Customer Retention is the Key to Success for a Software Product Firm

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Ankur Bansal

Software product firms thrive on increased adoption of their products by end users which they measure rigorously. At the same time, it is important for them to retain existing customers because that shows the net increase of adoption. Therefore, the consistent theme for success is “keep your customers happy”. The typical business model is to retain the customers so that the recurring revenue continue to flow. Since the cost of acquiring a new customer is high and time consuming, software product firms hate to lose customers.

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That has been the core strategy for most firms whether its big behemoth like Microsoft or Google or a nascent startup. The legacy thinking is to develop a product and license it out whether its perpetual license, subscription based or any other model. It’s about building something and licensing it out.

Enterprises world wide use dozens of point solution based SaaS products. Enterprises in mature markets like US may be using hundreds of them. Imagine the global landscape and the competitive landscape. How then software product firms thrive in this ecosystem? They have to not only focus on acquiring new customers but also ensure retention of existing customers.


What is typical customer retention strategy for product firms?

Invest in product features - Software product firms invest heavily into the product features to keep their customers hooked. Hence the importance on releasing new features with agility and speed. The cost of missing your releases can be enormous in a competitive world.

Sales, Campaign and Promotions - Firms also invest in reaching out to end users, plan for demos, offer free trials etc. This requires investment not only in product engineering team but also in relevant sales and pre-sales team or account team who manage customer relationships.

In case and which is quite often, the budget owner of the client is not the end user but a key decision maker, it becomes important to setup relationship with decision maker and develop ability to influence them. This means that software product firms will have to invest more in sales leadership and sales process who can showcase value proposition, develop ROI, plan for sales and solution pitch and provide end to end experience navigating through complex external ecosystem.

Reduce Friction with end users – Keep your end users happy by reducing friction with them. End users should get minimal opportunity to dislike the features or functionalities. The UI should be easy and the experience should be good. Anything that user does not like will create friction and they tend to switch to alternate product. The use of AI/ML based technology to understand user behaviour and predict the bugs and issues will be key. Firms need to adopt the mindset of making the product self-learn and self-heal. It results in faster resolution of issues and better experience for customers.


It all boils down to customer service

However, if you note the underlying factor, it is treading towards “How can you provide services that keeps your customer engaged to your product and keep them happy?”

So while focus on product development is a must, the importance of services cannot be underestimated. How can a product firm retain its customers if it does not focus on engaging its customers through post product sale services?. It requires a “Service” mindset, a mindset that customers needs to be engaged by people. There has to be a set of mechanism defined that enables the organization to engage with end users, collect and analyze experience/feedback and solve for the gaps.