What is customer retention?
Customer retention refers to a business or product's ability to keep its existing customers engaged and continue using its product or service over a given period.
Customer retention and churn are two sides of the same coin. Retention focuses on the positive, on how to keep customers engaged for longer. While churn looks at the negative, as in understanding why customers leave and how to prevent it.
Customer retention vs. user retention
Customer retention typically refers to retaining paying accounts (logos), while user retention focuses on individual end users and their continued activity within the product. In B2B SaaS, user retention often fuels customer retention like if enough users adopt and stay engaged, the likelihood of contract renewal improves.
💡 Related guide: User Retention: How to Increase & Measure it With Key Metrics
What is customer retention rate?
Customer retention rate is a metric that shows what percentage of your customers continue to do business with you over a defined time period.
This calculation provides a snapshot of how well you're holding onto your customer base over time.
How customer retention is affected by other aspects
Retention is not a standalone concept. It's an outcome of various business aspects like customer satisfaction, loyalty, and onboarding. Let's break down how each of these influences retention:
Customer acquisition and retention
Acquisition and retention are two key phases in a customer's journey. The acquisition brings new customers in, while retention focuses on keeping them deeply engaged over time. At first glance, it might seem like acquisition only affects retention, but in reality, they often form a cycle where each one feeds into the other.
When a product becomes an essential part of a customer's workflow, it naturally spreads. For example, users invite teammates, mention it in meetings, and share results externally. This creates organic acquisition without extra spending. At the same time, acquiring the right customers through targeted messaging and onboarding ensures they're more likely to stick around and find long-term value.
💡 Related guide: A Complete Guide to Create a Successful Customer Acquisition Strategy
Customer satisfaction and retention
Customer satisfaction is one of the strongest drivers of retention. If the product doesn't meet expectations or the support is slow or unhelpful, customers will leave—regardless of features or pricing.
There are two primary levers for improving satisfaction: the product itself and the support experience. A product that consistently delivers value and evolves with customer needs builds satisfaction.
As customers stay retained, customer satisfaction improves even more. The longer customers stay, the more time you have to listen to their feedback and make the product better.
Customer loyalty and retention
Loyalty and retention go hand in hand. Customers who feel loyal to your product are far less likely to leave, and focusing on retention efforts helps deepen that loyalty over time.
Loyalty programs can play a key role in this process. Offering rewards, recognition, or exclusive perks gives customers extra reasons to stay engaged and strengthens their commitment to your brand, ultimately supporting long-term retention.
💡 Related guide: Build Customer Loyalty in SaaS for Long-Term Growth
How to build a customer retention strategy
Before we get into the specific steps for creating a customer retention strategy, it's important to remember that your approach must be tailored to your company's unique audience, products, and overall business goals.
The steps below will give you a solid framework, but you'll need to dig deep into what's unique about your business to create a retention strategy that works best for you.
Step 1: Define what retention means to your business
Retention can mean different things depending on your business model. To build a strategy, you need to make it clear exactly what type of retention your business will be optimizing for across the organization. Beyond customer (logo) retention, there are also other types like revenue retention and user retention.
Step 2: Calculate existing retention rates
Once you've defined what retention means for your business, the next step is to calculate how well you're doing today.
At a basic level, you can start by calculating overall customer retention. This gives you a high-level view of how your customer base is performing like how many are joining, how many are leaving, and how many are sticking around. If your overall retention rate is dropping, it could point to a broader issue like poor product fit, something which is affecting all users across the board.
To gain a more detailed understanding, segment your customer base and calculate retention rates separately for each group. Segmenting helps identify which specific groups are struggling and where you should focus your efforts.
Common ways to segment include customer size (small, mid-market, enterprise), contract type (monthly vs. annual), industry, and region.
Once you've identified which customer segments have low retention rates, the next step is to go deeper and understand why customers in those segments are dropping off. Here are some ways you can analyze the reasons behind drop-offs:
Review support tickets and logs to identify common complaints, recurring issues, or frequent questions that might signal product pain points or service gaps.
Examine product usage analytics to figure out which features company users stop using before they churn or where usage significantly declines.
Analyze customer feedback to track low CSAT scores and negative comments., especially from customers in segments with poor retention.
Step 4: Implement retention tactics
Now that you know which segments are struggling and why, the next step is to take action. Here's how to approach this step:
Start with quick wins. If you find simple fixes like unclear onboarding emails or minor bugs in a key feature, tackle those immediately. Small improvements can make a big difference, especially if they remove friction from a high-traffic part of the product.
Next, address large systemic issues. For example, if you have issues like product misalignment, missing features, or poor support response times, you'll need collaboration across teams such as product, customer success, and support.
Finally, communicate changes. Let customers know you're listening and taking action on their feedback. This helps build trust and can boost engagement even before the fix is in place.
Step 5: Measure and refine as needed
After you've implemented improvements, keep a close eye on how they affect your retention metrics over time. Here's how to keep your strategy on track:
Track retention by segment: Revisit the same segments you analyzed earlier to see if their retention rates are improving.
Talk to your customers: Follow up with users in the affected segments. Ask whether the changes addressed their concerns and if there's anything still missing.
Adjust based on what you learn: Not every fix will hit the mark the first time. Use the data to course-correct, experiment with new ideas, and continuously refine your retention strategy.
Common customer retention tactics to use for SaaS
Here are some tried-and-true retention tactics you can put into action right now:
1. Excellent customer support
One of the simplest yet most powerful ways to boost customer retention is by providing excellent customer support. Make sure your customers can quickly and easily get in touch when they need help. This means not hiding your contact information behind layers of menus or walls of text.
Provide live chat options, add visible email addresses, and integrate easy-to-spot support buttons inside your product or website. Even small accessibility tweaks can make a big difference in a customer's moment of need.
2. Use pause over cancel options
Give customers the ability to pause their subscription instead of canceling it entirely. This is useful for businesses with seasonal usage patterns or temporary budget constraints.
Allowing customers to pause reduces immediate churn and keeps their account active, making it easier for them to return when they're ready. It also shows flexibility, which can build trust and goodwill.
3. Dedicated customer success managers for high-ticket customers
For your most important accounts, assign a dedicated customer success manager (CSM) who can offer personalized, proactive support. Set quarterly or bi-annual check-in sessions with your customers to ask if the product is meeting their expectations.
The feedback collected from this session helps you identify what's working and what's not. Plus, they give you the perfect opportunity to suggest features or solutions they might not be taking full advantage of, so they keep getting real value from your product.
4. Loyalty programs
Loyalty programs are a proven way to encourage customers to stay engaged and continue using your product. By rewarding them for things like regular use, renewals, or even referrals, you give people a little extra motivation to stick with your product. These rewards can be anything from discounts and exclusive features to points they can collect and redeem.
5. Maintain regular communications
Keeping the conversation going with your customers is key to staying top of mind and maintaining engagement. Regular communications like product updates, new feature announcements, and helpful tips show customers that your product is constantly improving and evolving to meet their needs.
Tools like Mailmodo make it easy to send personalized, interactive emails that grab attention and encourage users to take action. For example, you can send inactivity reminders, which can gently nudge users and encourage them to come back and explore what's new.
6. Drive feature adoption
Helping customers discover and use key features is one of the most effective ways to improve retention. If users only engage with a small part of your product, they're more likely to churn, simply because they're not getting the full value. The more features they adopt, the more embedded your product becomes in their workflow.
Start by identifying which features drive long-term stickiness, and make sure those are highlighted during onboarding and in-product guidance. Use tooltips, walkthroughs, email nudges, or even webinars to educate users and encourage deeper usage.
Final thoughts
As we all know, no retention plan is perfect from the start. Whether you're experimenting with new tactics or refining existing ones, regular reviews are essential. Neglecting to monitor ongoing progress results in tactics diverting from the retention strategy, and we know that's something you want to avoid.
We know that continually tracking the progress of the entire retention strategy can be a real headache, especially if you're trying to do it manually. But with clear communication channels and well-defined processes in place, you can make monitoring retention a shared responsibility across teams.
