Using product-led strategies to improve customer retention and expansion

The price to acquire a new customer can be up to five times higher than the price of retaining an existing one. For companies of all sizes, the costs associated with losing customers can be hard to swallow—particularly if customers are leaving in droves. But beyond the bottom line, customer churn takes a toll on a company’s reputation, and creates other challenges for teams across the organization. For example:

• High customer churn forces marketers to spend their time and resources on expensive top-of-funnel activities like awareness-building and re-engagement, rather than marketing to customers who are already “warm” and invested in the product
• High customer churn leaves sales with fewer upsell and cross-sell opportunities, which are far less resource-intensive (and generally faster-moving) than opportunities involving new leads

For customer success (CS) teams, churn represents not just a loss of recurring revenue, but also an erosion in customer trust and loyalty that could potentially impact the company’s growth prospects down the road. Low retention is also a signal to prospective customers that the company they’re considering doing business with might not be such a safe bet after all—whether due to poor product-market fit, a bad customer experience, or any other number of reasons. 

According to research from Bain & Company, increasing customer retention rates by just 5% can increase profits by 25% or more, in some industries. And in a world ruled by software as a service (SaaS) and other subscription models where it’s easy to move from one vendor to another at a moment’s notice, it’s more important than ever for companies to prioritize customer satisfaction and product experiences that inspire their users to stay.

How does becoming product led improve customer retention?

Customer retention is a measure of how many customers renew their contract at the end of their subscription term. It’s the inverse of customer churn, and is also sometimes known as a company’s “logo retention rate.” Retention is measured by comparing the number of customers at the start of a given time period with the number of customers at the end of that period—excluding any new customers gained during that time.

By virtue of putting their product experience at the center of the customer experience, product-led organizations see the product as their primary customer retention tool. They know that if the product delivers on its intended purpose and creates value for users, customers will be more likely to continue using it—and less likely to churn. 

If the product delivers on its intended purpose and creates value for users, customers are more likely to keep using it—and less likely to churn.

Customer success managers (CSMs) in product-led organizations focus on demonstrating the product’s value and aligning its capabilities to their customers’ use cases and goals. By helping customers maximize the value of their investments, CSMs build trust with users and encourage them to continue leveraging the product to reach their desired outcomes.

How product-led teams use data to improve retention

Product-led organizations also rely on customer usage and sentiment data to understand exactly how customers are engaging with the product—so they can proactively spot those who may be at risk of churn and intervene as necessary. Both quantitative data (i.e.product analytics) and qualitative data (i.e. user sentiment and customer feedback) have a critical role to play here.

Product analytics shows you exactly how users are engaging with the product, on both the individual (visitor) and account level. Customer inactivity, low feature usage, poor adoption, or a decreasing Product Engagement Score (PES) could all signal that a customer isn’t happy or not seeing value from the product—and may therefore soon stop using it. Analytics can also tell you exactly where in the product journey users may be falling off or struggling to complete certain tasks. If enough users are struggling in the same area of your product, you might consider flagging it for the product team so that they can investigate further or make a few changes to improve the user experience.

Feedback—like feature requests, customer survey responses, or Net Promoter Score (NPS) submissions—gives you valuable insight into what your users really think about the product. Consistently negative NPS scores or feedback from users within a particular account (or from key decision makers within an account) could be early signals of a customer’s intent to churn. Similarly, if a broad swath of customers have requested a similar feature or update and ranked it as a high priority, you could assume that not addressing their suggestion might cause frustration and adversely affect their intent to renew. 

How to track and visualize customer health

Many product-led CS teams use the intersection of this quantitative and qualitative data to calculate a customer health score, which is a metric used to determine whether customers are healthy or at-risk. Deciding on a scoring system is a subjective process, and will vary from company to company. Regardless, it should help product and customer success teams reliably assess the likelihood that a customer will grow, renew flat, or churn.

Depending on your analytics platform’s capabilities, you may also be able to easily visualize retention using a retention chart. This visualization is a helpful way to monitor retention rates over time, and is particularly valuable following a launch—giving you insight into which features have staying power even after initial launch promotions have ended. Segmenting this data based on persona types, user tiers, or even annual recurring revenue (ARR) value creates greater predictability for CSMs. It’s also a great starting point to help CS teams understand the experiences of their best-performing cohorts of users so that those characteristics—and the activities that helped them get there, like onboarding or in-app guidance—can be replicated for other customers and users.

How does becoming product led drive expansion?

The best CS teams also leverage the product to help drive upsell and cross-sell (i.e. expansion) opportunities.

Like retention, product analytics has a role to play here, too. CS teams can evaluate user behaviors and patterns to understand how their customers are using and moving through the product—then use tactics like in-app messaging to engage with them in the most impactful moments. For example, if a user continually navigates to an area of the app their organization isn’t yet entitled to, you might have a potential upsell opportunity on your hands. It’s the CSM’s role to determine whether the feature the user is trying to access could add value or help improve their existing workflows, then engage with the customer at the right moment to pitch a trial or sale.

Here are a few examples of how in-app guides can be used to encourage expansion or secure renewals:

• Use a tooltip to denote that a particular feature or area of your product is available with a higher subscription tier or for an additional fee
• Target a feature-specific in-app guide at users whose activity demonstrates interest in a premium area of the product
• Use integrations with calendar tools to make it easy for users to schedule time with their CS or account teams following the release of a new product or feature
• Launch in-app guides to alert customers of upcoming renewals, and if possible, make it easy for them to renew directly within the product

In-app messaging can also be an extremely helpful complement to multi-channel expansion outreach programs—often the last step in getting a customer over the line. This product-led approach doesn’t just make it logistically easy for customers to expand their entitlements by making the options available to them clearly visible within the product. It also improves the likelihood that they will actually investigate these premium features or new products because they’re presented in context, as the product is top-of-mind.

How to build an effective product-led retention and expansion strategy

Customer retention and expansion isn’t solely the responsibility of the CS team. But as the primary points of contact for their customers, CSMs are well-positioned to influence a customer’s intent to renew or expand—and to guide customers through the process. Here are a few tips for CS teams to keep in mind.

Focus on the product experience

The best way to build a loyal customer base and drive retention is to focus on delivering a great product experience. While many aspects of product performance and functionality are out of the CS team’s hands, CSMs are responsible for helping customers maximize the value of their investments and use the product to its fullest potential. By working with their customers to identify the right products or features to solve their challenges, CSMs ensure good product-market fit and help customers reach their desired outcomes—all activities that impact retention. They can also help the product team continually improve the product by submitting feedback on behalf of their customers and ensuring customer-submitted feedback is collected and considered for future product iterations.

Close the loop with customers

Collecting customer feedback and sharing it with the right teams throughout the organization is a key ingredient in building a great product. Closing the loop with customers after they submit feature requests builds loyalty and encourages them to continue sharing their feedback—creating a continuous loop of improvement and iteration. It’s also an opportunity for CSMs to thank their customers for their ideas, demonstrate that the company cares about what users think, and reinforce that the customer experience is a core driver of product innovation. All of this builds affinity and sends a signal to the customer that they can trust the company to keep up with their evolving needs.

Partner with customer marketing

CSMs should collaborate with the customer marketing team to identify the right strategies for engaging with customers throughout their journey—while also avoiding duplicity in their outreach. As customers near the end of their contract, there’s a good chance the marketing team will run renewal campaigns aimed at specific customers. Working with the marketing team helps CSMs find organic ways to incorporate their own additional, personal touches. The customer marketing team can also be a valuable resource for helping the CS organization scale their ongoing outreach efforts—for example, letting customers know what the company is working on via customer newsletters or in-app announcements, building loyalty by inviting customers to events or asking for feedback, or increasing engagement by inviting users to join a community.

Reduce friction with in-app guides

A simple—yet often overlooked—retention strategy is making it as easy as possible for your customers to get the information they need about your product or get in touch with the CS team when they have questions. Making your customers hunt for information breeds distrust and frustration. Conversely, bringing these resources inside your product can help reduce friction and simplify the support, renewal, and expansion processes. You can also use in-app guides to give users the option to start a free trial or take a tour, directly within your product. This makes what they’re seeing feel more relevant and timely, and therefore increases their likelihood of renewing or expanding their contract.

Make your message specific and targeted

Being as targeted and specific as possible helps ensure your retention and expansion efforts will resonate. Think about it from the customer’s perspective: They don’t want to be on the receiving end of a message promoting a feature that’s not in alignment with their needs—especially at the point of renewal. Leverage product analytics, segmentation, and targeting to ensure the guides and calls to action you deliver in-app are relevant to specific customers and personalized for the actions you want them to take.