Challenges of Customer Retention

Challenges of Customer Retention

SaaS Introduction

SaaS: Software as a service, a term used to describe software solution available on the cloud, without the need for user to download a software and install it locally, whether it is a small solution or large. SaaS solutions are available on the cloud are moving steadily to replace in-house solutions, and creating new market for software consumption, this market is not limited to replace in-house solutions; it is a market inventing new different solutions to fulfill human needs in daily basis.

Cloud Based Software Solutions

The development of cloud based software solutions still exploding the web, SaaS market is still booming. Competition on SaaS is still not challenging companies that provide those solutions for most of the business domains.

Few SaaS business domains are mature enough and major players on the market already formed, like ERP solutions; ERP dominators on the cloud are themselves the old ERP top players who were providing in-house solutions with addition to Salesforce who started their business purely as SaaS provider and were able to compete head to head with traditional big blue players.

Other SaaS solutions are emerged from its business original landscape to provide their solutions through the cloud using SaaS models, like TV Streaming services dominated by Netflix.

Customer Choices and Turnover

In an era of tough competition providing cloud solutions in some business domains, and less competition in niche markets, customers are finding abundant choices in daily basis to flip between SaaS providers. Customer churn is a new problem emerged from old concepts and practices on the services industry; businesses were signing contracts with terms and conditions, SLA measures. Operational teams were doing their job in providing services that address customer needs and handle daily problems. Upon contracts’ period expiration, business teams from both companies were talking and discussing the level of support and negotiating new terms to renew support contract, customer retention expectations were easier to measure and predict.

The new SaaS market evolved with different challenges, more tough, more constraint, timely sensitive. Customers are terminating their subscription with single click, without talking to the SaaS solution service provider, customers are getting less engaged with the SaaS solution without SaaS solution provider get to notice the level of disengagement.

New SaaS solutions providers are required to adopt Customer churn metric, customer churn is not limited to customers who cancel their service subscription on SaaS solutions due service-level degradation; they are turning to new services providers, they are reducing their engagement, they are not getting what they were looking for. Other reasons for customer churn is failure from SaaS solution provider to keep an eye on the competition, failure to introduce more features that keep customers engaged, failure to get genuine feedback from the customers to improve their service offering.

The rules of business growth and sustainability does not change quickly, the major rule is acquiring more customers and reducing cancellation. A business cannot stop customers from cancelling their subscription; however, they should acquire new customers to stay in business. Businesses who face quick growth without readiness to serve their community will fail quickly as well.


Insurance sector is one of the best examples to study for SaaS solutions providers; insurance sector is playing this game since long time, large players stay on business because they are able to provide differentiated service continuously by keeping their baseline services in good shape.
SaaS solutions providers need to adopt customer churn metrics to stay in business and grow.

Author: Jawad Alalawi

Information Technology Professional specialized in Financial Payment Services, Risk Management, Information Security, and Compliance. Experienced in solutions development and implementation, and technical writer.
Banking and Technology Consultant