Retention Rate Vs Renewal Rate

At present, there are certain factors that all businesses are dealing with. And just like any other business, the SaaS market is also taking the effect of the changes occurring in the corporate sector. So, here are the factors that all SaaS businesses have to consider while working on their business strategies:

Increase in the growth of the SaaS market (an annual growth rate of 9.8% is expected)
A predicted recession in 2023 and beyond
Change in WFH strategies in post-covid scenario

So, one thing is evident SaaS companies need to strategize and monitor the results of their strategies actively.

The next debate that starts is the renewal rate vs retention rate. Both are important for subscription-based SaaS companies. However, the renewal rate defines the number of customers who renew their subscriptions when their subscription plan ends while the retention rate is whether the customer wants to stay with you for a long time.

Now, many businesses confuse that where they need to be focused. SubscriptionFlow experts tell you to be more focused on retention, and you need to adopt robust retention management software rather a renewal management software—though platforms like SubscriptionFlow can help you with both. So, here are the reasons to focus on the retention rate:

Also Read: Important SaaS Customer Retention Metrics for Subscription Businesses

1. More Attracts More

Many people think that if they focus on retention, their customer base or members will not increase. However, it is not a fact. The focus on retention plays a huge role in not only getting maximum from the existing customers but also attracting more customers. How?

People believe in what your existing customers tell about your product or services. Here comes product-led growth (PLG). If the growth of the product is focused, you do not need to invest too much in marketing or sales rather the product itself is sufficient to increase the customer base. You will need to track the customer data so that you would know which features are most loved and that you can improve in the future.

A better product increases the retention rate and retained customers attract new customers because they start talking about your product. When SaaS products are discussed in social media communities, more potential customers come on board.

2. Retention—A Cheaper Option

Customer retention is a cheaper option for SaaS businesses. Just think about the lengthy process of acquiring more customers.

You must know the target market and know it well.
You need to identify the platform where you can find the target market.
Spend resources for marketing and sales
You will need to monitor the data of potential customers to nurture the right customers
Even when the customers schedule a demo or use free trials, they need to be nurtured to convert them to paid subscriptions
Then the revenue stream is established and again average revenue per person needs to be monitored.

See the process is lengthy and tiring. We do not say that it is not necessary. Of course, acquiring customers is important for all businesses. The point is to focus on the retention rate because it not only helps in keeping the current customer base loyal but also plays role in attracting new customers.

Retention on the other hand is quite cheaper, and sometimes it can be free. All that you need is to communicate with your customers and make them realize the product’s value. Try to increase the product value with time. When the value is realized, the growth game is in your hands.

Also Read: Retention Management with SubscriptionFlow – A Platform Where You Get Modified Features for Your SaaS

3. Customers/Members Equivalent to Market Existence

We tell you to make retention your priority because it ensures your market existence. Why?

Because the customers who churn from your SaaS platform are catered to by your competitors. And just like you want the leaving customers to fill out a feedback form, your competitors ask questions to the customers that they cater to. They want to know the SaaS product that the new customers were using previously and the reason why they left.

Here comes your market image. Though there are competitors in the market, all SaaS businesses fight for customers on professional grounds. Still, every SaaS company has a market standing that can be severely affected by what the customers tell in the market. that is the very reason businesses take negative reviews very seriously. So, to exist in the market with the best repute, you need to pay attention to customer retention rate.

SubscriptionFlow has recently been relaunched as the growth and retention management system. Here, we allow users to monitor the customer data, get it fetched from customer data centres, get it analyzed, and monitor reports that the system automatically generates. When you have such thorough knowledge of customer data, you will be able to find room for product improvement (and work on PLG). And as mentioned earlier—product-led growth helps in getting more customers and retaining the existing ones as well.

So, schedule a demo for SubscriptionFlow today!