Retaining Customers from Day 1 for B2B SaaS Startups
Let’s start from the beginning. You’re an expert in your field and you have identified a gap that is yet to be closed, or solved the way you think it should be solved. You decide to grab your buddies from the army, from your childhood, from your workplace or elsewhere and start brainstorming how YOU would solve it. Together, your skills and vision are complementary and you believe you can achieve great things. You decide to embark on this journey to create the next big B2B SaaS company – one that will solve the identified problem in the best way.
You start talking to potential customers and receive helpful feedback, optimize your future offering, and do so a few more times. You even raised seed funding. At this point, you probably have many great leads, whether they’re cloud-first unicorns, Fortune 1K enterprises, or otherwise. You even managed to close your first few deals – fantastic!
But what now? You worked so hard to close these target customers, how can you ensure not to lose them along the way? Perhaps they had a budget for you this year, but when Q4 rolls around to plan next year’s budget, will your offering have provided enough value for them to renew the contract and even increase their spending? Gigi Levy-Weiss, General Partner at NFX, wrote in his “10 Places to Find Product-Market Fit” blog about B2B SaaS Startups, “Engagement and retention numbers will tell the real story. If your product doesn’t have real value for customers, you’re going to see horrible engagement numbers and even worse retention metrics. Real PMF shows up both in user acquisition and in user retention. Top-of-funnel growth means nothing if the users all churn” and I couldn’t agree more.
When it comes to retaining customers and increasing stickiness in B2B SaaS startups, here are a few tips:
1. PRODUCT: Create a product your customer will rely on. Make your product central to the customer’s day or week and a core part of their operations.
- Incorporate a low-friction approach: How easy is it to onboard new customers? Is your product easy to understand & use or does it require hours of training the customer? Take Crowdstrike, for example, founded in 2011 with a current valuation of $62B (up 32% from 2020 and 520% since 2019) and check out their 2021 Annual Report (10-K) released this past March – Taking their unique and strong value proposition aside, they specifically talk about their “low friction land-and-expand sales strategy” on page four where they describe how their customers often expand their adoption of Crowdstrike’s Falcon platform over time with ease, such that their dollar-based net retention rate measuring the expansion of existing customers over the 12-month period was 125% as of January 2021 and almost consistent with 2020 (124%). Low Friction is key and it’s often the beauty of B2B SaaS sales.
- Pay attention to usage: Do they need you just every few months or is your platform a part of their daily or weekly routine? Measure this. Who connected to your platform? How frequently do they use it? If customer X uses it daily, what can you learn from that? If they hardly touched the platform since starting your relationship, what can you learn from that? Perhaps your platform didn’t deliver what the customer thought it would, or perhaps their needs changed over time (although a drastic change in focus is more unlikely).
- Tell a story and be actionable – To make your product a core part of their operations, ask yourself, does your product bring context and tell a story around the data that it presents that the customer would not have otherwise seen or understood? For example, in the cybersecurity space, it’s not enough to just show the customer where their vulnerabilities lie or detect suspicious activity. Cyber vendors need to provide actionability – they need to solve the problems their products bring to light.
- Grow your number of champions by adding use cases that touch on various functions within the organization to create a viral effect – If your platform is used by just one person in the company, that’s a huge risk. Arick Goomanovsky, Co-Founder & CRO at Ermetic shares: “The ultimate goal is to have more champions and one way to do this is by addressing more use cases that correlate to various functions within the organization. In doing so, you have champions across functions within that same organization. For example, even though we at Ermetic are a security company, we have a great use case for compliance that enables organizations to comply with industry standards, audit, and investigate evolving threats. Therefore, we don’t just have the CISO or VP Security as our champions, but also compliance executives.”
2. COMPETITION: Be the “Best of Breed” in your area and stay on top of what the competition plans next
I get asked this question a lot: “How is it that there are so many cybersecurity startups?” The answer: Layers. This is the essence of the cybersecurity space. Most CISOs never have just one cybersecurity vendor – he or she has many, each the “best of breed” in their area. A CISO can use Ermetic for securing identities and managing entitlements in IaaS/PaaS cloud environments, use Cider for ensuring CI/CD security, and Cyolo as their next-gen Zero-Trust solution. When you’re competing in a space that is becoming saturated, but that also has room for many solutions at once at the hand of the customer, it might be easier to navigate, but you should still always know what your competitors are doing and how…
In the Dev/DevOps space, for example, it’s similar. There are many problems to solve, and many solutions that can be used. I asked Ilan Peleg, CEO & Co-Founder of Lightrun, what he believes is the key piece of advice and he said: “To stay ahead of the competition. B2B SaaS companies need to continuously innovate – work consistently with existing customers to figure out not just what’s currently working versus what’s not, but what’s the next gap that they predict will need solving for. Turn your customers into people you can take advice from.” You can ask, “What are your other pain points currently?” or “What are your focus areas at the moment?” to figure out where your company can be applicable (if not now, then in the future). This takes me into my final point below.
3. FEEDBACK: Learn from your design partners and customers. Expectations should not just be met, but exceeded. You listened, you delivered, and you kept optimizing for the future to increase your net retention rate over time.
Open communication with your customers and constantly improve your offering based on the feedback you receive. It’s not enough to get into the mind of your existing customer today. You need to think about what they will want one, two, or even three years from now. With the right questions and the amount of touchpoints/engagement, you can combat customer churn and instead, gain a deep understanding from your user’s perspective. Take anecdotes, which started with a solution that streamlines audits and today, offers an end-to-end compliance management SaaS platform. Yair Kuznitsov, CEO and Co-Founder says, “We listened to our customers, that’s the most important thing. Our core functionality went through a positive evolution cycle where today, we are really leveraging all of the data that we collect for the better of the customer and not just offering a solution for audit management, but multiple offerings (evidence collection, compliance management, etc.) that our customers use daily.”
To Recap, some key factors to keep in mind when working towards retaining customers in B2B SaaS Startup are:
- Making your product central to the customer’s routine and a core part of their operations: Tell a story (rather than just present data) and be actionable, incorporate a low-friction sales approach, measure usage, and grow your champions (and use cases)
- Keeping two eyes on the competition and thinking ahead, while being the best at what you do
- Listening and learning from your customers
No matter what your company sells and who it sells to within an organization, getting into the mind of your customer – all the way from product development to customer relationships over time – is the game-changer. Good luck!