The MSP’s Guide to Customer Retention

As a Managed Service Provider (MSP), you have to balance the need to grow and evolve your business, without changing so much that you drive your existing customers away. 

Many companies hyperfixate on winning new clients (a study by Invesp found that 44% of companies focus on acquisition, while only 18% focus on retention). But while new customer acquisition is the key to growth, retention may be the key to sustainable profitability. 

In this article, we’ll talk about why MSPs need to retain customers, what retention challenges MSPs are currently facing, and how to hang onto your clients for the long haul. 

Customer Retention Benefits for MSPs

Nobody likes losing clients. But for MSPs, without clients, you have no business – which makes keeping them happy extra important. And when it comes right down to it, your retention is a reflection of how good you are at keeping your customers happy. But beyond the obvious, retaining your existing customers has additional benefits. 

• The possibility of referrals: If a customer chooses a long term relationship with your MSP, they’re likely happy with your service. And happy customers will likely tell their friends and colleagues about you. In fact, referrals end up creating 65% of all new business – which means the key to growth may be in maintaining your current customers. 

• Cheaper to retain customers than finding new ones: Research shows that it costs five times as much to attract a new client as it does to retain an existing one. Investing in keeping your current customers offers a better return on your investment than all the marketing, sales, and onboarding costs of chasing new leads. 

• Potential for higher monthly recurring revenue (MRR): Loyal customers are more likely to invest further in your MSP with additional services, a larger package or other scalable solutions. And once they’re embedded in your tech stack, they’re less likely to churn. 

What Challenges are MSPs Facing that Can Affect Customer Retention? 

The benefits of keeping your current customers happy are obvious, but the roadblocks you have to overcome to get there may be less straightforward. Let’s talk about a few customer retention challenges today’s MSPs must contend with. 

• Workforce-to-Workload Balance: To retain clients, they need to receive a customized support experience each time they work with your MSP. But on your side, you must balance having enough staff to make each client feel supported without breaking your budget with payroll. 

• Supply Chain Shortages: MSPs have to access the technology their customers need to retain them as clients. But the COVID-fueled supply chain disruption is expected to continue into 2023. Kaseya’s 2022 Global MSP Benchmark Survey Report found that 92% of respondents said the shortages are “somewhat” or “significantly” affecting their ability to sell solutions to their customers. 

• The Need for New Technologies: Finally: MSPs have to offer competitive and modern tech stacks to keep their clients’ loyalty. While many MSPs began reactively offering add-on services like remote support or compliance options during COVID, these tech stacks are often complicated and unwieldy when compared to modern, digital-native solutions. Today’s customers expect remote work support, compliance solutions, and increased security to contend with cybercriminals’ more sophisticated attacks.  

MSP Customer Retention Best Practices 

Now that we’ve discussed the challenges your MSP needs to be aware of, let’s talk proactivity. There’s plenty of steps you can take to overcome today’s roadblocks and hit your retention goals. The key is taking deliberate steps to counteract these challenges so you can continue delivering an exceptional client experience. 

Lead with Data and Metrics 

First thing’s first: get a handle on your current retention rates so you know where to focus your efforts. 

Since most MSP business models are subscription-based, you need to track your customer satisfaction and retention statistics proactively. Otherwise, you may not know that a customer is unhappy until after you’ve lost their business. But a shocking 97% of companies surveyed in Customer Service Collective’s State of Customer Retention 2022 report said they only track retention rates once a year. Get ahead of your competitors by tracking your retention quarterly instead. Here’s a few metrics to consider: 

• Customer Retention Rate (CRR): This metric measures how many existing customers are staying with your MSP. The value shows you whether your retention tactics are working. Aim to increase this metric over time.
  
  CRR = [# Customers at the End of a Quarter – # New Customers Acquired] / # Customers at the Start of the Quarter

• Churn Rate: This metric measures the rate at which your clients churn (both new and existing). Low churn rates indicate a stable, satisfied customer base – which is key for company stability. 
  
  Churn Rate = [# Clients at Beginning of Quarter – # Clients at End of Quarter] / # Customers at Beginning of Quarter 

• Monthly Recurring Revenue (MRR): MRR measures how much repeat revenue you’re bringing in month over month. In a business like MSP where each client has a scalable subscription plan, the number of customers does not automatically equal a linear amount of revenue. MRR offsets these variations by using a per-subscriber revenue average, and therefore may be a more appropriate gauge for MSPs. 
  
  MRR = # Monthly Subscribers x Average Revenue per Subscriber 

Utilize Net Promoter Scores Quarterly 

The best way to further gauge your customer mood for retention purposes is simple: ask them. Encourage your clients to fill out Net Promoter Scores (NPS) quarterly, which asks one simple question: on a scale of 0-10 with “0” being “not at all likely” and “10” being “extremely likely”, how likely are you to recommend this business to others? 

NPS scores are broken down into 3 different categories:

• 0-6: Unhappy Customers. Called “detractors,” these customers not only won’t recommend you, but can do damage to your business image. 

• 7-8: Satisfied Customers. Called “passives,” these customers are unenthusiastic but feel like you’re meeting their basic needs. This group is highly susceptible to competitive offers and are at high risk of churning. 

• 9-10: Enthusiastic Customers. Called “promoters,” customers will not only remain loyal to your MSP, but it’s highly likely they’ll encourage their friends and colleagues to use your services, too.  

Once you have your clients sorted into the three NPS groups, it becomes much clearer what you’ll have to do to retain them. For detractors, you need to be all hands on deck. If they don’t already have a dedicated customer success manager, assign them one. Institute weekly check-ins and do your best to use their feedback to make big changes if you want to retain their business. For passives, figure out what could push them from satisfied into enthusiastic, and pay close attention to what your competitors are offering that you’re not. For promoters, keep doing what you’re doing – and leverage their positive feedback with video testimonials or online reviews.  

JumpCloud for MSPs enables you to securely and efficiently provide your customers with seamless access to resources to make work happen.

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Invest in Top-of-the-Line Software 

Perhaps the biggest challenge MSPs face in retaining customers today is the competition from competitors who have already invested in cloud-native software that can easily adapt to new customer needs, like increased security, compliance requirements, and remote work. 

There’s no shortcut to solving this problem. The best way forward – and, indeed, the solution most companies will be converting to in the coming years – is investing in cloud native software now. 

A comprehensive directory platform like JumpCloud works seamlessly with remote organizations thanks to its MDM and policy options, and offers top-of-the-line security like multi-factor authentication (MFA) and single-sign-on (SSO). You can easily manage and enforce compliance across users and devices – all from one single pane of glass.

An investment in a cloud directory is an investment in the future of your MSP and your customer retention. But don’t take our word for it! Try JumpCloud today. Your first 10 users and 10 devices are free.