The Sales funnel series - No3. User Retention


The Sales funnel series - No3. User Retention is the third of the series, attempting to examine all 5 stages of the sales funnel framework, separately, and stimulating with references and case studies business owners and marketers, how these apply in business making, no matter the company size or the industry. Borrow My Brain opens-up to guest authors and the Sales funnel series is the creation of Despina Exadaktylou, which we welcome in our space. Despina is an experienced digital marketer with a focus on Inbound and Growth marketing

The Sales funnel series – No3. User retention

User acquisition is the 1st step a baby is doing when it is in need to reach out to you. Activation is the same baby actually starting to walk and getting those big smiles on your face (along with some tears out of thrill and joy)!

Retention on the other hand….is the same baby now running…going pretty much anywhere- indoors or outdoors- and really knowing what the next step will be- ok, maybe not always considering how many times it will stumble upon…pretty much anything in its way.

That is the exact way your SaaS user will behave. It has a single twist though! If he realises he can “run” with a similar pair of shoes, like the ones you offer to him, he won’t wait to fall for the millionth time. He will just go and swift the “shoes” he is wearing!

Oops, bummer! You just lost your next dedicated and faithful customer of yours, you were betting he was definitely going to renew his subscription!

Getting to know the enemy!

So what do you do? Besides, hoping that this will not happen to you. Trust me; your product awesomeness is not going to hold anyone from trying a similar product and eventually – if your competitors know their mojo- switching to a new solution.

The first step towards coping with any problem is actually understanding it. The same counts here for retention too. You should be fully aware of what it means when it comes to your product.

To achieve that you should own your success metrics too. Be aware of your North Star. What exactly makes your users blink when it comes to your solution’s use. Is it daily engagement? Is it the repeated fulfilment of specific tasks? If yes, how long would a user standoff from functions like those before he will be considered inactive?


An example new user retention cohort graph

The graph above is an example visualisation of retention metrics – like an indication of a long-term retentive product and changes in retention over time- which can easily help you understand where to focus your attention in order to improve it.

If however, you need to be aware of the most popular retention metrics – whether or not all of them applies to your case scenario- keep that list in mind:

  1. Customer Churn: This one is perhaps the point of reference when we talk about customer retention and refers to the rate at which customers stop doing business with you
    Calculation formula: Annual Churn Rate = (Number of Customers at Start of Year – Number of Customers at End of Year) / Number of Customers at Start of Year
  2. Revenue Churn Rate: is the percentage of revenue you’ve lost from existing customers in a given period of time
    Calculation formula: Monthly Revenue Churn Rate = [(MRR at Start of Month – MRR at End of Month) – MRR in Upgrades during Month] / MRR at Start of Month
  3. Existing Customer Revenue Growth Rate: Is an important retention metric as it gives you a straightforward number of how much your customers get to love you or just have forgotten about you.
    Calculation formula: Monthly Revenue Growth Rate = (MRR at the End of Month – MRR at the Start of Month) / MRR at the Start of Month
  4. Repeat Purchase Rate: Which substitutes the best indicator of loyalty coming from your customers, as it shows exactly how many of them cannot actually survive without your solution.
    Calculation formula: Repeat Purchase Rate = Number of Returning Customers / Number of Total Customers
  5. Net Promoter Score® (NPS): “How likely are you to recommend our company to a friend or colleague?” That is exactly the question you should ask your customers when it comes to calculating your NPS. Of course, those that will rate 9 or 10 are your promoters, while those rating around 6 or below the users that you must be concerned about leaving you anytime soon.
    Calculation formula: Net Promoter Score = % of Promoters – % of Detractors


“Always keep your finger on the pulse of customer loyalty, otherwise, your business will get a painful wake-up call.”

borrowmybrain-sales-funnel-user-activation (1) (1)

How to growth hack retention: the essentials

Hacking retention is not an easy task. Truth to be told, it is the quite opposite. If done right though, retention will be the No.1 factor that will make you avoid the cursed for all SaaS founders “C” word. Yes, you guessed it right.

If you know how to retain your customers, churn will never come knocking your way down to success. It will just be there as a kind reminder, by making you acknowledge the complications of its existence.

Remind them your product’s value: Users get to be impressed by a new innovative product, use it a whole lot, getting it to become part of their daily working routine but at the end of the day many of them will tend to forget what made them purchasing a pricing plan, to begin with. It has happened to any single one of us. We get bored of having the same routine or we may even desire to get more out of a solution – without actually having a real need to get more or even if the current solution does not luck anything of the essence.

So, remind them what they tend to forget. Here is where your customer success comes into play. Create a solid customer success plan and get to ping your customers every once in a while, even when everything seems right on the other part of the bargain. You don’t need a reason to check if they would need something from you, do you? In that way, you will end up,  worst case scenario training them more on your product- and best case scenario upselling to them a better pricing plan in the future.

Don’t get discouraged by users inactivity: As Intercom states in its recent study users don’t necessarily tend to forget about you when you see a decrease in your product’s usage.

There are a million destructions out there making them not able to dedicate the necessary time to perfect your product’s usage. Especially, if those users have not established dedicated habits from day one. The solution here is simple actually. Give them reasons to use your product more:

  • Educate them about your solution. Make clear to them that their success is indirectly related to your company’s mission.
  • Distribute useful content to them via social media or email campaigns
  • Create a new funnel especially for users like that when it comes to your onboarding strategy- yes onboarding applies here too. That funnel may be an extensive webinar course for newbies or perhaps an additional one- to- one Skype calls in order for the user to feel comfortable with your product.

If for any reason whatsoever, those users continue to be inactive you may need to reconsider that they are not representing your personas anymore or even more they never were. If the 2nd explanation stands, don’t spend any tears. Those users were never part of your product’s magic anyway.

Reconsider your onboarding process: What makes up a good onboarding? Well, we have covered that part extensively in the previous part of this sales series. Overall, a good onboarding reveals every part of your product’s capabilities and adds value to the user. It encourages him to complete the necessary milestones and leads them to its aha moment. Fine so far. What happens though if you have multiple personas with each one of them emphasizing in different parts of your product?

Have you customised your onboarding process to the extent that it will cover any possible case scenario? Let me be the bearer of bad news here. No, you haven’t. The SaaS companies that have done this practice are limited. Most of them forget that onboarding is a work in progress. Not to mention matured SaaS products that don’t even know what onboarding can offer to them in the first place.

If, however, for any reason you belong on those that do know its value, bear in mind that every time you get to change anything on your product your onboarding is being affected significantly. Plus, the odds are,  that your customer needs may also change- sometimes faster than your product- so you need to adapt your product usefulness to them from time to time- whether you release something new or not.

Finally, in case you are a master when it comes to onboarding consider to redesign it after you have gathered enough data about the user that you do retain. Data, that you will compare and contrast with those that you don’t and of course with your existing onboarding funnel. So, if by any chance the later users do belong in your personas you know by default what to change and optimise.

Reward engaged users: A user that has been faithful to your product for over a year is more likely to come back and renew his contract than a newly acquired one. Agreed. That stands. Now, imagine this user getting a bonus for his dedication and spreading the word to his acquaintances. Boom! You got that kind of user that will follow you no matter what!

[Hello referral! More on this one though on our next chapters] The reward could be something minor like a free dedicated consultation from your customer success manager every month – which you don’t offer to any user- to a monthly 5% off the user’s annual plans.

Wrapping it up

As with every stage of the funnel, there is no magic recipe when it comes to retention too. If you get to know your user, if you have created the right personas and targeted them you have big odds of actually building a basic clientele that will expand over time as your product gets matured. Having that said, no user feels totally satisfied with the benefits any solution provides to him. EVER.

You should continuously revisit the approaches you use to engage with your user and of course deliver an improved product as the time passes by. If, you don’t someone else will anyway and you already know that. That’s the magic and the curse of a SaaS product. So embrace it in any possible way you can.


Despina is an experienced digital marketer with a focus on inbound and growth marketing. She has an extensive working experience on the startup scene and her passion for SaaS is essentially what drives her passion for marketing. When she doesn’t create a strategy she writes about it on Medium. You can connect with Despina on Medium  |  LinkedIn  |  Facebook  | Twitter

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