What is Customer Retention & Expansion?

Customer retention and expansion refer to keeping your current SaaS clients over time and convincing them to make plan upgrades. This is done through cross-selling or upselling other products, add-on features within your software, and discouraging users from terminating their subscriptions (churning). This tactic is part of SaaS growth strategies. 

For SaaS companies, maintaining current customers is far less expensive than continuously acquiring new ones, hence it is imperative to concentrate on client retention. As a result, the SaaS business model becomes more sustainable and generates higher recurring revenue.

An up-to-standard client retention rate for most SaaS companies is typically higher than 80%. However, there are organizations that frequently hit 90% or even higher.

The formula for calculating your SaaS customer retention rate is subtracting new customers from a specific period from the total number of customers from the end of the same period, then multiplying the result by 100.

In order for your SaaS retention strategy to offer the expected results, consider the following factors: 

• High-quality software: Does your SaaS software offer a solution to a relevant challenge faced by your target audience? 
• Usability level: How user-friendly and intuitive is your software? 
• Customer assistance: Do you offer customers prompt and helpful guidance and support? 
• Value and price alignment: Does your price pag match the value your software delivers? 
• Regular product innovation: How often do you release software updates and feature additions?

Here are five best practices you can implement to improve your SaaS customer retention rate: 

• Consider your customer onboarding process and ensure that your users can access your product.
• Make customer service a priority for your SaaS business by quickly addressing issues. 
• Collect user feedback and implement it to demonstrate to users that you are listening. 
• Offer sufficient details on future updates and feature additional, as well as upcoming promotions. 
• Tailor your upsells and cross-sell campaigns to fit your users’ requirements.