How the best SaaS companies combine fast growth with great customer retention — Guy Marion on Brightback’s Retention Radio
At Brightback we’ve just launched Retention Radio, a new podcast focused on customer retention. We chat with top SaaS CEOs, practitioners and investors to understand why retention is so critical for SaaS businesses and, more importantly, what companies can do to measure and improve retention. Reducing churn can have a massive impact on the bottom line but it hasn’t gotten the airtime that the growth story has. Let’s change that.
We kicked things off by interviewing Brightback’s Co-Founder and CEO, Guy Marion. Between Guy’s deep experience growing businesses in the subscription economy and his time building Brightback he has a really unique perspective on retention with some really actionable, specific advice for companies.
Check out a few highlights:
What companies miss when measuring retention:
At the highest level we all look for silver bullets. There’s only one thing that really, really works whether you’re looking at retention or acquisition and that’s being systematic about how you’re measuring it. If you don’t have a framework against which you can assess the impact of tactical releases and experiments, as well as how that trends over time, then you’re basically firing blanks. The number one most important thing that companies miss is having no systematic approach whatsoever to retention beyond having customer success managers who work with each of their customers and maybe targets of retention for their particular batch of customers. That doesn’t necessarily tell us in a holistically measured fashion why companies are leaving, their churn frequencies or classifications, or the actual voice of the customer. How do you theme that up into categories? How have the environmental or macro-competitive pressures influenced pricing or product or the needs of my customers?
How startups should get started with retention initiatives:
There are several key transition points in the customer lifecycle. The first transition point is the moment in which they buy or convert from being a prospect or a trialist into being a true customer. The next transition point is the moment in which they graduate or convert from their onboarding or implementing into being a live customer. For most companies, that typically happens around day 90 or day 100 after they’ve first purchased. The third key transition point would be when they are recognizing full value from your service and their needs expand. This could mean they need to add more users, their data loads are going to increase or their usage metrics are changing and they need to expand and increase the value of their subscription with you. That usually comes as a result of being very active users and generating value. The fourth transition point is the early to mid signs of slipping behavior. That means they’re showing early indications they’re actually leaving either to move to a competitor or their business is transitioning. Finally the actual moment of cancel is a really valuable moment where, if you can capture it, you can learn directly from the horse’s mouth why they’re leaving.
So a couple tactical things that early startups can do from very early on (aside from using Brightback!) is 1) display a one question exit survey that you at least gather the data and you can go back and do ad hoc analysis over months or quarters and see what customers are telling you as to the actual drivers of the cancel, 2. when your customer’s subscription expires, trigger a personalized email, addressed from your CEO or founder or product owner, asking them to share why they’ve canceled and how likely they are to buy again, 3. Do an NPS survey at the end of your on-boarding periods and then NPS on an annual cadence to compare both “first impressions” and ongoing NPS sentiment. 4. Hire Customer Success early, potentially even before Sales, which is what we’ve done here at Brightback. It means you have a direct voice to the customer, from the customer back to the internal teams. You’re optimizing for the onboarding and growth of your customer before you start to pile too much fuel in there. This helps you make sure that as you bring customers on board, you meet their needs. This helps you identify the Ideal Customer Profile as well as the right approaches to win them and onboard them.
The one thing that a company can do tomorrow to mitigate churn:
Start asking every customer who cancels before they cancel “Why are you cancelling right now?” If you have a good handle on people telling you why they’re cancelling, you’re going to learn far more from that effort than if you start to offer every single person who cancels your service two free months of your service.
Listen to the whole podcast here or on iTunes.
Also be sure to subscribe at https://brightback.com/ to get regular updates on how the best and brightest in the SaaS world are tackling customer retention.
