Bird in Hand

Customer retention is a defining factor for the validity of a SaaS company. A high (or low) customer retention rate is a symptom of company’s quality. For a Saas company, a 90-98% customer retention rates is considered excellent.

In its almost 3 year existence, Mercury Grove has yet to lose a subscriber - a fact attributed to:

   -   Quality products - our products are simple and intuitive to use and thoroughly tested internally and through beta-releases.
   -   Quality customers - our customers have come via target marketing efforts, as well as through interaction with the communities in which we live.
   -   Quality service - this becomes more challenging as we scale, but the challenge is offset by a well-defined support model assisted by our fantastic support application (AppManager), a passionate support team, and the quality of our products and customers.
   -   Luck - We’d be arrogant to think we figured it all out before we started. Taking measured steps towards our product development approach and marketing strategy, combined with a little luck, has allowed us to minimize the impact of any mis-steps

…but it’s the world wide web - the customer base is almost infinite (> 1 billion). Why should we even care about customer retention?

1. It’s still hard (and expensive) to find new customers. Period. This makes coddling the existing ones all the more important. Simple math shows that, if you spend $2000 in time and resources to land a $100/month subscriber, you’ll need to average a 20 month subscription for that customer just to break even. Note to self - if we ever lose a customer, I’ll need to calculate our average retention time ;-).
2. Satisfied customers represent a referral base for our business. You’ve heard it a hundred times - a satisfied customer will tell 4 or 5 others about their experience (a dis-satisfied customer will tell 7 to 13 others).
3. Our current subscriber base is a more reachable, more willing market for our new products. New products that we deliver will complement existing ones. Subscribers that have been around a long time are more apt to give a new product a go.
4. If a customer has been around a while, it likely means they’re doing well for themselves. Companies that continue to grow represent a powerful partnership that could help us better understand how companies can be successful through the use of our tools.

As we continue to grow, our support model will indeed be tested. I’m confident, though, that if we continue to “act local” and represent more than a domain name to our customers, we’ll be in a better position to overcome many of the obstacles that we’re likely to face.

Tags: customer retention

This entry was posted on Saturday, June 14th, 2008 at 5:14 pm and is filed under Misc.... You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.