With the recent events happening around the world right now (Covid-19 at the time of publication), markets falling, the general economy taking a downturn, many business owners are wondering what is going to happen to them. More importantly, what will happen to their customers. Now it’s critical to understand how to retain SaaS customers when there’s a downturn.
As a B2B SaaS provider, you need to have a finger on the pulse of what other businesses are doing. While some companies are being forced to close temporarily, others are telling their employees to work from home, and yet others are going out of business entirely. Will something drastic happen to them?
The answer is that if you are a business owner, your company will most likely feel some kind of effect—especially if you run a SaaS company. So, if you run a B2B SaaS company you can expect to have some kind of disruption to your revenue flow.
So what do you do? Do you start cutting costs and laying people off? Well let me tell you. The smartest thing you can do is to focus on the most efficient use of your dollars to preserve as much of your revenue as possible.
You need to start worrying about revenue preservation, which means retention! Customer retention to be precise! You should have a very robust program focused purely on customer retention either in use, or in the creation process right now.
You should be doing all the “regular” things you would do to retain SaaS customers. For example, you should reach out via e-mail and let them know how you are handling the downturn and what they can expect from your company during that time.
This simple communication however is not enough!
Your customers are also business owners who are trying to intelligently plan what to do with their spending. You need to put yourself in their position and think about why they should keep paying you during this downturn.
Why should they pay for your particular subscription? Take yourself out of their position now. So, how do you get them to realize they need your services?
Let me share with you 3 action items that need to be a part of your planning for SaaS customer retention.
Know Your Customers’ Success Goals
You should already have a basic understanding of the return on investment that your customer gets for using your software. If you want to retain SaaS customers, now is the time to get really clear on it.
What is it that your customer is trying to do with the software? Realize that their entire world might be changing with this downturn, and it shouldn’t be a surprise if how they are using your software changes. You need to touch base with them and see what things have changed.
For some companies this may not be feasible, however, if you want to retain your SaaS customers during a downturn, you may want to reach out to key customers and get an update on what their expectations are for using your software going forward. Find out what would constitute a positive return on their software investment over the next 12 to 18 months then make adjustments as necessary.
You need to start talking about these success goals around your employees and in the office. For example, are your customers moving from growth to expense savings. Will that change how they use your software? Maybe they’re reducing staff and need to consolidate roles. How will that affect user management in your software?
Start Monitoring Your SaaS Customers’ Usage Metrics
Under the same framework of the principle we just covered, your customers’ usage metrics may have changed. The key here is to identify early on if the success metrics have changed, and if so, you need to know what they are tracking now and what you should be tracking as a result. Once you have a system in place to track these metrics, you then need to create control charting mechanisms.
Control charting mechanisms are statistical tests that you can use on a data set to identify changes. This is especially useful if you do not have someone monitoring your customers’ usage metrics. With the appropriate measurement in place you can detect when a customer is doing something really different as opposed to what is part of their normal activity.
An example of a control chart is a 3-sigma alert. Let’s say your customer logs in 2 or 3 times a day. If they suddenly log in 6 times in one day, that may set off an alert about unusual activity. We use control charting for security and fraud alerts, but it can also alert us to unusual activity of your customer that could indicate a problem.
There are many more control charting applications. Having a proactive alert set up when one of these statistical milestones is hit can be a very useful tool when you’re learning how to retain SaaS customers.
Prepare an Offer to Retain SaaS Customers
A sophisticated software company will know some customers will want to cancel their subscriptions and licenses. Will you be ready? Or will your frontline sales staff say they need to “talk to the manager?”
To be prepared to retain your SaaS customers, you need to first define who your most profitable customers are. You don’t want to keep customers who aren’t profitable and in a downturn, it’s even more important.
Once you know who to “save” and who to let attrite, identify what kind of an offer should you extend to them. This is going to be different for every company. Some companies value profit more than volume or vice versa. Once you define this, then you can determine how much you can “pay” to keep a customer.
This payment will come in the form of a special retention offer. This offer can come about one of two ways: reactively or proactively.
The reactive approach to retain SaaS customers occurs when the customer comes to you to terminate their subscription and you provide this special offer to keep them longer.
The proactive approach to retain SaaS customers occurs when you can predict attrition in advance. This prediction comes from knowing what kind of changes in usage metrics are indicative of a customer wanting to leave. Once you’ve determined attrition is likely, you extend a special offer to those individuals before they cancel or terminate their subscription.
The proactive approach can be tricky and can make business owners nervous, however, if done correctly it can be very powerful.
To find out which usage metrics are predictive in order to retain SaaS customers, you would need to perform a quantitative analysis that will give you a high-probability of confidence on which customers are going to leave. This approach often provides the most success during an economic downturn.
Here’s why: during a downfall the customer is looking for ways to save money. Suppose they want to cancel 5 of their subscriptions and yours is on their list. Once someone makes up their mind in a downturn they seldom will change it, even if a reactive offer is made.
On the other hand, if a proactive offer is made giving them an incentive to keep your subscription, then chances are your software is not even going to make it on that list to begin with.
You don’t want to use the proactive approach unless you are confident in your ability to predict attrition. This requires some quantitative work. If you do not know how to do this, hire an expert to do this for you. It will be well worth the investment!
If you are interested this analysis, talk with SaaS CX experts. We’ll guide your approach.
Three Principles You Can Use Now to Retain SaaS Customers
So as a recap:
- Get clear on what your customers’ success goals are and realize that those may have changed.
- Watch your customers’ usage metrics.
- Prepare a special offer for your profitable SaaS customers.
These are all things that you can start doing immediately to retain SaaS customers. If you would like to talk to an expert about different quantitative analyses or if you’d like to do an “emergency” retention analysis, contact us.