Customer Retention is about Creating Value not Lock-ins

| Last Updated: October 05, 2015 |

Reading time: 3 minutes

Lock In

Being a subscription business no longer means that your product is unique. It simply means you’re sharp enough to offer a service that’s aligned with the modern consumer’s expectations. Research by Gartner indicates that by 2016, more than 50% of CRM software will be delivered on a subscription, cloud-based model.

This means that simply existing and delivering a product isn’t all it takes to beat the competition.

According to subscription business marketing strategist Lincoln Murphy, “Being a SaaS company in 2013…allows you to be in the game.” If there’s no built-in competitive advantage, and you’re aware of at least a dozen other companies delivering the same product, you can’t afford to make any critical errors. We’re of the strong and educated opinion that offering lock-ins is one of the worst marketing mistakes a subscription business can make.

Why Lock-Ins Don’t Create Value

Why do your customers continue to purchase your service month after month, instead of taking their data to your competition? If your answer is the fact that they’ve been locked into a year-long contract without an option that allows them to churn, that’s a problem.

In the words of Murphy, “lock-in doesn’t make you unique…it makes you frustrating to deal with.

Brand loyalty is developed when you provide your client base with real value, which could come from the best uptime record in your niche, amazing customer service representatives or the best webinars online. There’s a number of ways that you can provide value, but not allowing your customers to cancel whether they want to or not certainly isn’t at the top of the list. 

The Dangers of Lock-Ins

80% of small business customers make their purchase decisions based on trusted referrals, not really great marketing or smooth sales representatives. When your prospects ask your current clients what they’re getting from being a customer of your subscription business, what are they going to say?

Regardless of whether they’re saving 10% or more with their year-long contract, you certainly don’t want their referrals to focus on the fact they’re not receiving value, but simply can’t cancel.

We’d be lying if we said that lock-ins have some appeal to subscription business owners, and they certainly are a way to ensure you receive decent life-time value from your customers.

However, it also dramatically increases the chances you’ll find yourself with a disengaged and dissatisfied user base, who aren’t talking about your product to their friends and peers. These users also won’t take the time to provide feedback on how you can improve your service and competitive edge.

Provide Value

The focus on your business needs to be on providing value to your customers that you competitors simply can’t touch, in the quality of your service, staff members and education efforts for your customer base. You will experience churn, because it’s simply the nature of the subscription business industry and the flexible consumers who populate the market in 2013.

The answer simply isn’t providing your customers with year-long contracts in exchange for savings. It’s about continually improving, listening and being a company that your customers want to recommend to others.

So, what is your focus? Just lock’em up and be proud of the number of customers you have? Or do you focus on keeping them engaged and happy? Please share your thoughts below.

Author of the post

John Solomon

Marketing Leader / Sales Enabler. Head of India Operations for @Infrascale / @sosonlinebackup.

Hear from a team of curious beings
A team that’s bent on delivering the best stories, lessons, and observations on SaaS, straight into your inbox. Every week.
SaaS Dispatch Team

Subscription Billing Made Easy

Try for free

Recent Blog Posts

Scaling SaaS Billing
Scaling SaaS Billing: How To Plan For The Insanity

Scaling your SaaS billing system can be complex. Here's the guide to making sure your subscriptions don't suffer for it. Read More >

Purpose Driven Friction
Friction Isn't Always the Bad Guy in User Experience

How friction improves UX in SaaS, how it helped Chargebee's onboarding and activation flows, and the right way to handle positive, purpose-driven friction. Read More >

SaaS - Customer Lifecycle
Aristotle’s SaaS: A Compendium of Advice for Understanding The Customer Lifecycle

How does a SaaS journey begin, what makes it last, and what leads it towards an untimely death. Read More >

Subscription billing software that lets startups deliver recurring happiness to customers.
How Chargebee Works