I spent my formative years at Hewlett-Packard, an engineering-driven company that believed great products sell themselves. But after several years running operations in the hypercompetitive luxury travel industry, I learned this isn’t entirely true; people buy from people they know, like, and trust. Beyond good products and services, a personal relationship is critical for subscription-based businesses to sustain high revenue performance.
While 100% customer retention is impractical and even undesirable, SaaS customer renewals for month-to-month and annual contracts have been estimated at 82-87%, suggesting there’s room for improvement. It’s worth the effort; venture capitalist David Skok’s popular blog shows customer churn affects profitability, and even small improvements have a significant impact. My team achieved 96% annual retention, and the same principles apply in any SaaS company.
Thoughtfully designed products and reliable service are important, but it’s the human element that ultimately drives high retention. The simple truth is that people become more attached to other people than they do products or services. Losing established, trusting relationships carries more weight than product preferences, system uptime, or price differences when customers consider switching.
High retention comes from great service peppered with what I call the “three loyalty moments:”
- Moments of Connection — Ongoing, personal assistance that ensures ongoing satisfaction, letting customers know they are important.
- Moments of “WOW!” — Instances when customers discover unexpected benefits or experience acts of kindness that form lasting impressions.
- Moments of Truth — Times when the company responds quickly, effectively, and caringly, going above and beyond to address problems that arise.
A SaaS customer myself, I’ve noticed Customer Success Managers periodically connect, but there’s a difference between “just checking in” and delivering personal assistance. Relationships are built through a series of positive and productive interactions, not just courtesy calls. Customers must perceive value in repeated exchanges, such as learning how to use the product or hearing tips on how to maximize results in the customer’s unique business.
As I found in my own business and the Kano Model famously states, occasions that surprise and delight peg the customer satisfaction meter. Customers rave when they’ve had a “Wow!” experience, discovering a valuable feature or receiving an unexpected gift. A random, personal gesture is far more impactful than an expensive one—it’s the thought that counts.
Finally, it’s been said that adversity reveals character. My team found our rare failures embarrassing and unpleasant to deal with, but how we responded built lasting trust. Our 5-step process to empathize, apologize, fix the problem, give appropriate restitution, and follow up afterwards quickly turned around bad situations. A 2008 study supports our experience that a customer’s overall satisfaction directly influences their degree of loyalty after a service recovery incident.
We mastered the three loyalty moments and it paid off. One may argue that SaaS providers face a difficult challenge to deliver these experiences in a highly scalable, profitable way, and they’d be right—I’m working on that in my new business. But equipping and empowering CSMs with the right tools, training, and authority to enact these moments can help SaaS companies attain unmatched levels of customer retention.
-Ed
Ed Powers is the Chief Operating Officer at G2G Collection, a subscription-based company combining luxury travel with charitable giving. Service excellence doesn’t happen through hard work and good intentions—it requires application of seven essential management practices. I’m a serial entrepreneur whose mission is to build high performing organizations with happy, successful people working there.
