Our 6 Favorite B2B Customer Retention Strategies for Startups [A 2024 Guide]

A growing startup should invest in getting new customers. But what about your existing client base?

Customer retention’s importance can’t be overstated. Improving your customer retention will lead to an increase in revenue, for a fraction of the cost focusing on new customer acquisition would have. And in this post, we’ll dispel most doubts you could have about it. 

We’ll cover:

• What is customer retention
• How does it differ between B2B and B2C companies
• Customer acquisition vs customer retention
• Customer retention and product led growth
• How to implement a customer retention strategy
• What are some of the best strategies for startups
• How to retain customers who are leaving

Let’s get right to it.

What Do We Mean by “Customer Retention”?

Customer retention is a percentage-based metric that represents your organization's ability to retain its clients. A critical metric, it helps to assess customer satisfaction and brand loyalty.

According to ElasticPath, there’s a 60-70% chance of selling to a repeat customer in contrast to a 5-20% of selling to a new prospect. And a 5% increase in customer retention can positively impact your profits by up to 95%.

To best contextualize customer retention, you’ll also need to keep track of:

• Customer churn rate - Also known as customer attrition, is the percentage of customers who leave your business during a certain period
• Average order value - Represents the average spending per order
• Repeat customer rate - This metric takes into account the customers that have placed more than one order
• Purchase frequency rate - Shows the amount of repeat business your organization gets over a stated period of time

Why B2B Customer Retention Is Different from B2C Customer Retention

Customer retention is key for both B2B and B2C organizations, but the strategies implemented will vary according to their customers' needs.

Businesses tend to be proactive and act upon specific strategic needs. For instance, the need for software that simplifies communications between teams. 

The buying process will be longer than that of a direct customer, because you won’t be dealing with a singular purchaser. Instead, you’ll need to sell to an entire team/company. Your main point of contact, along with other stakeholders and decision-makers will have to decide whether your product is right for them. This decision will be reliant on the business value of your product, on a concrete ROI.

After-sales service is also usually a deciding factor in purchases, as your product might need maintenance, repairs or updates (like our hypothetical communication software). The quality of your customer support and your ability to reduce initial frictions will also be key.

Direct consumers will also act upon their needs, but their decision-making process is usually much shorter than in business-related purchases. Fewer people are involved in the decision - it’s usually one person or, at most, a family unit. B2C customers are also considered “emotional” buyers, being strongly influenced by the feeling a product generates: Do they like how it looks? Does it make them feel “good”?

B2C businesses’ retention efforts should target the biggest spenders, who find their products life-changing and have the resources to make recurring purchases. 

‍

B2B companies should also focus their efforts on a specific client profile. But their ideal customer profile shouldn’t just “like” their products and have the budget to afford them. Instead, B2B ICPs:

• See significant business impact from your solution
• Don’t require long and expensive sales processes
• Have the budget and are willing to scale with your solution
• Have strong internal advocates for your product

B2B Customer Retention vs. B2B Customer Acquisition

As we briefly covered in this article’s introduction, studies show that customer retention is more cost-effective than customer acquisition. But why is it so?

B2B customer acquisition is a lengthy process. Unless you are lucky, you won't be dealing directly with the final decision-maker. You will invest significant time and resources toward making a sale. And, in the worst case scenario, your B2B customer acquisition strategy could actually make it unprofitable to get new clients.

In contrast, customer retention has a lower cost. It’s less expensive to retain a customer than to acquire one. And that’s not the only benefit, a happy customer can act as a brand ambassador, furthering your reach through word of mouth.

Customer Retention & Product-Led Growth

We can't discuss customer retention for B2B startups without mentioning product-led growth.

Product-led growth is a growth strategy focused on using product features as the primary driver for growth. It aims to optimize a product so it will attract new customers and keep current ones engaged.

Some excellent examples of this strategy being implemented successfully could be:

• Notion, a productivity and note-taking software that uses a freemium model, produces resources to educate its users and help them make the most out of their platform. And of course, their team tracks relevant content KPIs.
• Dropbox, the famous data storage platform, also uses a freemium model, offering 2GB of free storage that can be expanded by referring new users to the platform.
• Slack, one of the most resonating PLG successes, implements a freemium plan while also offering an excellent user experience, taking the company to a $7 billion valuation.

PLG synergizes especially well with customer retention strategies. The product itself becomes the primary retention tool by delivering on its business value, generating a tangible benefit for your client, and thus preventing customer churn.

Stats compiled by Paddle in a recent report suggest that 83% of public SaaS companies to surpass $100m ARR in their first five years leverage product-led growth motions.

How to Start Implementing a Customer Retention Strategy

A successful customer retention strategy depends on correctly identifying how efficient your company is at maintaining customer satisfaction in the long run. You can get an idea of your current standing by calculating your customer retention rate and your customer churn rate.

How to Calculate Your Customer Retention Rate

To calculate your customer retention rate, first you’ll have to select a period. Let’s say you pick the entire year 2022. Then, you’ll need to find out how many new clients your business got during 2022 and how many of them remained at the end of 2022. And, finally, the number of clients you had at the start of 2022.

Got the numbers? Great, now subtract the number of new customers remaining by the number of new customers added through 2022. Divide that by the total number of customers at the start of the year. Finally you’ll multiply the answer by 100 to get a percentage.

For customer churn, you could flip the percentage you got for customer retention. If you had a 96% customer retention rate then you’d have a 4% churn rate.

Divide your churned customers at the end of the period by the customers at the start of said period. Then multiply the result by 100 to get your rate.

Once you get your retention numbers you’ll know where your company is standing. If it’s withinthe 5-7% rate, you’re in the average for SaaS companies. But even if it is, you should be applying a retention strategy. But that would be impossible without knowing what your clients' needs are. Reach out to your community and get their feedback, what are they expecting from you and your product?

Our 6 Favorite Customer Retention Strategies for B2B Startups

We’ve already explored what customer retention is and the variables that go with it. So now, let’s see some of our favorite customer retention strategies for startups.

We recommend:

• Leveraging customer feedback
• Niching down
• Offering personalized experiences
• Implementing cross-selling and upselling strategically
• Starting a loyalty program
• Automating retention efforts

Leverage Customer Feedback

Your customer’s feedback is crucial, you should provide an avenue for your clients to reach you with inquiries and needs, and then act upon them.

That way, you will:

• Help your customers feel heard
• Get first-hand insights that you can use to optimize the customer experience and prevent churn

Niching Down

Your product should solve your customers’ problems, but not every problem everyone has ever had. Trying to provide too broad of a service will dilute your product’s quality and drive your prospects to other companies that better fit their needs. Don’t be afraid to niche-down and become hyper-focused on the problems you solve best, for the companies that need you the most.

Offer Personalized Experiences

Dont treat your customers like a faceless mass, every bit of personalization helps. Be it a welcoming video after their first purchase, a carefully curated selection of resources,or a congratulatory email on their birthday. Even small things can make your customers will feel a closer conection to your company.

Use Cross-Selling and Upselling

Offer a complementary product or service to the one purchased by your customer. This way, you’ll be helping your clients to achieve their goals beyond the scope of your original service.

Another option is to offer a progressively better option to the initial purchase. A typical example is the freemium model. The client subscribes to a free service. This service may be robust - but it's likely to lack some valuable features. If the user needs them, they can get them through a high-tier plan.

Utilize Loyalty Programs

Reward customer loyalty. Consider offering rewards for further purchases or subscription milestones. These rewards can take the shape of anything from discounts to swag boxes.

That way, you will:

• Gamify the buying process
• Offer a new way to connect to your brand
• Minimize friction
• Give clients something they may want to celebrate - and share on social media

Automate Your Retention Efforts

Nowadays, you have a wealth of automation tools that can help with your customer retention. Consider implementing automation to:

• Provide 24/7 customer support
• Trigger emails based on user behavior
• Automatically deliver resources or incentives during the purchasing process
• Detect at-risk customers

How to Retain Customers Who Are Leaving

Let’s face it, customer churn is inevitable. In average, SaaS companies have a churn rate of 5-7%. But retaining customers who are thinking of leaving isn't futile or a lost cause, far from it.

Your first line of defense, so to speak, should always be focusing on customer satisfaction. Keeping your customers happy with your product/service should keep the churn rate to a minimum.

But when all else fails, you need to be able to identify those who are unsatisfied quickly. Analyze website activity, send satisfaction surveys and bring visibility to direct complaints. Is there something wrong with your customer support? Are your customers feeling unheard? An unresponsive customer support will leave your clients feeling in a limbo where solutions are never presented and they waste time and money.

At every step of the way, automation is your friend. Create automated email campaigns targeting unengaged clients. Offer them personalized product recommendation based on data Give them opportunities to voice their discontent and offer them attractive solutions.

Additionally, if your clients can disengage through a subscription cancellation form, include a final offer. Don’t try to make churning more complicated than it should be. But consider offering a discount or freebie. That way, your customers can choose to give your brand another chance.

Let’s Talk Retention

Your brand isn’t in a vacum. Its growth can be thought of as a collaborative process between your team and your customers. Keep robust client communication channels and listen to feedback. Satisfied customers will reward you with their loyalty and help you grow and expand.

Struggling with customer retention? At Postdigitalist, we can help you rethink your customer retention strategy. Whether you're failing to give users the informative resources they need or your UI is holding you back, we can help. Book a free call today.