In January 2020, an unknown virus spread rapidly through China. There was no panic, no assumption it would spread worldwide. However, by March 11th, the WHO declared the COVID-19 crisis had become a global pandemic.
Worldwide lockdowns knocked the first domino down in a long-haul economic shift that affected the United States for the following year. All types of businesses shut their doors, unable to recover from such a profound financial loss.
As another recession breaches the economic horizon, many startups are transitioning to ‘survival mode.’ Customer retention during a recession should be a high-priority focal point for founders of SaaS companies, but other factors contribute to company revenue during a market downturn.
Trimming your budget, extending runway, and cash flow monitoring are essential actions founders should take during a recession. But for the purposes of this article, we'll be looking specifically at best practices for keeping existing customers happy and reducing churn. Keep reading below!
Customer Retention: What Is It?
Customer retention is the ability to keep current customers subscribed and prevent customer succession. Retaining customers involves realistic goals, planning, and taking actionable steps to counter customer cash flow concerns, and overall keep customers happy over an extended period of time.
Why Customer Retention Is Important During Recession
Expansion during a recession is a high-risk gamble. Sustainable, stable revenue is your golden ticket to survive. During an economic dip, customers are trimming their budgets and searching for ways to cushion their cash inflow. Customers who are already satisfied with your services have a higher chance of spending more money or keeping their current plans, while obtaining new customers could be more difficult.
Consistent revenue during a market downturn creates a cash cushion between your bottom line and the repercussions of a recession. When you retain customers, you create a strong bond of loyalty. Treating long-term customers right leads to positive word of mouth, which can bring in new sources of revenue later on.
Look at your current number of customers and the revenue generated through their loyalty. Is it enough to keep you afloat? With a few budget tweaks, the cash inflow your company is receiving will most likely keep your doors open.
Customer Retention Strategies
Customer retention during an economic downturn is possible; it just takes creative thinking and teamwork. In survival mode, you’re not focusing on new opportunities to increase your customer pool. All your decisions should be about your customers' satisfaction to improve customer retention. They are the foundation of your company’s sustainability.
Twenty percent of new businesses fold in the first year due to cash flow problems. The possibility of a startup experiencing financial strain grows in a recession.
So, what can you do to retain your customers during a recession? Below, we’ll go over our top tips all founders should know.
1. Customer Communication
Remember, your customers are being negatively impacted by the market too. Reach out to them and ask how they are affected by the current economic climate. Customers often pull the trigger on cancellation without warning. Contacting them first allows you to work together on a solution if they need adjustments. Direct communication could potentially stop them from ending their contract.
Ask if their business goals have changed and offer any additional or different features your service provides that can help them attain those goals. A personalized experience shows you don’t just see dollar signs over their heads.
Offer a live chat over a virtual communication tool. Emails can get lost, information can get left out, and it’s more complicated to have a constructive conversation with broken-up chains. Send out an option for customers to schedule meetings to discuss their needs or concerns with their current contracts.
2. Showcase Different Uses Of Your Product
How often did you use Zoom before the COVID-19 pandemic? Maybe you used Zoom to speak with family far away or overseas manufacturers. When working from home became the social standard last year, Zoom became one of the central communication systems between teams and co-workers.
Can any of your tools be used for additional purposes? Do you have an onboarding service that can double as a brainstorming tool for parties to share presentations? Is there a way to use one-way communication as a group messenger instead?
Offer free seminars to show different ways to use your products. Your customers most likely haven’t put a ton of thought into various uses. Brainstorm as a team to see what you can offer and use customer feedback as a foundation for ideas.
3. Remove Specific Pay Walls
SaaS companies with multiple plans tend to keep features that smooth out product use on higher-priced subscriptions. Temporarily remove the paywall for these features. Customers feel more appreciated when companies look out for them in their time of need. When they’re able to, there is a chance your customers will want to continue using these features and up their subscription in the future.
Keep paywalls for larger features and extended services. You don’t want to over-work your team or product, especially if you’re cutting payroll or operational costs that affect the lesser-used services in more expensive plans.
4. Extend Free Trial Offers
Free trials are a highly utilized tool for a reason. They work.
One tactic is to extend trails for customers already taking advantage, allowing them to keep upgraded plans or features longer.
If you utilize a sales or customer service team, make your offer extensions as personal as possible. Discuss prolonging access over a phone call or email while genuinely asking about their current business goals. It’s a great way to retain an existing customer and advertise new products without giving a sales pitch.
Another approach is to offer free trials for different services to customers who have shown interest in a particular feature in the past. Or, send out a survey to ascertain what features customers now consider valuable with their pivoted business plan.
Suppose your customer is interested in a higher-tier product. Instead of offering a discount, offer one or two simple services for a trial period. If customers truly need the service to help their business, they’ll find the funds to pay for it. Alternatively, there is a higher chance for them to up their subscription when they can afford the higher price.
5. Pausing Over Cancellation
No one in SaaS wants to hear the word cancellation, but customers might have to cut out your services if the economy takes a hit. If you cannot provide alternatives at a discount, offer a pause in their subscription instead of canceling it altogether. Customers are more likely to return to their service when they don’t have to repeat the entire onboarding or registration process.
When the customer is ready to return, avoid confusion and construct an easy-to-follow plan for reinstatement across the board. Don’t set time limitations either. When the client is in charge of when they come back, they are more likely to follow through.
Additionally, get ahead of the bullet and send out an email or message offering pauses in subscriptions to clients who have expressed concern over payments. Don’t mention a pause to all clients. You want to keep as many subscriptions intact as possible; this is merely a tool to combat possible customer succession.
6. Invest In Your Customers
Loyalty programs are a dime a dozen. If you currently have one make sure it’s worth it. Adapt to what your customers actually need and construct a well-thought-out loyalty program that offers benefits, not just advertisements.
Customer and revenue retention is your goal. Find what works for your customers to help them in tandem with helping your company reach your own retention goals. Use insight into what your customers need at this moment to construct a proper plan.
Customer loyalty programs can have a variety of benefits:
- Require customers to follow your social media page as an onboarding fee or have your customers share your page on their own.
- Offer points or account credits to customers who try different product features.
- For every paying customer referral, offer a small account credit (whatever is manageable for your business) or exclusive beta access to a new product or service.. For example, at Zeni, we offer a $1,000 bonus for customer referrals.
Customer Retention Provides Stability
Reducing or even simply maintaining your customer churn rate during a recession is not always easy. Ultimately, customer retention will affect your finances and ability to survive.
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Zeni can help you track your total revenue (particularly incoming subscription revenue) on a daily, monthly, and quarterly basis so that you always have a clear picture of where you stand. Easily access your profit and loss statement within a custom dashboard wherever you are! Use this information to estimate your future cash flow, see trends, and re-strategize when needed to focus on customer retention.
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