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Your Guide to SaaS Customer Loyalty [With Proven Tips + Metrics]
6 min read
What is the customer lifecycle for SaaS?
The SaaS customer lifecycle is a framework that describes the various stages — from acquisition to engagement and retention — that customers progress through.
It’s where customers learn about a product, engage with the brand, and decide whether to become a customer. It’s also where such a customer can also go on to become a loyal brand advocate.
On the road to SaaS customer loyalty, here are the stages of the customer lifecycle they’ll need to pass through:
Awareness:
This is when a potential customer becomes aware of your solution through your inbound and outbound marketing techniques — whether through your blog or social media channels (inbound) or events and cold calling (outbound).
Conversion:
Now, your target audience has become curious enough about your solution that they sign up to receive more information — whether through your newsletter, free resources, or a demo of your product.
Purchase:
Purchase is as straightforward as it sounds: when the customer decides to buy in and subscribe to your product or service.
It’s the magical payoff for your marketing acquisition efforts and sales team’s hard work to close the deal.
Onboarding:
Following a purchasing decision by the customer, they move on to the onboarding stage.
This is where you’ll show them how to get the most out of your product with training and ongoing communication and support.
Renewal:
A key part of the retention stage is renewal.
The focus here is to keep each customer engaged and satisfied with your product: provide ongoing support, offer new features and updates, and listen to customer feedback to meet customer needs.
Loyalty:
Finally, they move on to the loyalty stage, where happy customers graduate to become brand advocates.
How to drive SaaS customer loyalty
Retained customers mean retained earnings — as SaaS Capital’s 2023 survey points out, your net revenue retention can dictate the pace of your growth.
But customer retention is different from customer loyalty; a retained customer has only chosen to renew their subscription and doesn’t necessarily feel a sense of loyalty towards your brand.
A loyal customer remains on your books come hell or high water, and luckily, there are ways to supercharge your customer lifecycle to not only retain customers — boost your Monthly Recurring Revenue (MRR) — but transform them into ready loyalists for a greater Customer Lifetime Value (CLV).
So, how do you do it? Here are some proven techniques.
Personalised experiences and customer support are a must
Segment your audience based on their profile and demographics, behaviour data, and preferences to create personalised experiences.
Tailored content and customised messaging are excellent ways to speak to specific customer segments and coax compelling customer connections.
Very often, SaaS products have multiple use cases, and a failure to match the specific use cases of customers could lead to churn.
With a robust tool like a CRM, you can analyse segmented data to create adaptive user experiences that adjust in real-time based on each use case.
Create loyalty programs
Even passive customers like to feel appreciated.
Throw in a deal-sweetener with discounts on your pricing, limited deals, personalised product recommendations, exclusive or early access to premium features, and recognition on special days (for instance, birthdays) alongside reward points are a good way to incentivise — and thus drive — customer loyalty.
Spot disinterested users and interact with them
When you spot customers with a low Net Promoter Score (NPS), or detractors — customers who’re left unsatisfied, their lingering presence suggests that there’s still a chance to turn their dissatisfaction into a delightful customer experience.
NPS survey responses come in handy in gaining feedback that spotlights common frustrations with their use. Take stock of this customer feedback to iterate improvements in your product + rebuild the trust.
Provide continuing education with an on-demand resource centre
Every so often, customers want to be empowered to problem-solve, if possible, without resorting to your customer service.
More and more SaaS firms are meeting this expectation through a comprehensive knowledge base, providing an easily accessible and fully equipped online location that allows customers to find answers to their burning questions quickly.
Customers today demand fast answers and easy support, and they expect them now.
A knowledge base is yet another way to show customers you’re invested in their (product) success. Identify common problems through ongoing communication and create content targeted at solving these problems.
The efficy knowledge base helps you make the most of this proactive approach to problem-solving through a self-care-type platform, housing resources that help customers solve any recurring issues they’re likely to face.
Want to know how else a CRM can help your business grow?
How to measure customer loyalty for SaaS (metrics)
Bearing in mind that we can’t measure what we don’t know, these metrics indicate your performance in the minds of customers, thus helping you gauge customer loyalty:
Net Promoter Score (NPS):
The Net Promoter Score (NPS) measures the likelihood of customers recommending a company's product or service to others.
The survey asks customers to rate their likelihood of recommending the company's product or service on an 11-point scale, ranging from 0 to 10.
Customers are asked something along the lines of: "On a scale of 0 to 10, how likely are you to recommend [company name] to a friend or colleague?"
Customers can select a rating of 0 up to a rating of 10.
Based on the ratings provided, customers are segmented into:
- Promoters (rating 9-10): Customers highly likely to recommend the company to others; loyal advocates of the company who may refer new customers.
- Passives (rating 7-8): Customers are likely to recommend the company to others; considered neutral and may not actively promote the company but also not likely to speak negatively about it.
- Detractors (rating 0-6): Customers unlikely to recommend the company to others; considered dissatisfied and may speak negatively about the company to others.
To calculate the NPS score, subtract the percentage of detractors from the percentage of promoters.
The resulting score can range from -100 (if all customers are detractors) to +100 (if all customers are promoters).
A higher NPS score indicates a higher level of customer satisfaction and loyalty.
The Customer Loyalty Index (CLI)
This metric measures customer loyalty and satisfaction with a brand or company.
It’s based on a survey that asks customers to rate satisfaction on areas like product quality, customer service, and overall experience on a scale of 1 to 10; 1 being the lowest level of satisfaction and 10 being the highest.
The responses are then used to calculate the CLI score, which can range from 0 to 100.
The CLI score is then calculated by averaging the ratings for each question and multiplying the average by 10.
For example, if the average rating for all questions is 8.5, the CLI score would be 85.
The CLI tracks changes in customer loyalty and satisfaction over time to identify areas for improvement and inform your customer retention strategy.
Churn rate
Also known as customer attrition rate, churn rate measures how frequently customers stop doing business with a company over a given period, usually monthly or annually.
It’s calculated differently, depending on the type of business. For example, in a SaaS customer loyalty business, churn rate may refer to the percentage of subscribers who cancel their subscription during a given period.
And so, to calculate churn rate, the number of customers who leave the company over a certain period is divided by the total number of customers at the beginning of that period.
The resulting number is then multiplied by 100 to get a percentage.
Churn Rate Formula
Churn Rate = (# of Lost Customers / Total Beginning Customers) x 100
Customer Lifetime Value (CLV):
CLV shows you the total worth of a customer to your business. It’s a projection of the revenue a company can expect to earn from a particular customer over the course of the customer lifecycle.
To calculate CLV, factors like the average amount spent per transaction, the frequency of purchases, the length of time they retain a customer, and the cost of acquiring and serving the customer are considered.
The result is then used to inform decision-making on marketing, sales, and customer retention.
Want to know more about customer loyalty for the SaaS industry? See how to manage the SaaS customer journey (with a free template and checklists!) next.
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