In the early days of building your SaaS company, it’s tempting to put all your attention on acquiring new customers. However retaining and delighting existing customers is just as important for future growth.
For many growing SaaS companies, 2020 showed just how important our existing customers are. We saw many companies take big steps to help customers out who may have been affected by the coronavirus pandemic. For example, Buffer launched their customer assistance program and Hopin offered discounted pricing for event organisers affected by the pandemic.
Why? Because in SaaS, growth compounds. If you’re losing 100 customers a month, you have to replace them with 100 new customers to break even – and 101 to grow even a tiny bit. Given that the average cost of acquiring a new customer is 5 to 25 times more than retaining a current customer, that puts your company in a challenging (and financially unsustainable) position. Losing customers is costly, but keeping them for the long-term can be a real growth driver for your business. Therefore keeping your existing customers happy should be your number one priority.
In this post we’ll be looking at some customer success best practices to help you boost retention and lower churn. It covers:
- Why SaaS companies should make customer success a priority
- When you should start investing in customer success
- The role of customer success across the customer lifecycle
- Customer success best practices
- Understanding what success looks like
- Collecting and actioning customer feedback
- Customer success metrics
- Supporting ‘at-risk’ customers
- Helping your customers to help themselves
- Closing thoughts: Making customer success a priority for 2021 and beyond.
Why SaaS companies should make customer success a priority
Put simply, there are three main reasons why SaaS companies should make customer success a priority:
- Reduce churn – if you have a high customer churn rate, it will be difficult to acquire the number of new customers you need to grow.
- Increase Customer Lifetime Value (CLV) – if your customers are successful using your product, they’re less likely to churn. As well as staying customers for longer, each account can grow with the customer if there is a good opportunity to upsell to them.
- Unlock second-order revenue – second order revenue is revenue that comes from customer referrals, or when customers change jobs and start using your product again at their new company. Making your customers successful makes it more likely that they’ll recommend your product, or choose it when they move to a new company.
When should you start investing in customer success?
Put simply: the earlier you focus on customer success, the better.
“You Must Hire your First Customer Success Manager as a “Single Digit” Hire… Because getting just that one or two extra second order customers, those one or two extra upgrades, from happy existing customers, is the magic in SaaS. It compounds.” – Jason Lemkin
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