Haarlemmerstraat 124-E
1013 EX Amsterdam

Designing a great onboarding experience

Imaging waking up. Not in your bed but in the cockpit of a 787 Dreamliner. There are a million buttons, handles, and blinking lights. You have no idea what to do. Yet, there are 400 people behind you waiting to get the thing up in the air. Oh, and landing it would be nice as well. This is how your users feel when first launching your application for the first time. Maybe we exaggerated slightly, but still.

It happens way too often, that UX designers forget that they have conducted research, mapped user-flows, and tested interfaces while your users have not. A freshly registered user might not know how everything works or where to find what they need, even if it seems clear to the designer or product team.

Users need onboarding.

What is User Onboarding?

First and foremost, the goal of onboarding is to show or experience the value of a product asap.

User onboarding is a planned series of interactions that help the user ease into your product. Onboarding can be really simple, or very comprehensive. Sometimes a simple greeting will do, in other cases, a tutorial will be needed. So long as you’re providing your users with an on-ramp to the benefits of your product, you’re setting them up for success. Or better put, you’re setting up yourself for success.

A great onboarding experience provides users with what they need to get what they need out of a product. And thus does wonders for your retentive capabilities.

Why is User Onboarding so important?

On average, nearly 25% of users will stop using an application after using it just once. First impressions can be tough. So, just as you don’t try to get the phone number of that hottie at the bar by quoting Star Wars, you want to get this right. It is essential to give your users the right-sized onboarding experience for your product. It is quite likely that the users stopped using an application because they didn’t see the value from the app and weren’t immediately convinced.

When a user makes the effort of downloading or starts using your application, they want to get something out of it. Once they open the app, it’s crucial they feel rewarded for their effort right away. Otherwise, they might try another app. And, can you blame them? Great onboarding can be paramount for your NDR. Implementing new features to your product is great, but if people don’t know how to use them, they’re of no use to anyone.

A great onboarding experience makes sure that your users understand that value that you can deliver, and how much of an impact you can make on their lives. Simply put, a great onboarding makes sure that users keep using your product. And retention is the best growth strategy.

Best practices for a great user onboarding in a SaaS-product.

Make sure new users see the onboarding

Every new user must be able to go through the onboarding flow to help introduce them to the experience and show them how to get the most value out of the application. Also, if the user doesn’t want to go through the process, it must be possible to dismiss the process swiftly.

Use illustrations and movement

Visual content has a much greater impact than text. Make sure to use recognizable illustrations that enable the user to instantly associate the feature to what it does.

Keep your copy short and sweet

The copy of your onboarding must be concise. It’s of the utmost importance that the copy is easy to understand and that every single word is useful. If users don’t get the message they’re very likely to leave. Keep it simple.

Show the progress

A user must be able to see where they are in the onboarding process. By showing users their progress, they know they’re near the end and will likely stay to complete the process.

Keep it consistent

Keep your onboarding visually consistent so your users already feel familiar with the UI, copy, and brand. You want to build on the visual elements you’ve built your application on.

Haarlemmerstraat 124-E
1013 EX Amsterdam

Difference between an MVP and a prototype

Creating a Prototype and building an MVP are both smart approaches to start product development. Nevertheless, they differ quite a lot from each other and each has its specific uses.

What is a prototype?

A prototype is an interactive digital version of a product that allows you to explore your ideas and show the intention behind a feature or a product to users before spending time and money on development.

In a nutshell, a high-fidelity digital prototype design is a draft version of a future product (software, app) that can be seen and touched.

Prototypes are a great starting point for creating a digital product. A prototype helps you to acquire funding and to validate your idea.

What is an MVP (Minimum Viable Product)?

An MVP is the simplest version of your product with which you can actually provide value to your users. Building a simple but well-functioning version of your final product ensures that you can go live and do business quickly.

A minimum viable product is a version of a product with just enough features to be usable by early customers who can then provide feedback for future product development.

To build an MVP you have to choose features that are from one side bring the greatest value to your users and from the other side are the fastest/easiest/cheapest to implement. To select the right features you have to think both as a user of your product and as an entrepreneur. Thinking in business terms helps you to control development costs while choosing the features to add maximum value to your product from the users perspective.

An MVP consists of the ideal set of some of these features that make your product “launchable”.

How is an MVP different from a Prototype?

A prototype revolves around the presentation of the idea to stakeholders and proving the proof of concept. An MVP can also do this, but it requires more resources to do that. There are many types of prototypes, ranging anywhere between two extremes – Lo- and High-fidelity prototypes. A low-fidelity prototype is a quick and easy tangible representation of a concept, a user flow, or an information structure created for getting prompt feedback. With a high-fidelity prototype, companies can prove the concept or idea of their product before the actual development, get users feedback, and acquire funding.

On the other hand, MVP is a good technique for realizing a product. It is the first iteration of your product that should be good enough to solve a problem for your users. MVP should be good enough to immediately realize revenue from a smaller group of early adopters.

Prototypes are not used as a real product, while an MVP is. Nevertheless, high fidelity prototypes usually look much like the final product and the designs used for its creation is used as a base for the building of the MVP.

The main differences between an MVP and a Prototype

Benefits of an MVP

Benefits of prototyping

Haarlemmerstraat 124-E
1013 EX Amsterdam

UX Audit whitepaper

Get the UX Audit whitepaper

Haarlemmerstraat 124-E
1013 EX Amsterdam

Benefits of a UX Audit

So, you have a fantastic product. Your tech is top-notch and you’re constantly onboarding users. Yet, your company isn’t growing. You’re not able to retain users. Frustrating, because you don’t why. It seems to you users like your product. But do they love it?

The power of a UX Audit

Your business can definitely benefit from conducting a UX Audit. A UX audit is a great way to see where you stand now and how to improve your product significantly. A UX audit is the best way to find out which hurdles users face when using your product. A user experience audit is used to identify what works, what doesn’t, and what is missing so that designers and developers can focus on making the necessary improvements and move in the right direction.

Whether you have a particular issue or you want an improvement plan of your digital product as a whole: a UX Audit is what you need.

Benefits from a UX audit

Evaluating your digital product is vital for your business. The only way to create a successful product, achieve positive NDR, and turn users into lovers is to know what they expect and where they encounter difficulties. The results of UX Audit are used as a robust basis for the design process and for improvements of the digital product. UX Audit provides the following benefits:

Higher customer satisfaction

Make your users happy. A satisfied user interacts more with your product. He/She is more likely to upgrade their subscription, turn to a long-term loyal customer and recommend the product to peers. Loyal customers are the best referrers. Customer satisfaction does not only influence or affect sales and profitability; it develops a better image of the company as a whole.

Elimination of usability issues

Find out what, when and where blocks users from reaching their goals and bothers ultimate user experience. Usability issues can be at a single page (or pages) in the interface, as a problem with the overall structure of the interface, and finally as something that ought to be included in the interface but is currently missing. UX Audit helps you to define which issues are critical for your users and your business. It will also provides you the best options on how to eliminate them.

Higher user retention

For SaaS, improving user retention is an absolute business priority, as most customers become more valuable over time. Retention often comes down to one thing – happiness. When users are happy, they will stay with you. And retention is vital for your business and its growth.

Direction for further product development

Define which direction to take in further product development and how to fix the problems missed during the initial stage of the development. Before jumping into the design process, you need to run a thorough analysis of an existing product and set up the goals and priorities for the design work. Conducting an audit before the development cycle helps set the right direction of product development and minimise financial risks.

Make sure your users never leave you

The UX audit will give you a clear direction for your product design development. Knowing what ingredients were missing, you are fully equipped to provide designs for the unconditional happiness of your users. A happy user means higher levels of conversion and sales. A happy user is a lifetime user.

Haarlemmerstraat 124-E
1013 EX Amsterdam

How to perform a UX Audit

Unless you are an expert UX designer, we don’t recommend to perform a UX Audit on your own. Nevertheless, UX Audit is a useful tool for entrepreneurs, managers and product owners to determine how users experience the product and where improvement is needed.

How to do a UX Audit?

If your digital product doesn’t deliver the outcome you expected, you need a UX Audit. During the UX Audit, experts will go through a series of steps that will help determine why. You can request a UX Audit for a specific issue you are facing (e.g. retention rate is low, users don’t move from the free subscription to a paid one) or for a specific part of your application. Of course, you can do a UX Audit for a general review of your product. The size of your digital product and the depth of the audit you require will determine the length and the cost of the UX Audit.

Practically, each company and specialist may have a slightly different approach to conducting a UX Audit, but most of them follow the next steps:

Discovery session
Designers arrange a meeting with you to understand your business goals, your product, and your target audience.

User flows
User experience experts look at interfaces and user flow to define how users actually navigate through and interact with every part of your software.

Heuristic evaluation
UX designers review the app against best practice and industry standards around responsiveness, usability, navigation, clarity in design, branding, and more.

Data analysis
Specialists analyse existing metrics/ funnel for the way people use the application. Looking at the bottlenecks and how we can solve them.

User interviews (optional)
Through user interviews, all the stakeholders gain a more in-depth understanding of people’s needs, behaviours, goals and usage of the product.

What to focus on during UX Audit?

During a UX audit, an auditor (UX expert) will use a variety of methods, tools, and metrics to analyze where a product is going wrong (or right). Besides looking at UX best practices specialists also review business and user objectives. Auditors try to gather as much information as possible to understand the product and business as sales data, traffic/engagement, customer care data, conversion metrics.

Target users
Identifying your users, including their persona, needs and desires are important. The focus should be on user expectations, behaviours, needs and motivations.

Business Goals
You need to be clear on what business goals you want to achieve with your product because they guide the UX Audit. You should identify which actions that you want your users to take and then you identify sales channels, key brand values and top competitors.

Data analysis
Existing metrics should be analyzed to find out the way people are using your product.

In accordance with best practices
Compare your product with the best practices and business practices around responsiveness, usability, navigation, clarity in design, branding and many more.

UX and Visual Design
Pay attention to the details. Review each page, button and letter for consistency and conformity with the design.

Human Connection
The user should not get lost in the vastness of your product, but your design should hold the hand of your user and it should also guide them to your goal.

User retention
Explore all for user retention and upselling. We believe that sustainable companies focus on Net Dollar Retention and using UX will help you do so.

Haarlemmerstraat 124-E
1013 EX Amsterdam

7 main reasons to do a UX Audit

Every SaaS manager or entrepreneur wants to know how appealing the product is for the users, how much value it brings and what needs to be done to make it even better. A UX Audit gives answers to all these questions. A UX audit is a fast and affordable way to identify what works, what doesn’t, and what is missing so that designers and developers can focus on making the necessary improvements. In addition, UX Audit helps you to understand your users better and their relationships with your product.

Based on UX Audit data, you can mitigate the hurdles users face and execute necessary improvements. Also, you get a professional view of your product usability and visual appearance. Finally, the recommendations and action plan provided to you by the end of the audit allows you to create a product that meets users’ actual needs and wishes. But let’s review all the reasons to do a UX audit in more detail.

Seven great reasons to conduct a UX Audit

  1. To know where to start improving your product and how to move in the right direction of the product development: Before jumping into the design process, you need to run a thorough analysis of an existing product and set up the goals and priorities for the design work. Conducting an audit before the development cycle helps set the right direction of product development and minimise financial risks.
  2. To find out which hurdles users face: Knowing what blocks users from reaching their goal or what slows down their process is crucial. By knowing which obstacles users face, you can focus on making the necessary improvements. Having insights into the particular difficulties your customers stumble over and solving those problems will improve user satisfaction and user retention.
  3. To get insights into the quality and consistency of UX design: User interfaces that aren’t consistent often leave users confused and frustrated. The visual elements and their placements should help users to move to their goal easier and faster. Inconsistency of your design blocks users from archiving their goal and causes churn. UX audit provides insights into the consistency of UI design, making sure elements in a user interface are uniform – meaning they look and behave the same way. Consistent UI creates a sense of control, familiarity, and reliability. During UX Audit, experts check the consistency of your digital product with device UI guidelines and behaviours, other similar apps/sites, and your design.
  4. To learn how your users behave and get to know them better: Audit gives you insights into how your users use your product – which pages they visit, which path they take to reach their goal, what they like and what makes them leave your system or application. Once you analyse what blocks them, you can make changes to your product to ensure the ease and comfort of using your product for users. When you know what they like, you can apply these features or elements to the other segments of your product. Understanding your users better allows you to improve their experience and keep them happy.
  5. To acquire valuable insights about how to improve user retention: A percentage of users that remain with your business long-term start to form a reliable stream of revenue for your SaaS business. It means that the user retention rate sits at the heart of your business. Improving user retention is vital for your SaaS business growth. UX Audit helps you find out what your users are missing or not totally satisfied with to stay with your product or service for longer. User retention is often referred to as one of the most important KPIs when analysing the product’s health or potential and a key indicator for growth that impacts almost every key business metric.UX audit makes your users happy
  6. To get an actionable list of improvements: When you have a clear idea of what is there to improve on your website or app, you can actually bring it to action. UX Audit provides you with all the necessary information and an action plan for creating as valuable and user-friendly digital products as possible.
  7. To understand how to make your product more appealing to your target audience: As a business owner or manager, you want to make sure your product is appealing to your target audience. To do that, you need to discover what blocks them from the ultimate satisfaction. UX Audit helps you find out how users really experience your product, what they like or dislike, how they use it and what needs improvement.
Haarlemmerstraat 124-E
1013 EX Amsterdam

What does a UX Audit do for me?

With UX Audit results, you’re ready to add more value to your visitors, build a deeper connection, and perform a more human approach.

You probably know what a UX Audit is. You might even know our spiel; A UX audit is a fast and affordable way to improve your product. And yes, we can easily say that it is the best way to find out which hurdles users face when using your product. With an audit like this, we identify what works, what absolutely doesn’t and what simply isn’t there.

But, if we would be blunt and ask; what do you get out of this? We would tell you this…

  1. A UX Audit tells you how to make your users (even) happier
    Because that’s what we always strive for, don’t we? Making our users happy. Solving their challenges in the most elegant way possible. With a UX audit we tell you where you’re succeeding, and where there’s room for improvement. Happy, or satisfied, users are of the utmost importance for your product because it’s these kinds of users that upgrade and recommend your product to their friends.
  2. Make your users happy
    A UX Audit shows you what challengers users face when making use of your product. The blockages so to say. Basically everything that stands in a user’s way of reaching their goals with your product is identified.
  3. A UX Audit provides you with a higher user retention
    A UX Audit provides you with a higher user retention. For SaaS, user retention is an absolute business priority, as most customers become more valuable over time. If you’ve ever taken a marketing 101 course, you’ve learned that keeping a customer is much more profitable than acquiring new customers. It’s an old piece of wisdom but still valid today. A UX audit provides you with all the insights you need to retain your customers.
  4. A UX Audit provides you with a sense of direction
    If you learn more about the way your users make use of your product it becomes far more clear where to steer further product development. A UX Audit tells you what users expect where, and where they expect more. Or less. Or, different maybe?
Haarlemmerstraat 124-E
1013 EX Amsterdam

The (further) rise of human-centered design

In a world that’s becoming more digital by the second, a great product is a product that feels human, that feels real. A human-centered design approach plays a determining role in designing digital products.

What is a human-centered design?

Many of our daily activities that used to require human interaction are now online, and the majority of them tend to stay so. Thus, a human-centered design fuels the creation of products that respond to the users’ needs on a more profound interaction — ultimately driving engagement and growth.

The human-centered design approach dictates that the creation of products that deeply resonate with a target audience. Thus, it’s not only about building empathy with the end-users but also about building an easy, intuitive, and enjoyable user-product interaction.

We at YouSir see a human-centered design (HCD) as creating products that meet users’ actual needs. With the HCD approach, we look at users’ needs as humans, without limiting them to the borders of application. Our analysis goes further than the primary goal of the application – we are searching for the original motives. When we understand the people we are trying to reach and design from their perspective, we develop the ideas they will embrace.

The Human-centred design approach delivers value. It enables creating products that solve the predominant users’ problem and those above and beyond it. With this approach, we create more benefits for the user and design a product that resonates better with their needs.

Importance of HCD

According to the UXmag, in the wake of COVID-19, it became clear that human-centred design isn’t just a buzzword — it’s a process with tenets meaningful enough to create lifesaving solutions. While empathy is always crucial in human-centred design, the severity of the crisis, real pressure of the response teams, and rapidly ticking clock meant empathy was no longer step one of a five-step HCD process — it became the process. Empathy was the red thread used to sew together solutions for medical professionals overwhelmed by a flood of patients and critical cases, hospital admins dealing with resource supply shortages, and government workers facing mounting pressure and uncertainty.

Importance of human-centered design (HCD)

Human-centered design has been on the design scene for quite a few years. But that doesn’t make it less relevant. On the contrary, human-Centered Design continues to gain traction and prosper. We see a few reasons for that:

 

Adapting to the new reality

The COVID-19 crisis has sparked rapid, large-scale changes in human behaviour. And organizations have adapted to meet people’s needs in new ways. The challenge now is to build on that momentum and keep adapting—and innovating.

In their article “The importance of human-centered design” the BCG predicts that some of these shifts—accelerated technology adoption, hybrid digital˗physical delivery, and remote collaboration—will have a lasting impact. While no one exactly knows what the future holds, a few things are clear. First, we need to think differently about building and implementing solutions for the new reality. The human perspective is essential for a successful design, and that perspective is evolving—rapidly. Human-centered design lets you better understand people’s needs, motivations, and concerns, but it also makes for a more efficient, more flexible design process. By engaging early with users and seeking their input and feedback, you gain valuable insights while still working with sketches rather than fully built products. So you can pivot early and avoid steering resources in the wrong direction.

Also, it’s important to factor in geographic and cultural nuances: what might work well in one market could fail dramatically in another.

Another essential point to consider is the increase in the speed of innovation. It’s not enough to meet increased expectations and ensure robust, high-quality, and continually improving experiences. We need to do it quickly. And we need to respond to sudden and unexpected shifts quickly as well. Enabling such a fast pace means developing processes—and a culture—that let you iterate rapidly while engaging with end-users. Agile methodologies are a proven way to boost responsiveness to change and feedback.

Relationship-centred design

There is also a so-called “extension” to the HCD. That design process is called “relationship-centred Design”. RCD is going beyond the human; it is discovering relationships — between entities in the ecosystem. It considers the position or stage in which the user currently is, the pressure and goals they are feeling, and their capability and potential to exchange value between each other. We are not anymore designing for transactions; we honour the relationship.

TO SUM UP

In summary, both RCD and HCD are all about putting the users’ needs at the center of the design process, and there is no significant difference between them. Both approaches ensure that the digital product will be actively and meaningfully used and represent good value for money from the beginning of the relationship.

Haarlemmerstraat 124-E
1013 EX Amsterdam

SaaS Product Design

Whether you’re working on a new SaaS-product or are improving on an existing one, you want your users to have the best possible experience. With ever-growing competition and constantly increasing expectations from users, it’s absolutely critical to deliver an outstanding experience. Every. Single. Time.

Standard conventions for better interaction design

Developing a truly exceptional SaaS-product is not easy. Literally every step along the way matters. For you, but even more so for your users. Therefore, we center our product design for SaaS on the sign-up process, onboarding, retention, and extension.

Sign-up process of a SaaS-product.

For SaaS products, signup flow is one of the most critical parts of the users’ journey. It’s the first impression a user gets when interacting with your business. That’s why it can significantly impact the way your product is perceived. So, designing this path requires a deep understanding of the users’ needs, abilities, and limitations.

When your product looks nice, and your marketing team is doing a fabulous job, you shouldn’t have problems with subscribing users for a free trial. Unfortunately, users quite often are not moving further than that. Companies are disappointed with the fact that they’re not able to convert users to paid customers. The reason for that is that the product and user flow, in particular, aren’t as polished as users await them to be.

To get to a seamless flow in the signup process, you need to recognise potential pain points. Mapping out a user journey can help to reduce friction. Decreased friction in a signup process leads to a higher conversion rate of your free trial users to lasting paid customers.

Sign-up proces in SaaS product design

Onboarding process of a SaaS-product

Onboarding is the process of helping new users get started and get engaged right away. New users need a clear explanation of how to use the product to reach their goals. With great onboarding, companies reveal the true value of their product. They teach users to follow logical steps, avoid friction, and progress efficiently. Great onboarding sets the foundation for long-lasting relationships and upselling.

Far too often people see onboarding just as a few screens after signup, while it’ should be much more than that. Onboarding is the online equivalent of white-glove service – holding your customer’s hand and guiding them to their goals. And it goes far beyond their first visit.

Retentive capabilities of a SaaS-product

Retention, the ability to build a two-way and engaging relationship with your users, often comes down to one thing – happiness. When users are happy, they will keep using your product. When users are unhappy, there is almost no chance of retaining them. Users’ happiness is essential for retention. And retention is vital for your business.

Retention can be seen as an onboarding process for more advanced users. You lead experienced users through advanced functionalities, product updates, and new features. You help them see your product as an asset instead of an expense. With each step, you show them the power and ease of use of the product to solve their problems. And look good and pleasant while doing it.

Your users have four options while using your product – upgrade their plan, downgrade, stay with the current plan, or leave your product. Each of these decisions influences your business profitability to a large extent.

Churn is a disaster for your business.

A monthly churn of just 5% turns to a 46% annual churn! It means you might lose half of your users in a year!

To avoid a situation like this, you should track your SaaS company performance with a metric like Net Dollar Retention (NDR). NDR shows how clients value your product and how much impact you’re making on their lives.

With exceptional UX & UI design, you can build a strong connection between users and your SaaS product. YouSir can help you to create designs that bring measurable results and deliver better user experiences for the end-users.

Before embarking on the design process, we recommend conducting a UX Audit. A UX audit is the best way to find out which hurdles users face when using your product. A user experience audit is used to identify what works, what doesn’t, what is expected, and what is missing so that designers can focus on making the necessary improvements.

Start with a UX Audit

Upselling to existing users
When you’re upselling, everybody wins. For your company it’s an increase in the revenue; and for the customer, it’s access to the advanced functionalities. Advanced functionalities can solve the users’ problem quicker, or to a larger extent. Moving users to more advanced features can improve user retention as well. The more skilled your users become, the deeper is their connection with your product. They are unwilling to switch to the competitor, as the learning curve is too time and energy-consuming. When users move forward, they feel delighted; when they are in stagnation, sooner or later they will leave.

Truly great UX-design
Avoid any situation of frustration, worries, and failure. Delegate us the design of your SaaS and concentrate on growing your business. By means of UX Audit and Product design, we can help you to find out the obstacles and debug them for the ultimate user experience. With the human-centred design approach, we help you to create products that deeply resonate with your target audience. Make your users love your product (more) with YouSir. You can bring more value to users and at the same time, make your business more profitable.

Haarlemmerstraat 124-E
1013 EX Amsterdam

Net Dollar Retention

Most people judge the performance of a SaaS-company on its MRR, while judging a company on its NDR might give much more valuable insight. Why? Well, it’s not uncommon that a company’s MRR increases while their NDR deteriorates. In other words, you’re bleeding money.

What is Net Dollar Retention?

NDR stands for Net Dollar Retention. It’s a metric, expressed as a percentage. It compares a company’s revenue from retaining current users and compares that to another period, taking into account downgrades, upgrades and churn. NDR is not as well known as MRR, but it might even be a more valuable metric – especially for SaaS-entrepreneurs.

Why is NDR so important? First and foremost, we should have a look at the downside of MRR. It is quite possible that you grow your MRR while bleeding money. This occurs when your marketing department is on fire and the acquisition of new users creates a revenue stream exceeding the net reduction in revenue from your existing user base.

Let’s say your company starts this month with €100,000 in MRR. It books €50,000 in new subscriptions, zero in expansion revenue, suffers €20,000 in downgrades and €5,000 in churn. All in all, your MRR rose with a whopping 50%. You could bring out the champagne for that, if it weren’t for your NDR only being at 75%. You lost 25% of MRR from your current user base. And what was your marketing budget? How much money did you spend on acquiring these new users? Most probably, money has been leaking from your business…

To grasp the concept of Net Dollar Retention, you must understand expansion (by marketing), downgrades (of packages) and churn, and their effect on monthly recurring revenue (MRR).

Increases in MRR

Generally, MRR can increase via two mechanisms:

Through newly onboarded customers.
Through an increase in usage or upgrades within your existing customer base.
Simply put, MRR increases when your existing customers start spending more on your product, for example, when you upgrade a standard subscription to a premium subscription or when your marketing department does a bang-up job. An example of the first would be a user upgrading from a €10 basic subscription to a €50 premium subscription. The expansion revenue, in this case, would be €40 or the net increase resulting from the upgrade.

€50-€10 = €40 increase in MRR.

Decreases in MRR

Life can be hard, especially when being a SaaS entrepreneur. Sometimes you lose clients, which decreases your MRR. This can happen in two ways:

Through downgrades in usage within your existing customer base.
Through churn, where customers cease to do business with you.
Downgrades are any decrease in revenue caused by downgrading in usage. Basically, that’s the opposite from our previous example. A downgrade would be a user moving from a €50 premium subscription to a €10 basic subscription. The downgrade in revenue, in this case, would be €40, which is the net decrease resulting from the downgrade.

€10-€50 = €40 decrease in MRR

Churn

Churn means losing customers. That’s why we define it as a disaster. An example of churn is a user completely leaving the platform from a €50 subscription. The churn would be €50, which is the net loss resulting from the user leaving your platform.

Calculating Net Dollar Retention

NDR accounts for the changes in MRR caused by expansion, upgrades, downgrade, and churn within an existing customer base.

It’s expressed as a percentage and calculated using the following equation:

(Starting MRR + expansion – downgrades – churn) / Starting MRR * 100 = NDR
For example, a company starts the month with €10,000 in recurring revenue. Over the month, it added €2,500 in expansion revenue, lost €1,000 in downgrades and had a churn of €500.

(€10,000 + €2,500 – €1,000 – €500) / €10,000 * 110 = 110% NDR.

The company now has €11,000 in MRR, due to an NDR of 110%

Making use of NDR (Net Dollar Retention)

A Net Dollar Retention below 100% means churn and downgrades were greater than the growth you realized with your existing customers. You are losing users or they’re spending less on your product. The role your product plays in their life is not significant enough. They can do without you. Or, at least, with less of you. Both are a little painful.

It’s like being dumped.

If this analogy seems a little far-fetched, we tend to disagree. People don’t leave something they really love. Or, in this case, a product they truly love. Maybe you’re just not loveable enough. Maybe it’s time to invest in the relationship with your users.

Optimizing your Net Dollar Retention (Or: making your users love you more)
There are many ways to optimize your NDR. Your customer success team has a tremendous job to do. You have to handle your user feedback well and implement desired improvements and add new valuable features rapidly and appropriately. When it comes to topics like these, you should get in touch with Amsterdam Standard, GlobalOrange, or Saasmore.

YouSir can help you become more lovable though. We help you become more valuable to your users, become something they simply can’t and don’t want to miss. Become something they only want more of.

Instead of focussing on bare functionality, we always take the relationship between the user and the product into consideration when designing a product. You might call us hopeless romantics. Indeed, there are quite a few similarities between a romantic relationship and the way people interact with a digital product. That’s why we googled reasons why relationships end. Thanks to bustle.com, we found out these were the most prominent reasons.

Get the whitepaper!