How To Improve Your Net Dollar Retention Rate In SaaS?

In 2022, the global software-as-a-service (SaaS) market is worth USD 157.05 billion, up from USD 85.36 billion in 2019—a Compound Annual Growth Rate (CAGR) of 14 per cent, according to Gartner’s latest report. To put that into perspective, the research firm predicts that the SaaS industry will double in size over the next three years. With such a rapidly growing market, it’s no surprise that SaaS companies are under pressure to scale quickly and efficiently. But as any seasoned entrepreneur knows, scaling a business is no easy feat. Statistics show that 70 percent of startups fail due to “poor scalability.”

One of the most important—and often overlooked—factors in a SaaS company’s ability to scale is its Net Dollar Retention Rate (NDR). As the SaaS industry is continuously growing, so is the competition. To stay ahead of the curve, it is essential to continuously work on improving your net dollar retention rate. In this article, we’ll take a closer look at what NDR is, why it’s so important for SaaS businesses, and how you can improve your own NDR.

Elaborating the Concept of Net Dollar Retention (NDR) In SaaS?

Net dollar retention (NDR) is a metric that tracks the expansion or contraction of a SaaS company’s recurring revenue from existing customers.

Why Is NDR Important In SaaS?

A high net dollar retention rate indicates a strong and sustainable business model. It means that your customers are not only staying with you, but they are also expanding their use of your product over time. It represents a significant source of growth for SaaS companies.

How To Calculate NDR?

NDR is calculated by subtracting the customer churn rate from the gross expansion rate.

There are two ways to measure NDR:

  1. Absolute NDR: This measures the expansion or contraction in dollar terms of a company’s recurring revenue from existing customers.
  2. Relative NDR: This measures the same as absolute NDR but is expressed as a percentage.

Read Also: How to Calculate Your Annual Recurring Revenue

A Reasonable NDR Rate?

There is no one-size-fits-all answer to this question, as the right NDR rate will vary depending on your specific business goals and objectives. However, an absolute NDR of 20% or higher is a good starting point.

The Best Tips To Improve Your NDR Rate?

Here are 4 smart and effective strategies you should implement to increase NDR in 2022. We have categorized them into 2 major tips.

Improve NDR Rate by Increasing Account Expansion

  • a) Prompt users to upgrade by showing what they are missing out

One of the best ways to increase account expansion is to prompt users to upgrade by showing them what they are missing out. It can be done in several ways. You can use in-app messages to highlight the features and benefits of upgrading. You can send targeted emails that showcase the advantages of upgrading. You can display “teaser” content on your website or social media channels that are only available to those who upgrade.

  • b) Use contextual in-app messages to drive account expansion

Another effective way to increase account expansion is to use contextual in-app messages. Contextual in-app messages are triggered based on user actions or behaviour. For example, you could send a message to users who have been using your free trial for 14 days, offering them a discount if they upgrade to your paid plan. It is an effective way to convert free trial users into paying customers.

Improve NDR Rate By Reducing Churn

  • a) Use NPS surveys to identify dissatisfied users before they churn

One of the best ways to reduce customer churn is to use NPS (net promoter score) surveys. These surveys help you identify dissatisfied users before they churn. By doing this, you can take steps to address their concerns and improve their experience with your product.

  • b) Provide an in-app help centre to reduce churn

Another effective way to reduce customer churn is to provide an in-app help centre. It is a self-service support portal that allows users to get answers to their questions without contacting customer support. By providing an in-app help centre, you can reduce the number of support requests, saving you time and money.

SubscriptionFlow to Facilitate NDR Rate for SaaS

There are many benefits of using SubscriptionFlow, including the following:-

  • It helps you increase your NDR rate by automating the process of account expansion.
  • It provides tools to reduce customer churn.
  • It gives you insights into which users are at risk of churning.
  • It allows you to segment your users and target them with specific messages.
  • It integrates with your existing CRM system.

If you’re looking for a way to improve your NDR rate, SubscriptionFlow is the perfect solution.

Click here to book a demo of SubscriptionFlow.

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