In this article, we’re talking about SaaS Customer Retention, not necessarily paying customers, but all of your product users. This is more about your product being sticky than anything else. If your product is not sticky, you’ll have an incredibly difficult time monetizing it down the road.

What exactly does it mean to have a sticky SaaS product?

Stickiness refers to a SaaS product’s ability to keep a users attention for an extended period of time. The length of time will vary from product to product, but the overall concept is simple – give me a reason to come back and use your product on some regular interval.

Measuring SaaS Customer Retention

We could seriously overcomplicate this, and many businesses do, don’t be one of those businesses. Here are the core metrics you need to understand when it comes to retention.

Key Feature Adoption – are your customers finding and using your core set of features. Simple. If they are not, figure out why.

Active Users (daily, weekly, monthly) – the number of users that are active in your product. This should be trending up, if it’s going down you have a problem. Dig in and figure out where the disconnect is.

Value – This is where many SaaS businesses lose track and/or overcomplicate things. Value represents the point when your product is giving more than its taking. Remember product led growth is about the relationship your customers have with your product. In the beginning, there is a lot of strain on the user to setup and configure things, learn the UX, etc. There eventually comes a point where the heavy lifting is over and your product starts to give back.

This shift is the moment when value is first achieved.

How do I track, measure and report on SaaS Customer Retention?

There are a number of tools out there to help you diagnose and improve your products ability to improve customer retention, for starters you’re going to need to do these 3 things:

  1. Deeply understand your product and target audience This sounds obvious, but it’s not as simple as it seems. Many early-stage SaaS businesses start out with a strong vision and mission and lose their way as they take on funding, add team members, start acquiring paying customers, etc. The more clearly you can define your target customers and how your product addresses their needs, the more accurately you’ll be able to define a core feature set and overall product experience to get them to fall in love with your product. This alignment between your customer’s needs and your product is a core principle to optimizing SaaS Customer Retention.
  2. Core feature and value definitions and tracking After defining core features and value you’ll need to instrument events in your app to track these key product interactions. There are many options when it comes to instrumenting in-app event tracking. Here are a few options to consider: Google Tag Manager A free and relatively easy way to instrument event tracking. There is a learning curve, but it’s well documented and not terribly complicated. Segment A more robust and long term solution for managing customer data. Along with event tracking, Segment has the ability to identify users and track them through your full-funnel, pipe data to a warehouse, and more. This is a more complex tool that can get expensive and requires some technical expertise but is also very powerful. MixPanelThis tool is typically a popular choice for enabling in product analytics. MixPanel has been around for a number of years, has a free plan, and does in-product behavioral analytics very well.
  3. Theories, Goals, and Reporting Once you have things clearly defined and instrumented it’s time to make some assumptions regarding performance, set some goals, and identify the KPI’s you’ll use to measure your progress. Something like … we expect that 30% of new users will achieve value within 24 hours of creating an account. The metrics we’ll use to track this have been defined as XXX, and the report we will use to track our progress is YYY. Set a goal and hold yourself (and your team) accountable.

The thing to keep in mind through all of this is that you designed your product to meet improve your customer’s lives in some way. If you’re in b2b SaaS you’re making them better at their job, and on the consumer side, you’re doing something that brings your customer joy.

Building successful products that your customers love is all about understanding your customers, and making promises and keeping them. If you tell me you can make my life easier by doing some magic, and deliver on that promise, I’m yours, but if you can’t keep that promise I’m gone. Understand your customers and give them what they want and watch your SaaS Customer Retention rates improve!

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