How to improve your net revenue retention
There are three areas to focus on to improve your net revenue retention rate:
1. Reducing churn
There are different ways to analyze churn in a SaaS business, and different types of churn to consider. For many SaaS companies, issues with customer support result in cancellations. Friction in the user experience within the product is also a common driver of churn. A customer may only have occasional use for your product, or require features you’re not yet supporting. And sometimes churn is unintentional.
The best tactics for improving churn are based on the real reasons why customers are leaving in the first place. So start there. Look for low-hanging fruit, like better signposting to self-serve materials for troubleshooting, for instance. Then invest in the areas that will make the greatest impact, like new features, building out your support or success teams, investing in UX, or revisiting your pricing strategy.
2. Limiting downgrades
Downgrades are preferable to churn and can be used as a churn prevention tactic. You could, for instance, give customers who have started a cancellation flow or reached out to end their subscription the option to pause or reduce their subscription tier instead. You can expect a lot of the tactics you implement to reduce churn to reduce downgrades too. But downgrades are also the result of purchasing the wrong subscription or product upfront or upgrading at the wrong time. Similar to churn analysis, you’ll want to dig into why customers are downgrading to find any underlying trends that you can resolve and improve customer retention rate.
Depending on what you discover, tactics for limiting downgrades could include:
- Better enabling customers to choose the right package for their needs
- A more flexible pricing strategy
- Reworking your value proposition
- Reconfiguring your packages to drive more renewals
- A more considerate timeline for upselling or cross-selling maneuvers
3. Improve upselling and cross-selling
One of the best ways of expanding revenue from your existing customer base is to focus on the value metrics that matter most to your customer segments. Once you understand the value of the solution your product offers, you can design your pricing and packaging in a way that nudges customers to grow their spending over time. This requires testing and revisiting as the market evolves and whenever you expand into new markets or segments.
You can take steps to remind customers of the value they're getting from your product. Writing improvement tool Grammarly, for instance, uses weekly insights emails that summarize a user’s usage statistics, highlighting where the product has helped them the most. You can also remind them what they’re missing out on by not upgrading their access or buying a new product line when they’re logged into their account. Just don’t be too pushy — that’ll likely lead to a faster churn or downgrade.
If you want to learn more about expansion revenue, here’s a useful resource on the topic.