“Do what you do so well that they will want to see it again and bring their friends.”
Walt Disney famously said this about his theme park, but it applies equally well to SaaS businesses. Customer loyalty is the Holy Grail, and for good reason: gaining a new customer is 5 to 25 times more expensive than keeping an existing one.
A landmark study by Bain & Company found that increasing customer retention rates by even 5% can lead to a 25-95% increase in profits1. Clearly, building enduring relationships with your customers is very good for your bottomline. This makes Customer Lifetime Value (CLV)—the total revenue you can earn from your customer over time—one of the most important SaaS metrics.
There are any number of methods employed by SaaS businesses to improve CLV. But today, we’re looking elsewhere for inspiration—traditional consumer business playbooks.
For decades, traditional consumer businesses have been experimenting with retention strategies to build long-term relationships with their customers, long before SaaS and digitally native companies came into the picture.
What great ideas from this world can we steal creatively for SaaS businesses? Let’s take a look.
#1 Run a reward program
The allure of reward programs is that they offer customers immediate value, thus satisfying their need for instant gratification. But they also keep customers coming back because each subsequent interaction offers more gratification.
Take Starbucks for example. Their strategies include simple ones like giving customers stars that can pay for their next drink and more complex ones like mobile games and compounded points. The fundamental idea remains the same: reward the customer for every interaction with the brand, be it a purchase, writing a review, or referring the brand to their network.
❖ Stealing the idea for SaaS:
Xero, a cloud-based accounting software company that targets small to mid-sized businesses, wanted a smart growth hack that scales fast. They used the rewards platform Xoxoday to run a referral campaign for their existing customers in the UK. Each successful referral would earn the customer up to￡200. Within 4 months of implementations, Xero managed to build a pipeline of 1900 new customers and initiated a habit of advocacy within their customer community.2
#2 Personalize the customer experience
At the heart of this strategy is the recognition that personalization makes customers feel special and valued, and they will associate the good feels with the brand that made them feel it.
On the glitzy end of this spectrum is Swarovski, which offers a crystal personalization service where customers can engrave their own messages or designs onto select Swarovski crystal products. This service attaches so much emotional meaning to the transaction that there’s no looking at it as just a purchase.
On the more mass-pop end of the spectrum is Coca Cola’s landmark 2011 campaign, ‘Share a Coke’. This campaign personalized their iconic soda bottles by printing popular names and nicknames on the labels. Customers began to seek out bottles with their own names and even began to share pictures on social media—true viral content in the early days of social media.
What is even more interesting is that this campaign didn’t truly personalize the bottles. Coca Cola just printed the most popular 50-100 names from each region on the bottles!
❖ Stealing the idea for SaaS:
Personalizing is incredibly easy and cost-effective in the case of digital products and you can do it at practically every step of the customer journey. A simple, elegant example is Grammarly. As soon as you create an account, Grammarly tries to understand your needs and personalizes its recommendations and features based on your response.
#3 Create a community around the product
Communities not only strengthen a sense of ‘oneness’ with each other and the brand, but are often a rich source of feedback for the product.
Perhaps the OG community building exercise was the one Harley Davidson undertook. From facing extinction in the 1980s, it went on to become a beloved global brand over the next two decades—the catalyst for the turnaround was its community building efforts. Its tribe of motorcycle enthusiasts, known as the Harley Owners Group (H.O.G.) organize rallies, events, and group rides for Harley owners to connect with one another and share their passion for riding.
Another example is LEGO’s dedicated community of fans, known as Adult Fans of LEGO (AFOLs), who share their creations, collaborate on projects, and engage in spirited competition. LEGO engages with its community by featuring user-generated content on its website, sponsoring LEGO conventions, and collaborating with fans on product designs. With this kind of richness within the community, can you imagine a LEGO fan ever just going off it?
❖ Stealing the idea for SaaS:
Canva’s official Facebook group, called the Canva Design Community, is a great example of a tribe built around the product. It has 400,000+ members actively helping each other design using Canva, share tips, plan events, and generally talk about all things design. Canva has also partnered with content creators called Canvassadors, to create tutorials and videos/content around Canva’s products and features. What a great way to leverage existing customers’ expertise to help others while also building brand recall!
#4 Impress from the get-go
Traditional consumer brands pay an insane level of attention to the packaging they use for their products, because that forms the first impression for the customer. You cannot think about great packaging without thinking of Apple’s elegant, meticulously designed packaging for the iPhone. Unboxing an iPhone is a sacred, spine-tingling exercise for many—and when you look behind the magic, it just comes down to attention to detail.
What can a SaaS company learn from this? Simply that first impressions are that important. Pay as much attention to your first brush with the customer, the user onboarding experience, and see what a world of difference it makes to your retention and churn rates.
❖ Stealing the idea for SaaS:
Our favorite example is Headspace, the meditation app. Their welcome screens are warm and welcoming and help newbie users, even those unsure or skeptical about meditation, to ease into the practice. In a small way, they begin to experience some of the benefits of meditation, almost as soon as they sign into the app.
#5 Build relationships through shared causes
The Covid-19 pandemic and the world events since seem to have jolted our collective conscience into awakening. Today, more so than ever before, customers expect the brands they love and buy from to be a force of good. Cue: value-based loyalty programs.
With a values-based loyalty program, the business donates a percentage of their sales profits to a cause rather than offer the customer a reward. These programs have been around in some fashion for decades, but they’re particularly relevant now.
Popular footwear brand TOMS came to the limelight for its charity within the bounds of a for-profit model, with its ‘One for one’ campaign. Right from its inception in 2006, it donated a pair of shoes to children in undeveloped countries for every product purchased by its customers. Over time, it updated the model—today, you can buy a pair of shoes from TOMS and choose to support one among a variety of causes. But the core proposition for customers remains attractive–buy something you like, and don’t just feel good about your buy, feel virtuous about it. Just the sort of thing that will make them stay with you.
Stealing the idea for SaaS:
Salesforce is known for its 1-1-1 philanthropic pledge, by which they donate 1% of their product, 1% of equity and 1% of employee time to give back to the community. This involves them offering their expertise and resources to support causes as diverse as climate and education in different geographies. Salesforce also spearheads the global Pledge 1% movement to enable companies of all sizes to give back to their communities—and so far, 18,000+ small to large companies have signed up to do more.
The bottomline: Whatever the nature of your business, whatever your business model, the fundamentals of building customer relationships do not change. So, look around and get creative about where you find inspiration.
