Dear SaaStr: What Are The Best Ways to Retain Your Customers in SaaS?
A few things that always work to drive down churn in the early days — and later:
- Make sure you have a strong Head of Customer Success … whose #1 goal is reducing churn. Too many early-stage VPs of Sales don’t have a strong “wing person” running customer success. And importantly — resist the urge to have this Head of CS own upsells as their #1 KPI. That may seem to help short-term revenue, but it will lead to a de-focusing on driving down churn. More here.
- Go visit all your top customers in person, even once a quarter per top customer if you can. Far fewer customers churn if you visit them in person. We’ve been saying this on SaaStr for 10+ years (!), and yet I see fewer and fewer sales execs flying to meet customers. Zooms are great, and try to do 5-10 Zooms a week with customers, too. But they aren’t enough. More here.
- Read your team’s emails and listen to their calls. If you don’t, they’ll often say things that are just plain wrong. And lead to unnecessary churn. You might not want to do this, but you have to. More here.
- Put together a strong onboarding team. And drive up your activation rates and time-to-value. Try to get every single customer to fully be on-board within 30 days in general — or much faster for many apps. At least 90% at a base case onboarding in 30 days, ideally much faster if you sell to SMBs. Klaviyo for example hits 90% activation in 30 days even with 100,000+ SMB customers and $600m in ARR. If customers are slow to use you, they may never really use you. And they’ll be much more likely to churn. More here.
- Do pilots, if customers want them. Don’t resist them. Too many sales execs resist pilots, since they seemingly add risk to the deal, and often force you to resell the deal just a few months later as the pilot ends, in essence. But a pilot also aligns everyone to value and gets them on the same page. And it in essence roots churn out and identifies it early, during the pilot — when there’s still a chance to do something about it. Just remember to do Paid Pilots only. No one values a Free Pilot or Super Cheap Pilot, so no one puts in the work on the prospect / customer side. More here.
And a few things to be aware of:
-> QBRs Don’t Really Work. Yes, you should do “Quarterly Business Reviews” with all your customers, or at least your bigger ones. But the reality is, this overly formal process, while good to try to do, doesn’t really work in practice. Most CS leaders I talk to say less than 15%-20% of customers even show up to QBRs. And they’ve become so formalized, all they really do is report the “good news” — or act as an upsell vehicle. Still do them, but don’t count on them to move the needle.
-> Be Careful About Too Much Upsell in Customer Success. This has become way too common, and way too agressive the past 12-18 months as SaaS companies have looked to more revenue from the base vs new logos. Do this inorganically, and no one wants to talk to Customer Success. More here.
-> Maybe Don’t Hire Anyone in Customer Success That Won’t Travel. This may not need to be a strict rule, but if you push here in the interview process, I find it shows who really goes the extra yard, and who doesn’t. Work from Home can be great, but you gotta meet the customers. Especially, don’t hire a VP of CS that doesn’t raise their hand on their own and say how important it is to visit customers.
-> Small Customer Events Really Work. They don’t magically solve retention issues. But if you do even a basic meet-up or steak dinner in major cities 6-7 times a year, and bring all your customers and prospects in that geo together, magic happens.
-> Having CS Report to Sales Is Usually Suboptimal. The best VPs of Sales are closers. Let them close. They don’t have the time or the right experience to manage CS. Better nine times out of 10, that it reports to you.
A Key to Startup Success: Getting Out and Actually Visiting Customers pic.twitter.com/8stW3MIMfA
— Jason ✨Be Kind✨ Lemkin (@jasonlk) July 24, 2023
(it’s me image from here)