SaaS: Customer Retention is EVERYTHING!

SaaS – software as a service is a business model that was pioneered in the early 2000s to eliminate the costly software license model.  There are now a handful of global public company comparables with metrics that are published on the performance of these SaaS companies (Salesforce.com, Successfactors) and emerging fast growing companies (Appsense, Eloqua, Marketo, and Qualys to name a few).

An attribute to the SaaS business model is recurring revenue with shorter duration contracts, with resign upsell opportunities that typically range from 0-20% of the annual value.   With shorter duration contracts than that of a typical software license sale, retention of customers in a SaaS model becomes CRITICAL for the organization to make it’s overall annual revenue number.

Here are 5 techniques that I’ve used to help aid in retaining SaaS based customers:

• Formal interviews with exited customers:  to be done by an external 3^rd party to eliminate any survey bias and to get accurate information, you’ll be amazed at what your former customers will say about the onboarding process, their interactions, and the touchpoints they have with the organization.  This will also give a roadmap to win back their business.  I’ve used Primary Intelligence in the past with success.

• Implement Net Promoter Score with existing customers:   to test periodically how customers see progress in your service offering or where the pain points lie on your customer service side.  This is typically done with larger, global enterprise B2B SaaS companies.  There are newer, more cost effective companies emerging to help smaller SaaS companies to run similar surveys.

• Study and understand the compensation scheme for how your sales organization gets compensated on new and retention business.  A compensation model that is effective is how Gartner Group compensates their reps on new business and retention business (NACV model is what they call it – ask your rep, he or she will know all about it!)

• Bundle and drive new feature/functionality around the resign period.  This bundling is key to drive price increases, I’ve had instances of other SaaS companies approaching me for annual renewal increases ‘just because’.  That line of reasoning is difficult to justify!

• Involve your customers in global customer advisory boards so they can help shape product direction.  Engage your customers in regular field communication via newsletters AND LinkedIn (and opt-in customer forum), thus keeping them in constant contact with new developments on your product so they are always informed and never surprised.

What do you find that works for your organization’s customer retention efforts?