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5 Strategies to Boost Customer Renewal Rate and Drive Revenue

The CloudShare Team

Jul 13, 2023 - 3 min read
5 Strategies to Boost Customer Renewal Rate and Drive Revenue

You’ve likely heard a dozen times by now that it costs roughly five times more to acquire new customers than it does to retain existing ones.

This means that, particularly for SaaS companies, customer retention is arguably the most important metric of all. It’s a direct measure of how effective the company’s software is at solving its customers’ problems. Renewal rate is a metric closely associated with retention, measuring the number of customers who renew at the end of each subscription period.

Today, we’re going to talk about why that matters, and how you can build a better customer renewal strategy.

Why Customer Renewals Matter

Customer renewals provide an excellent barometer for a SaaS business’s overall health. A high customer renewal rate means the business is profitable, with generally satisfied customers and a stable revenue stream. A low customer renewal rate, on the other hand, indicates an issue with either the company’s software or its business operations.

Tracking your customer renewal rate allows you to keep a finger on the pulse of your business, so to speak. It allows you to identify potential problems with your service delivery and also clues you in on potential weaknesses in your software. Reaching out to customers who renew or cancel can also give you insight into why.

How to Calculate Your Customer Renewal Rate

If you want to determine your customer renewal rate, the calculation is relatively straightforward:

  • Determine what period of time you want to assess. Typically, you’ll want to look at months or years, though you can also measure your renewal rate in terms of weeks or days.
  • Identify how many customers were up for renewal during that period.
  • Divide the number of customers who actually renewed by the amount of customers who were up for renewal.

Strategies to Improve Renewal Rates

First, Understand Your Customers

Ideally, you already know a fair bit about your customers, particularly with regards to why they use your software. That includes their value drivers, their pain points and needs, and their willingness to pay. That’s a good starting point, and can help you shape your product to ensure they get the most out of it.

However, you can take things a step further when assessing churn and retention. Look at your customer database, and divide it up into two groups — the customers that renewed and the customers that didn’t. What do the members of each group have in common with one another?

If the customers that churned all came from the same acquisition channel, for instance, it could indicate that your marketing efforts on that channel are mistargeted.

Make the Customer Renewal Process Painless

Your customers shouldn’t have to jump through hoops in order to renew their subscription. Both your renewal process and the follow-up process should be as seamless and streamlined as possible. Put automations in place to remind customers of upcoming or impending renewals, and provide them with ample guidance when it comes time to actually renew their subscription.

Provide Ongoing Support

Too many SaaS companies seemingly forget all about their customers after onboarding. This is a mistake. The best vendors — the ones with the highest renewal rates and the highest level of customer satisfaction — don’t just cut things off after onboarding. Instead, they provide ongoing support.

Build Relationships

Customer renewals may impact your business’s bottom line, but you’d do well not to view them in terms of pure numbers. As a SaaS vendor, you should be positioning yourself as more of a partner than a merchant. You’re not just selling a product to your audience, you’re providing them with a service that helps them solve a problem.

Remain in regular contact with your customers, and actively engage with any feedback or concerns they have about your product.

Create a Playbook

Just as your sales team should have a standardized playbook for closing deals, your customer success team should have a playbook to help them secure renewals. This playbook should include both reactive and proactive responses. What we mean by this is that it should provide guidance on how to reach out to a potential cancellation but also include processes for standard renewal reminders.

Some key points this playbook should cover include:

  • Unexpected payment issues.
  • Leading indicators of churn.
  • How to manage and configure automations such as renewal emails.
  • How to reward team members who lock in early renewals.

Take a Deeper Dive into SaaS Customer Renewals

What we’ve provided here is a brief overview of how you can improve your customer renewal rate.
If you want to take a deeper dive into the topic, we’ve published a blog titled 10 Best Practices to Increase Your SaaS Training Renewal Rates.

Even if you aren’t offering a SaaS training program, it’s worth a read — the advice it contains can realistically apply to any SaaS business.