Do younger SaaS companies have a high retention rate?

A 2017 SaaS Capital survey showed that young companies actually have higher retention rates than more mature SaaS businesses

Consistently retaining customers is an important characteristic of any successful SaaS business, and an entire industry, Customer Success, has sprouted up to help SaaS executives do just that. However, knowing what is a “good” retention rate for your individual SaaS company remains difficult to pin down. This research helps answer that question based on our survey of over 700 private SaaS companies.SaaS customer retention is broken down by:

  • average contract value
  • company size
  • company age

This brief also explores the relationship between growth and retention, the “false positive” retention rates of young SaaS businesses, and the impact of Customer Success programs on overall retention.

The Benefits of Young Companies for Loyalty and Retention

The findings from the 2017 SaaS Capital survey demonstrated that young companies have several advantages that lead to higher customer retention. As a business just getting started, young companies often have an advantage because they haven’t yet developed bad habits or made mistakes common in more established businesses. Additionally, new startups are often agile and may respond faster to feedback or requests. Another factor at play is human connection. Many customers find comfort in knowing they can easily approach founders with their questions and be responded to quickly without having to navigate the bureaucracy.

Different Approaches Lead to Different Results

The survey results suggest there are distinct approaches being taken by different generations of SaaS businesses when it comes to developing customer loyalty. For example, many younger startups take an aggressive approach to marketing spending in order to acquire users more quickly. They also tend to focus more on personalizing their service in order to create personalized relationships with each user as opposed to relying simply on features or functionality offered by their product or service. On the other hand, mature businesses tend towards a “set it and forget it” approach. This is when users can maintain their existing account but aren’t encouraged to invest further into the product or service offering by being incentivized down other sales funnels such as higher price tiers or offers of complimentary access for certain activities.

Each Business Needs To Identify Their User Base

It’s clear from this survey that not all approaches yield the same results when it comes to developing customer loyalty, so each business needs to identify what works best for them when engaging users. Your main goal should be successfully building a happy user base with high retention rates – regardless of your company’s age!