Once a prospect becomes a customer, do you have a strategy for nurturing that relationship? It’s easy to assume that if you don’t hear anything from a customer, they’re satisfied with your products or services, but that’s not always true. Silence can signal a lack of engagement.
Customers that aren’t engaged, aren’t frequently using your product, or don’t feel like your product is the best value for their investment are likely to part ways with you. To improve customer retention, you need to look for trends about the customers you’ve lost and learn which customers are the most engaged with your brand.
Customer retention metrics will give you these insights and help you refine your strategies.
Customer retention metrics can reveal patterns you might have overlooked and help you zero-in on where your customer retention efforts are falling flat. If you’re not sure how to measure customer retention, we’ve got some tips for you.
We asked more than 20 SaaS professionals which customer retention metrics they find most valuable — read on to see what they said.
Our survey of CEOs, customer success managers, marketing managers, and sales executives at various SaaS companies revealed some common themes. The following 11 retention metrics were the ones that emerged as being the most valuable, overall.
What it is: Also known as attrition rate, this customer retention measurement tells you the rate at which you are losing customers. (Churn rate is also helpful for human resources teams — they can analyze employee churn, as they look to reduce employee turnover).
Why it’s important: Churn rate can show you how many customers you’re losing, and when. So with this information, and comparing results by quarter, month, or year, you might be able to identify some weak points in your customer engagement strategy.
How to calculate it: Because you may lose and gain customers in the same period, exclude new sales/new customers when calculating customer churn rate. You can calculate churn rate a few ways:
% of customers lost in period 1 / percent of customers lost in period 2
# of customers lost between beginning and end of period / # of existing customers at beginning of period
What it is: This is the percentage of customers that buy more than once from your company. In a SaaS context, a “repeat purchase” could be an annual subscription renewal, the purchase of an a la carte feature, or an upgrade to a premium version.
Why it’s important: The average repeat purchase rate is somewhere between 20% and 40%, so if your rate is lower than that, you might want to look at why customers aren’t buying from you after their initial purchase.
This customer retention metric is useful for companies whose customers buy their products frequently, or on a subscription basis, but it’s not as relevant for businesses with a long customer lifecycle — car dealerships, for example.
How to calculate it: Here’s the formula for calculating repeat purchase rate:
# of purchases in period / # of those purchases made by repeat customers
What it is: Customer Lifetime Value is a retention tracking metric is the total dollar amount a customer is likely to spend on your products or services during their lifetime. “Lifetime” refers to the span of time a customer buys your products, but for large brands with loyal customers, a “lifetime” could literally mean a customer’s entire life.
Why it’s important: This metric can show you which customers are most valuable to your company — information you can use when developing targeted marketing campaigns or promotions. Higher-value customers may be more receptive to upsell or cross-sell offers.
How to calculate it: When calculating CLTV, some people prefer to factor in customer acquisition cost (CAC) — that can include your marketing spend, sales staff salaries, technology (like your CRM software), and overhead, such as the monthly rent for an office space.
(Avg revenue per account * gross margin)/churn rate
What it is: You’ve seen the pop-up or email surveys that ask how likely you are to recommend a company’s product to a friend or colleague — those surveys collect data to calculate a net promoter score.
Using a 10-point scale — with 10 meaning “most likely” — businesses can assess which customers are “promoters” (those who choose a rating of 9 or 10). Customers who choose a rating of 7 or 8 are considered “passives” — receptive to offers from other companies. Customers who select a number between 0 and 6 are considered “detractors,” which means they’re not satisfied (or they’re downright disappointed).
Why it’s important: NPS is one of the most revealing customer retention metrics. When you review your NPS over time, you may notice trends like an increasing number of detractors, which could indicate declining product quality or poor customer service.
When a customer has a negative view of your product, your service, or your company, consider asking for more information. Sometimes, dissatisfied customers have a change of heart when someone takes the time to listen to their concerns.
Don’t forget that your promoters need attention, too. Offer them a loyalty discount or some other offer that makes them feel appreciated.
How to calculate it: Here’s the formula for calculating NPS:
% of detractors – % of promoters
What it is: Once you know how many of your customers have churned, you can calculate your gross revenue retention. This metric is the amount of recurring revenue in a given period, minus your losses due to churn or downselling (selling a lower-priced product than the one you intended to sell to a customer).
Why it’s important: This metric shows you how customer churn and downselling is affecting your bottom line.
How to calculate it: Calculate GRR with this formula:
(Recurring revenue in period – churn revenue losses in period) / Beginning recurring revenue
What it is: Net revenue retention rate is a more holistic picture of financial health, as it factors in customers who upgrade or downgrade services.
Why it’s important: This metric can show you whether your agents are succeeding at upsells, how much revenue you’re losing from downgrades, and how your products are performing now as compared to previous time periods.
If you’re seeing a lot of downgrades and churns, reconsider the options customers have. For example, if a customer wants to cancel, do you offer a “pause” option? If a customer wants to downgrade, are you able to offer a discount instead? Flexibility can go a long way in retaining customers.
How to calculate it: This is the basic formula for calculating net revenue retention rate:
(Recurring revenue at beginning of period + upgrades – downgrades – churns) / Recurring revenue at beginning of period
What it is: This metric gives you the total loss of monthly recurring revenue (MRR) due to customer churn.
Why it’s important: MRR churn can help companies produce more accurate revenue forecasts, and it can highlight problems that merit further inspection (for example, gaining customers less frequently than losing customers). And remember that all new customers have an acquisition cost, so one new customer does not offset the loss of one existing customer.
How to calculate it: You can calculate gross MRR churn percentage with this formula:
(MRR churn amount in a period / MRR at beginning of period) x 100
What it is: This is one of the customer retention metrics that can help you gauge agent performance, as it shows revenue earned through cross-selling and upselling. Customer-driven actions — like upgrading from a standard software version to the premium version — would be included in expansion revenue, as well.
Why it’s important: Expansion revenue is a good indicator of customer satisfaction — if existing customers are open to paying for premium products or services, that means they’re not likely to be in your “churn” column anytime soon. When your agents are able to convince existing customers to upgrade, offer a tutorial or some other form of support that will help them make use of the expanded features.
How to calculate it: You can look at the total dollar amount of upsells and cross-sells in a given period, or you can use this formula to determine your expansion MRR rate:
(Expansion MRR in current period – Expansion MRR in previous period / Expansion MRR in previous period) x 100
What it is: DAU (daily active users) and MAU (monthly active users) metrics tell you how many customers are using your product in a given day or month. “Active” means whatever you want it to mean — you might count a log-in or some other user action as the benchmark for active.
Why it’s important: If you notice these numbers decreasing, you might need to follow up with your customers to ask if they need additional training on how to use your platform. Customers who aren’t getting everyday value out of your product are likely to churn at some point.
How to calculate it: DAU and MAU are straightforward figures; to calculate the ratio of DAU:MAU, divide DAU by MAU.
What it is: That figure you got when you divided DAU by MAU? That’s your customer “stickiness” score. Stickiness is an added dimension of customer retention — it describes the depth of engagement customers have with your product. A sticky customer believes your product offers the best value, convenience, and usability, compared to similar products.
Why it’s important: SaaS companies that have a lot of competitors need to consistently reinforce the value of their product to preserve stickiness. Companies can promote stickiness by letting customers know about new features, asking for feedback, and offering live training or how-to guides. (An email newsletter is a good way to share useful information and stay top-of-mind with your customers).
How to calculate it: (This is your DAU/MAU result).
What it is: This figure is just the time that elapses between purchases.
Why it’s important: Knowing when customers might be ready to make their next purchase can help businesses know when to reach out with special offers, to remind them it’s time to renew, or to explain what new features customers can anticipate.
How to calculate it: Divide 365 (days of the year) by purchase frequency.
Now that you’ve read about the best customer retention metrics and learned from our experts how to measure customer retention, do you think you need to track more metrics? Will you be reviewing your customer stickiness, churn, and LTV?
Fast Cover Travel Insurance | COO & CMO
When measuring customer retention, I consider repeat purchase, purchase frequency and lifetime value as essential metrics.
Repeat purchase rate is essential to know if your customer base is coming back to you or deselecting you and choosing your competitors.
Purchase frequency is how long between repeat purchases. Once you are measuring this, you can develop plans to entice your customer base to shop with you more often and reduce the period between purchases.
The lifetime value of your customers should be going up. If it isn’t, you are onboarding new customers whilst your previous customers are no longer selecting you. If this isn’t addressed, your new customers are also going to turn into one off customers which come at a higher attribution cost than existing customers.
Orbit Media Studios | Co-founder and CMO
Net Promoter Score.
We're a web design shop. After every project, we wait a few weeks for things to cool down. Then we call and interview every client. It's a 30-minute conversation with several outcomes:
• It's a service call (anything else we can help with?)
• It's a feedback call (anything we could have done better?)
• It's marketing (would you mind if we shared your great experience on our site in a case study or testimonial?)
But the real outcome is retention. We know very quickly during each interview if the account is at risk. Anything lower than a 7 out of 10 and we know we have to work harder to keep the client.
HealthMarkets | Executive Sales Leader
I use several metrics to make sure we are aware of our business performance in real time, but the most important hands down is repeat customers. Some crucial metrics tracked would be: People reached, impressions, cost per lead, cost per transaction, total cost of acquisition of client basically, and then it is about the persistency that remains . . . numbers along those lines are always helpful, of course.
I am more interested in how well we keep client's on our products, how long they keep products, and if they are turning into repeat customers who send referrals . . . that's what I feel matters most.
JSL Marketing & Web Design | VP of Sales & Marketing
Customer Lifetime Value. We believe measuring the customer lifetime value is very important for the growth of a company. This metric shows us how much revenue is generated from each individual client. When measuring this metric, we generally would like to see the number staying the same or even increasing a bit.
Especially in our business, this is important because because if we see that the customer lifetime value is decreasing, this would generally mean that we are either losing clients more quickly or we are landing lower value clients. As our business grows, we try to work with higher value clients in order to keep our company moving forward. That's why this metric is so important for us to track!
Intuitive Digital | Sr. Brand & Accounts Manager
We run service performance audits, and relationship audits on all our accounts at least once a quarter.
By evaluating the performance of our SEO and PPC work and then measuring that against the current relationship with the partner we can determine how likely a partner is to continue services with us.
For example, if the account data is telling us things are good, but the partners perception based on conversations with their Account Manager is that performance is bad, we know there's a disconnect happening that we need to work to repair with the partner or else they're not likely to stick around too much longer.
Yoreevo LLC | Co-Founder
We focus on Net Promoter Score because we provide an infrequent service (real estate brokerage). Without much chance for near term repeat business, we need a way to determine how likely someone would be to continue working with us and net promoter score does a great job with that.
CrankWheel | CEO
The obvious ones are voluntary and delinquent churn, which we track closely. When customers request to cancel, we have a process of trying to learn from the cancellation and in some cases depending on their reasons for cancellation, explain various options on our plans that might suit them better. For delinquent churn we have the typical dunning approach but also human outreach for all but our smallest accounts.
A metric that for us can predict churn is the overall number of meetings they are using our platform for, and the number of engaged presenters on their account, which we measure as presenters who do at least two meetings per week. These are the best metrics for account health that we've found. For all but the smallest accounts, we focus on customer success to help build these up at the start, and if we ever notice them sliding, we reach out and engage with the account owners to see how we can help them get more value from CrankWheel.
Anvil Media | President
Our primary metrics for customer retention & growth, in order of value, include:
-Annual Net Promoter Score surveys: our best predictive indicator we have for client retention
-Bi-annual Check-ins: twice a year, I reach out to every client to discuss the relationship and how we can make it better. The feedback is invaluable
-References and referrals: clients that are willing to be references and are providing referrals to new business units or clients are generally the happiest around
-Responsiveness: a more subtle metric is how quick clients are to respond, the quality and quantity of feedback and timeliness to pay invoices
Onfleet | CEO & Co-Founder
Net MRR Churn - are we keeping and growing our existing customer relationships faster than they're declining? This is our top retention metric.
Gross MRR Churn - are we keeping our existing customers on board?
Customer Churn - are we retaining our logos?
And the "why" - if customers are churning, and they fit your "ideal customer profile" - ask yourself (or ask them) why they churn.
Mavens & Moguls | Founder & CEO
In my experience Customer Churn is the most direct way to measure customer retention. It is important to understand the rate at which customers stop doing business with you. Whether the customer has ended or opted out of renewing a subscription, a churned customer is a customer that your business unsuccessfully retained.
Some attrition in your customer base is natural when companies are acquired or go out of business, hire an internal resource, no longer need your product or service, etc. but if your annual churn rate is >5%, it's time to evaluate the happiness of your customers to see if there is a problem. An unreasonably high churn rate is typically indicative of your product or service failing to meet your customers' expectations or goals.
Databox | CEO
To measure the health of our business, we look at our Net Dollar Revenue Retention Rate. This takes into account all our flows: revenue from new customers, lost revenue from churned customers as well as subscription upgrades and downgrades.
Given that we sell to small businesses in a relatively low-touch model, the only way to get to positive dollar retention is to get some percentage of our best users to pay us more over time. So, we've added features exclusive to our higher priced plans, introduced a value-based pricing axis so that every user (regardless of plan) pays more when they use us more and we launched add-ons for features that aren't core to most user's needs, but are highly valued by some. Net dollar revenue retention helps us analyze how much these pricing and packaging decisions are helping us improve our financial results.
However, when evaluating the impact of our team's work, we look at our customer retention rate too. As we've grown our sales, support and onboarding teams, this metric is more under the control of the team. Since we offer a free trial, monthly contracts and easy-to-setup software, many of our customers purchase without ever asking us a question. To most, this may sound amazing.
However, unfortunately for us, we've found that the customers who don't engage our support and sales team before they purchase churn at more than twice the rate. Measuring customer churn gives us a clear and direct correlation to the quality of the team's work and helps us justify growing our support and sales teams.
Dryrun | CEO
We use a number of varying data points for quantitative evaluation (Churn, Contract Term, etc) and also interaction/ engagement to highlight the qualitative value from our customers. As we are expanding our scope in market to work with businesses that have clients needing our services - how our metrics is defined is currently evolving.
Horseshoe & Co. | CEO
Number of referrals, churn rate, annual recurring revenue, customer lifetime value, and number of reviews are all metrics we track internally and for clients. Depending on the length of the sales cycle,, we track these monthly or quarterly.
TEFL Hero | Founder
We look at repeat purchases, recommended purchases (where they recommend us to another person via their link), and supporiting services (where the customer pursues a service with one of our partner companies).
Repeat purchases demonstrates how much value a customer gets from our brand, recommended purchases is a huge trust signal, and supporting services represents how well we're doing at satisfying supporting customer needs that our products don't answer.
We track these automatically and report on them monthly via Google Data Studio dashboards.
Outgrow | SEO & Partnerships Manager
We've just started with a funnel based analysis since our sign up process has multiple steps. We use tools such as Google Analytics and Intercom to track progression rate for each step. One key metric we track is churn rate between steps. This helps us in pinpointing the steps where there's user friction and aids us in further analysis. We've also started to use product analysis tools such as Heap for deeper insights on the sign up process.
Return On Now | President
There are many different angles we can take to measure customer retention, but the two that we focus at the most within Return On Now are Repurchase Rate and Upselling Success. Loyal clients are the backbone of any successful services business or agency, and growing revenue per client is atop our list. Both of these show not only the retention itself, but also the ability for our team to grow the engagement over time as we sustain a productive working relationship.
Referral Rock | CEO
Our customer retention metrics are tied in with how much success customers see with our product. Being a referral and affiliate marketing software, that means we look at how many successful referrals our customers have had, increase in leads or sales, etc.
If our customers have seen an increase in success and brand awareness, then it's a good metric to also gauge our customer retention.
Perrill | Director of Marketing
Client attrition and churn rate - In order to hit our annual goals, we closely monitor our churn rate and make adjustments to sales targets and other marketing efforts as needed. We report on this every week in comparison to our expected attrition.
Social Success Marketing | Chief, Social Media Strategist
Using metrics to measure customer retention is a necessity in business. Your company’s success hinges on more than just how many new customers you attract, but how many of your existing customers you can keep. Customer retention metrics allow you to stay on top of your customers’ needs by understanding what they want and what they like.
For example, if a lot of your customers are leaving because of poor customer service, then it’s time to boost your customer service, but if they’re leaving because of product issues, then you need to look into improving your product quality.
ProcurementExpress | COO & Co-Founder
The metric we use is "Retention rate" which is calculated by the sum of upgrades, downgrades, reactivations and churn divided by the revenue, on a monthly basis.
Monsido | Marketing Director
As a company we look at a number of metrics including the standard customer success metrics including CSAT, NPS, Customer Churn Rate, and Net Revenue Retention Rate - but we also look at various product engagement/adoption KPIs specific to our platform. From a marketing perspective,
I am very interested on these product engagement/adoption KPIs we've set up in the company as I see this as the lever for all the other metrics. They help us identify ways to improve product communication but also provide a lot of value to our CS and Product departments to improve on-boarding, UX, and more.
Max Effect Marketing | Marketing Manager
Retaining clients is basic for organizations. Did you realize that holding a client is 5x less expensive than acquiring another one? Regardless of whether your clients have made one buy or ten, you need to urge them to return and purchase from you once more. Hence, in order to maximize your customer retention efforts, you'll need to understand, track and analyze key metrics. Some of the key customer retention metrics we implement are:
- Customer Lifetime Value
- User Frustration Rate
- Customer Loyalty Rate
- Existing Customer Revenue Growth Rate
- Repeat Customer Ratio
While acquiring new traffic and new clients is fundamental for a business to develop, retain existing clients is similarly significant. After all, loyal customers spend 67% more than new ones. In this way, if you still haven’t employed a robust customer retention strategy and began following your client maintenance measurements, now's an ideal opportunity to start.
Cedreo | Digital Marketing Manager
NPS, CLV & churn rate are the main metrics used on a weekly basis. NPS allows us to identify any customer satisfaction issues which would impact the churn rate and ultimately CLV.
JivoChat | Product Marketing manager
We’re mostly looking at the percentage of customers who still have the chat widget installed on their website after a certain time after registration (1,7,14 days, month and year). It is the most important metric to see if there are some issues in our product/pricing/etc.
We also track Lifetime value (LTV) to see if we recoup our acquisition costs in each particular channel. Recently we started tracking Net Promoter Score. This will help us see if customers are satisfied with our company in general.
Starship HSA | Senior Product Marketing Manager
Customer retention is an important metric for any marketer to measure as it is a representation of loyalty and overall customer success. The first metric to understand retention is churn. Churn identifies the number of customers leaving your platform and can be cross-analyzed with a time stamp, campaigns, and new product initiatives. You can even work with your CX team – like we do – to measure sentiment alongside churn rates. Measuring churn will help you calculate your customer retention rate.
Some other metrics that are important are DAU, MAU, and LTV. For an app such as ours, where transactions can occur frequently, DAU is a good measurement to follow in order to see customer behavior. On a broader scale, MAU should be measured to see how your customers are using your app on a monthly basis. These two metrics can then be used to measure your DAU/MAU ratio, which is also a good definition of how "active" your customers are.
Finally, LTV is the revenue a customer will have during the "lifetime" they are using your product. From a financial perspective, this number is important to see not only where you are breaking even, but also to understand who your high-value and low-value customers are. Measuring these metrics will help you understand your customers and therefore support you in building an even better product for them.
Hologram | Senior Customer Success Manager
We're a bit different in terms of our customer health metrics, but at Hologram we care about how often customers are engaging with our technical support teams, feature adoption, for example, how many customers leverage dashboard features vs. using our API, as well as speed of scale -- meaning, were we able to facilitate and support our customers' business to enable them to scale their IoT fleets within their goal timeframe.
Some of these metrics we track monthly and quarterly, and others we're still determining the best cadence and structure. Essentially, we want our product to remove barriers for our customers and our metrics align with that goal.
Brandfolder | Head of Customer Experience
First and foremost, when the question is how often we're reporting on customer retention metrics, the answer is simple; constantly. While true evaluation comes on a monthly or quarterly basis, we aim to always have our finger on the pulse of not only what direction customer retention is trending but also the reasons as to why.
There are two metrics we primarily dive into while painting that full picture. Gross Revenue Retention, which considers the starting revenue minus any revenue lost through downsell or churn over the same period, ultimately answers “are we losing customers? Net revenue retention, which accounts for gross recurring and expansion revenue, tells us whether our existing accounts are growing.
From there we segment in a variety of ways to truly assess the impacts of churn, health of the business most importantly, the value being found in the platform by our customers.
This article was updated from it's initial publishing in 2021.