retention mistakes

Retention rate is a binding mechanism that keeps your businesses together and helps it to grow and prosper. No matter how many potential leads, visitors, one-time-purchasers you acquire, it all means nothing without the ability to retain them and turn into loyalists.

Boosting retention rates involves a lot of learning and analyzing your customers’ behavior to keep them engaged and satisfied with your product.

If you randomly opened the link to this article and wondering why to even bother with all these fancy metrics. Stay for a while, you have nothing to lose and A LOT to learn.

For example, did you know that a research conducted by Econsultancy shows that increasing retention rates by only 5% can affect your bottom line by at least 25% up to 95% in some cases? It is cheaper to keep old customers than to attract new ones.

This article will be helpful for SaaS business owners as well as product managers, who want to discover helpful and actionable tricks and tips.

What is a retention rate and How to calculate it?

You probably already know what is retention rate, but to keep everybody on the same page let’s shortly define the concept. (Feel free to skip this part.)

Retention rate – is a key metrics for a SaaS company that measures how many users/clients/customers are making repeat purchases.

Customer Retention Rate = ((EC-NC)/SC)*100, where:

  • EC – number of customers at the end of a period
  • NC – number of new customers during that period
  • SC – number of customers at the start of that period

Let’s say you released a mobile game. On September 1st you had 1000 players. You got 500 new players by September 30, however, 200 players stopped playing the game. So, at the end of a period (in our case one month), you had 1300 paying customers. Let’s calculate the retention rate: ((1300-500)/1000)*100=80

Each industry, each company has its own definition of “good” and “bad”. What works for an organic, whole foods chocolate bar seller doesn’t work for KitKat.

I recommend you to read this article about the technical aspects of retention rates:

The one problem of calculating retention rates is one part of a problem, the main question is how to effectively increase the company’s retention rates over time.

Customer Success

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Customer Success wasn’t a thing even 5 years ago. Back in 2009, if you go to LinkedIn and search for Customer Success specialists, I bet the search results showed an empty page. We won’t talk today about Customer Success and its principles in details. However, there is one tactic you can do – hire a Customer Success Manager. 🙂

Breakdown a customer journey and analyze critical moments, where customers are not sticking around and leaving yours before making a purchase.

For example, if trial customers have used your product for a few days and stopped. What can be the issue? Maybe they simply didn’t understand the value that your tool brings. Maybe your users couldn’t navigate.

In order to solve the issue – incorporating onboarding or sending onboarding emails could help. Also, you can create a “Help” section on your website with a frequently asked question. Or maybe you need to rethink and redesign your product. The only way to discover the cause of low retention rates is to test and see how it affects the retention rates.

Putting yourself in the shoes of your users and imagined how they would feel and do with your product – is crucial. Many product managers, developers, and marketers bring their judgment and biased towards the product. So, we tend to forget that we create our products for real people, with real problems, who are seeking a real solution.

(The first tip and trick technically is not a tactic that you can implement right now and today, and it might sound vague. But sometimes it is not about THE tactic and strategy  but rather… a mindset you need to put the entire team or entire company into.)

Continue bringing value to users even after the purchase

You and are both customers. We are customers of other SaaS tools, coffee shops, taxi apps, etc. And we both want to receive more value for our money.

When we subscribe to a tool we expect to see new features coming.

(Here we go, tactics you can actually implement from today)

Collect Feedback to improve customer experience and reinforce customer insight knowledge into building new features.

When users see that more value is coming their way, they are less likely to seek out other alternatives.

However, just writing code in a vacuum is a waste of time.

Majority of startups and even enterprises fail to communicate to customers about new updates and features they are developing. So, they sit behind closed doors, develop new features, release them to the world and then do nothing about it.

Don’t think that users will figure out things on their own.

We’ve already covered smart ways to announce product updates. and have dedicated two articles about Release notes and Emails. Go check them out and learn how to introduce product updates more effectively.

Social Proof

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The number two most common mistake I usually see is underestimating the power of social proof. As humans, social proof is encoded into our DNA.

Social Proof builds trust between you and your users. The more they trust you the more they are likely to stick around. Social proof can be used both to attract new leads and convert them into paying customers, but also to retain them.

💡 Related article: How to build instant trust on your website?

Social Proof magic can be used in several ways

Website testimonials


Emails with testimonials

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Case studies

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Reward top 1%

Take a look at your CRM software. It can point to you the most profitable customers. And here we’ve come to the third mistake many companies fall in a trap by thinking: “Well, they are already our most profitable customers, why to bother more?”

Rewarding top 1% is actually easy. In your CRM software create a special list and track their metrics and behavior separately from others. Send them personalized letters, special “only for them” gifts and discounts. Treat them like royalty and you will keep them forever.


Even if your business is gaining users each day, not retaining customers is simply involves high direct and indirect costs. You need to spend more money on acquiring new clients, advertising, onboarding, etc.

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