13 SaaS Renewals Best Practices For Driving Business Growth
Mastering SaaS renewals’ best practices can transform a routine administrative task into a strategic opportunity to drive customer success and propel your business toward sustainable growth.
In this article, we examine what makes SaaS renewal management so important and explore renewal strategies for preventing customer churn and increasing upsells.
Let’s dive right in!
TL;DR
- The SaaS renewal process involves a series of actions on/before the renewal date that lead to a customer’s renewal.
- A good SaaS renewal strategy helps drive customer retention, increases the customer lifetime value, and improves your monthly recurring revenue.
- The renewal rate is calculated as the number of customers who renew their subscription divided by the total number of customers up for renewal at any given period.
- SaaS renewal rates above 80% are generally considered healthy. However, the higher the rate, the better your business health.
SaaS renewal best practices for driving free to paid conversions include:
- Create a personalized onboarding experience to retain trial users.
- Guide trial users towards key actions with checklists.
- Use interactive walkthroughs to drive customer success.
- Offer self-service support to improve customer satisfaction.
- Monitor customer health metrics to identify at-risk users.
- Send trial-ending reminders to boost conversions.
- Routinely collect customer feedback and act on it.
SaaS renewal best practices for driving upsells include:
- Use path analysis to identify upsell opportunities.
- Trigger upsell messages at high-intent moments.
- Offer limited deals and discounts to motivate users.
SaaS renewal best practices for driving cross-sells include:
- Promote a new add-on with email marketing campaigns.
- Leverage reverse trials for stand-alone features.
- Personalize the cross-sell messages based on user segment.
Userpilot helps you track product usage and trigger data-driven contextual experiences to drive customer success. To get started with Userpilot today, book a demo call right away.
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What is a SaaS renewal process?
SaaS renewal refers to a customer’s decision to extend their subscription at the end of their original subscription period.
The SaaS renewal process, thus, involves a series of actions before or during the subscription period that leads to a customer’s renewal.
Why is SaaS renewal management important?
The SaaS business model is heavily dependent on sustaining an ongoing customer relationship. But with several SaaS companies springing up each day, losing your customers to a competitor is easy if you lack a proper renewal strategy.
A proper SaaS renewal management strategy helps you in three key ways:
- Drive customer retention. A proper SaaS renewal management system tracks user behavior to identify customers at risk of churning. Armed with this knowledge, you can take steps to prevent churn and improve your customer experience.
- Increase the customer lifetime value. By closely following your user’s activities, you get a better sense of when upsell and cross-sell opportunities are most likely to be successful. This helps you to extract more revenue from the customer over their lifetime.
- Increase monthly recurring revenue. Holding on to your existing customers is integral to improving your revenue stream. By working to guarantee customer renewals, new SaaS contracts bring in new revenue rather than replace previous ones.
Ultimately, with customer acquisition costing up to 7 times more than customer retention, ensuring your customers renew their subscriptions is central to your business’ success.
How to calculate the SaaS renewal rate
SaaS companies have different approaches to calculating renewal rates. The most basic and common of these is known as the Count of Customers Method.
It involves taking the percentage of users who renewed their contracts over a subscription period. So, if 100 customer contracts are up for renewal and 95 renew, the renewal rate is 95/100 = 0.95 or 95%.
This approach is effective for SaaS businesses with a homogeneous customer base (customers with very similar SaaS contracts) but is less effective when the customer base is varied.
SaaS businesses with varied contract sizes (say, $1000/year for some and $3,500/year for others) may, instead, measure the percentage of revenue retained rather than the number of customers that renewed.
What’s a good SaaS renewal rate?
There’s no hard and fast rule for SaaS renewal rates – the exact number might vary depending on your industry, pricing, and product. Given these variables, it’s essential for SaaS businesses to continually monitor and refine their renewal strategies.
Ultimately, though, you want this number to be as high as possible. For example, businesses with an above 80% renewal rate are generally considered healthy.
This high benchmark, as noted by industry insights from Mosaic, reflects a company’s ability to deliver continuous value and meet its customers’ evolving needs.
SaaS renewals best practices for driving free to paid conversions
The goal of any limited free trial offer is to get customers to convert to a paid subscription at the end of the trial period.
At this stage, your goal is to help the customer justify the payment as they approach the renewal date. There are different ways to go about this:
Create a personalized onboarding experience to retain trial users
For most SaaS products, different user personas are attracted to the product for different reasons. Each persona should, therefore, adopt the feature in your product that best helps them solve their problems.
With that in mind, you can set up trial users for success by personalizing their experience to make it easy for them to derive value from the product and justify paying for it at the end of the trial period.
Begin your personalization by launching welcome surveys to determine the user’s persona upon sign-up. Use the survey to collect data such as the customer’s background, job to be done, location, etc.
Once you’ve collected the relevant data, it’s time to segment the user and trigger an onboarding flow that highlights the features that this group finds most useful.
The faster the user experiences the product value during the trial, the more chances they’ll renew their subscription.
Guide trial users towards key actions with checklists
Rather than blindly hoping customers will find and complete all the steps required to experience value, proactvely guide them with checklists.
Checklists are effective thanks to psychological principle called “Zeigarniks effect”, which states that users are more likely to remember incomplete tasks and come back to them.
You can further improve checklist completion rates by adding progress bars to them. This will reassure users that they are close to finishing and push them towards the goal.
Use interactive walkthroughs to drive customer success
While checklists point users toward important steps, they don’t guarantee the user will be able to complete a specific workflow.
That’s why it’s important to couple checklists with contextual in-app guidance which is triggered when a user clicks on a checklist item.
One example would be to launch interactive walkthroughs when a free trial user interacts with a feature for the first time.
These step-by-step guides engage users and walk them though using the feature, ensuring immediate feature adoption.
Offer self-service support to improve customer satisfaction
Customers use your product at all times. This is true of both free trial users and paying customers. Unfortunately, providing 24/7 customer support to every customer is both expensive and inefficient.
Instead, invest in a self-serve support process. You can do this by curating a knowledge base full of resources like product documentation, video tutorials, how-to articles, etc.
Your goal here is simple – whenever a customer has a question or runs into a roadblock with your product, they should be able to immediately get the answer they need and return to using your product.
Monitor customer health metrics to identify at-risk users
By keeping an eye on customer health metrics, your customer success team will be able to detect early warning signs of potential churn and act to address the issue.
There are 2 main types of metrics you need to monitor, which are:
- Product usage metrics: This includes data relating to a customer’s engagement levels with the product, including the number of sessions per user, daily active users, product engagement score, feature adoption rate, and so on.
- Customer satisfaction metrics: These metrics measure customer sentiment at different touchpoints and include customer satisfaction score, Net Promoter Score, customer effort score, etc.
Send trial-ending reminders to boost conversions
Avoid involuntary churn by ensuring users are aware of their expected renewal date. You can do this by notifying them before the trial period ends.
Use these notifications to remind users about your product’s benefits and highlight what they’ll lose without the upgrade. To be truly effective, you may need to send this reminder more than once.
For instance, you can send a reminder 3 days to the end of the trial period, and another with only 24 hours left. That way, these users can choose whether they want to upgrade or not.
Routinely collect customer feedback and act on it
Customer satisfaction plays a key role in the SaaS renewal process. One way to determine whether or not the customer is satisfied is by asking them directly.
For example, as a customer approaches the end of their trial period, you can send a transactional NPS survey to measure their satisfaction.
Be sure to use open-ended follow-up questions to understand the reasons behind the score.
Always remember, though, that user feedback is powerful if you act on it. As customers identify areas for improvement, act on them to improve your conversion rate.
SaaS renewals best practices for driving upsells
To drive upsells, you must understand the needs of your existing customers and move to address them.
Your customer will expand their accounts only if they feel like they are getting good value for their money.
Use path analysis to identify upsell opportunities
Successful upsell promotions depend on your ability to find the right moment for your campaign.
Conduct a thorough path analysis to understand how users interact with your product and pinpoint moments where additional features or complementary products can add value to users.
After launching successful upsells, use the same path analysis to track how users journeyed to that conversion point. Based on the data generated, identify opportunities to shorten the path and convert more users.
Trigger upsell messages at high-intent moments
One way to ensure your upsell campaigns are effective is by triggering them when they’re most needed.
Most SaaS products, for example, set usage limits for lower-tiered user accounts.
If you use this, you can track the app engagement of users to detect when they reach their limits and prompt them to upgrade.
This technique is very effective since users are engaged with that specific feature in the moment and are more open to investing in it versus if the message was triggered when they were doing something else.
Offer limited deals and discounts to motivate users
You can also encourage upsells by providing limited-time discounts and deals to users.
For instance, you can incentivize users to upgrade their accounts during the renewal process by offering a bonus or discount.
Your discount will help them justify the pricing, seeing the offer as a steal they need to get in on before it expires.
SaaS renewals best practices for driving cross-sells
Unlike upsells, cross-sells don’t involve selling an account upgrade. Here, your goal is to expand the customer’s purchase by getting them to add extra features that add value to their initial purchase.
Promote a new add-on with email marketing campaigns
In-app campaigns are excellent tools for reaching customers while they’re engaged with your product. Thankfully, email marketing campaigns provide a chance to expand on that offer.
Take advantage of emails to highlight the benefits of the new feature and encourage users to try them out. Your emails should be clear, concise, and compelling.
At the end of the email, include a call-to-action (CTA) that encourages customers to explore the additional value of the add-on.
Leverage reverse trials for stand-alone features
Reverse trials granted users access to the premium version of a product for a limited time and then downgrade to a freemium if users fail to convert.
This cross-selling approach allows users to try out a premium feature before making the monetary commitment required to access it.
For example, Loom grants users full access to its Loom AI add-on for a limited period. They then prompt users to upgrade before the trial ends, reminding them when they have just one free usage left.
The goal is to create a sense of urgency that supercharges the SaaS renewal process and helps the customer make a final decision.
Personalize the cross-sell messages based on user segment
Much like upsells, cross-sell offers are most effective when they’re tailor-made to a customer’s need.
You can do this by segmenting your users based on shared characteristics and tune your messaging (for the same feature) to highlight its specific benefits for each user segment.
How to implement your SaaS renewal strategy with Userpilot
Userpilot empowers your customer success manager and team to understand your customers’ needs better and create an effective SaaS renewal management strategy.
It helps you in three key ways:
Track product usage data to identify disengaged customers
With Userpilot’s feature tagging, you’ll be able to track interactions (clicks, hovers, and text inputs) with a feature/element. You can also track custom events by combining several feature tags and events.
This will help you to identify users who haven’t adopted key features for their use case and trigger engagement flows to reach them.
Trigger a micro-survey before the trial ends to gather user insights
Feedback is an essential part of ensuring your customers feel valued and heard. It is also crucial to ensure your product development decisions best suit your customer.
Userpilot helps you create in-app microsurveys to collect feedback from users while they engage with your product. This includes NPS, CSAT, and CES surveys, among others.
You can create a survey from scratch or select from one of 14 templates and customize it to match your brand’s look and feel. You can also translate your survey into other languages in minutes to better engage customers across the globe.
After launching the survey, Userpilot lets you track and analyze user responses from a simple dashboard so that you can identify improvement dashboards and make necessary changes.
Create experiments for different segments
Userpilot enables you to create user segments based on their demographic data, product usage, survey responses, content engagement, etc.
With Userpilot’s audience targeting features, you can then trigger contextual in-app experiences for a specific segments of users.
You can also run A/B tests for each segment to see what works best for them and tailor their messaging/experience accordingly.
Conclusion
Although creating an acquisition strategy is important, you must also take other steps to improve the renewal process.
SaaS renewals happen when customers feel like their investment is justified and they are getting enough value from the product.
Want to get started creating meaningful in-app experiences that unlock value for users? Then book a demo with Userpilot and we will show you how!
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