Churn Rates

Keeping track of these three metrics is enough at your initial stages because any more than that can overwhelm or deviate the team from the rest of the problems.

Metrics can also help you read the behavior or learn more about your consumers. With proper utilization of this data, you can significantly increase your customer retention and reduce churn rate.

This is where Successeve can help you achieve the customer goals for your business. With Successeve, your customer success and sales team can access product usage in a centralized platform. It also helps you track essential features of product adoption for every customer.


Your current customer base speaks a lot about your efforts. Because if you fail to satisfy five existing customers, how can two new prospects trust enough to invest? Indeed you need new customers, but retaining existing ones and convincing them to re-purchase every time takes a lot of effort.

And doing it all alone seems like a humongous task to everyone. However, Successeve is here to help in the process. Join us for free today and increase your customer retention rate with advanced analytics tools.

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