Breakups aren’t just hard for couples.
They’re also devastating for SaaS companies.
Why?
Maintaining high retention is equally important as acquiring new customers in the SaaS industry.
That’s why it’s vital to track retention metrics, as they offer insights into customer and revenue growth.
But which SaaS metrics should you track?
And what’s a good benchmark for retention?
In this article, we’ll explore what SaaS retention metrics are and show you 12 of the most important ones. We’ll also cover tips to improve retention metrics and answer some common questions.
Further Reading
- Learn to calculate the Lead Velocity Rate to understand how quickly your company closes deals.
- Explore the nitty gritty of SaaS Customer Lifetime Value (+ 6 awesome ways to boost it).
- Find out 5 easy tricks to increase Weekly Active Users and make your product talk of the town!
This Article Contains:
- What Are SaaS Retention Metrics?
- 12 Valuable SaaS Retention Metrics
- 3 Tips to Improve Customer Retention Metrics
- 4 FAQs About SaaS Retention Metrics
Let’s get started!
What Are SaaS Retention Metrics?
SaaS retention metrics provide insights into how many customers you retain and the value they bring over a set period.
These metrics, spanning Customer Retention, Loyal Customer Rate, Customer Lifetime Value, and more, paint a better picture of the health of your SaaS business. Moreover, they help you understand how you can boost your revenue.
How so?
On average, it can cost nine times more to convert a new customer than retain an existing one.
That’s why retention metrics are helpful in showing you how to improve revenue.
Let’s look at the SaaS metrics you need to consider.
12 Valuable SaaS Retention Metrics
Below are retention metrics that are helpful indicators of growth for a SaaS company:
- Customer Retention Rate
- Customer Churn Rate
- Monthly Returning Revenue Churn
- First Call Resolution Rate
- Customer Lifetime Value
- Customer Acquisition Cost
- Existing Customer Revenue Growth Rate
- Loyal Customer Rate
- Time Between Purchases
- Days Sales Outstanding
- Net Revenue Retention
- Net Promoter Score
1. Customer Retention Rate
Here’s all you need to know about customer retention rates:
A. What Is Customer Retention Rate?
Customer retention rate or logo retention rate is the percentage of buyers who continue to avail of your services over a set time period.
B. Who Should Use Customer Retention Rate?
All SaaS companies should track this as it highlights if your customer success efforts are working. This is equally important for new and well-established businesses.
C. Why Is Customer Retention Rate Important?
This retention metric provides insights into your ability to retain active software subscribers. But more importantly, retention helps you estimate customer satisfaction and how much revenue you may earn in the next period.
D. How to Measure Customer Retention Rate
Customer Retention Rate = Number of active customers that continue their subscription in a given period / Total number of active customers at the beginning of that period * 100
The number of active customers is your total customer count at the end of the period minus the new customers acquired during that period.
E. How Often Should You Measure It?
You can calculate it based on a monthly, quarterly, or yearly basis — preferably based on a subscription model.
If you deal with monthly contracts, then measure your customer retention rate every month. If you mostly have yearly contracts, measure it every year.
But remember, tracking SaaS customer retention across multiple periods simultaneously can offer a better idea of your overall performance.
F. Acceptable Ranges
Per mixpanel.com, a retention rate above 35% is considered good for SaaS companies.
G. Example
If a company had 100 active subscribers at the beginning of 2021, but 10 customers canceled their subscriptions and stopped using the service during the year.
They would then have a yearly customer retention rate of 90%.
Customer retention rate = 100 – 10 / 100 * 100 = 90 / 100 * 100 = 90%
This 90% retention rate indicates that your customer retention strategies are working. It also means that you don’t need to spend most of your marketing budget on customer acquisition in the next year.
However, if this was a low retention rate, it means your current customer retention strategies aren’t effective, or you need to improve your product.
Moreover, you should see if this rate is trending upwards or downwards when tracking it over many months or years. Doing so will help you get a clearer picture of what’s affecting the rate and what efforts help resolve the issue.
2. Customer Churn Rate
Below is everything you need to know about customer churn rates.
A. What Is Customer Churn Rate?
Customer churn measures the number of customers that stopped using your service over a given period. It’s the inverse of customer retention.
B. Who Should Use Customer Churn Rate?
B2C or B2B SaaS companies that are trying to improve customer satisfaction and retain customers. It’s also useful for companies planning to scale up since it tells them if they’re losing too many customers to maintain healthy financial growth.
Moreover, such companies can use this metric to identify a correlation between customers leaving and activities that affect customer experience.
C. Why Is Customer Churn Rate Important?
This retention metric helps you understand when and how many customers leave. This, in turn, helps you gain insights into how you can optimize your customer experience and improve your gross retention.
D. How to Measure Customer Churn Rate
Customer Churn Rate = Number of customers at the start of a period – Number of customers at the end of the period / Number of customers at the start of the period * 100
E. How Often Should You Measure It?
It depends on your customer volume.
Calculate a monthly churn rate if you have a large customer base (hundreds or thousands). You can focus on an annual churn rate if your customer list is small.
F. Acceptable Ranges
The 2022 KeyBanc SaaS Survey found a median annual logo churn of 13% for the surveyed SaaS companies.
However, fullview.io — a customer support platform, mentions that SaaS companies should try to maintain at most an 8% annual churn rate or a 3% monthly churn rate.
G. Example
Consider this: Your company had 5,000 customers at the start of the month but was left with only 4,500 customers at the end of the month.
That would mean your monthly churn rate is 10%.
Churn rate = 5,000 – 4,500 / 5,000 * 100 = 500 / 5,000 * 100 = 10%
That’s significantly higher than the benchmark mentioned by fullview.io. In such cases, it would be best to invest more in customer success to reduce your churn rate. You could try adding a customer loyalty program or improving your onboarding process.
You could also relate months with high churn to services, activities, or updates rolled out in that month. This can help you identify what isn’t working or needs improvement. For example, if you noticed high churn after you replaced your customer service team with an AI chatbot, it might be time to roll that back.
3. Monthly Recurring Revenue Churn
Consider these factors when tracking monthly recurring revenue churn:
A. What Is Monthly Recurring Revenue Churn?
Monthly recurring revenue churn or MRR churn rate indicates how much revenue was lost due to customers downgrading or canceling their subscriptions in a month.
P.S.: Instead of a net MRR churn, you can calculate your average revenue loss over a year as annual recurring revenue churn.
B. Who Should Use Monthly Recurring Revenue Churn?
SaaS companies that want to assess their potential for business growth by reviewing how much revenue they lose month-over-month.
As a result, this isn’t as important for early-stage startups who don’t really have as much revenue to begin with.
C. Why Is Monthly Recurring Revenue Churn Important?
This churn metric offers deeper insights into the impact of customer behavior than the customer churn rate, which only measures the number of cancellations.
Aside from revenue loss, monthly recurring revenue churn also indicates that your existing customers aren’t completely satisfied with your product or their subscription plan.
D. How to Measure Monthly Recurring Revenue Churn Important
MRR Churn Rate = (MRR at start of month – MRR at end of month) – MRR in upgrades during month / MRR at start of month
For a yearly revenue churn rate, you can calculate Annual Recurring Revenue (ARR) churn rate.
ARR Churn Rate = (ARR at start of year – ARR at end of year) – ARR in upgrades during year / ARR at start of year 100
E. How Often Should You Measure It?
Calculate MRR churn month-over-month if your customers subscribe on a monthly basis.
You can calculate ARR, if your customers subscribe to your service on a yearly basis.
F. Acceptable Ranges
According to klipfolio.com, most successful SaaS companies have a negative net MRR churn rate. This means their upgrades outweigh their downgrades.
G. Example
Suppose you have an MRR of $50,000 at the start of the month. You then lose $5,000 in contract cancellations at the end of the month and gain $1000 in subscription upgrades.
Your MRR churn would be 8%.
MRR Churn = (50,000 – 45,000) – 1,000 / 50,000 * 100 = 4,000 / 5,0000 * 100 = 8%
This would indicate that you’re losing more revenue to downgrades than what you’re gaining through upgrades. However, if you lost $3,000 in contract cancellations but gained $4000 in subscription upgrades, then your net MRR churn would be -2%.
MRR Churn = (50,000 – 47,000) – 4,000 / 50,000 * 100 = -1,000 / 50,000 * 100 = -2%
This negative MRR churn rate is a good indicator of your company’s ability to generate income and grow. Plus, it implies that many users are happy with your product or service and want to access more features.
4. First Call Resolution Rate
Here are important details about first call resolution rates:
A. What Is First Call Resolution Rate?
First Call Resolution (FCR) rate measures customer satisfaction. It tells you if your customer success agents can address user queries and issues during the first interaction.
B. Who Should Use First Call Resolution Rate?
SaaS companies who want to know if their customer care agents are well-equipped to address issues efficiently.
However, it’s also useful for any company that wants to review the productivity and capabilities of their support agents.
C. Why Is First Call Resolution Rate Important?
It indicates whether your agents or customers need to get on more than one call to resolve an issue they have with your product.
Plus, a high FCR leads to a better customer experience.
D. How to Measure First Call Resolution Rate
First Call Resolution =Total number of customer calls resolved on the first attempt in a given period / Total number of customer calls received in the given period * 100
E. How Often Should You Measure It?
It’s helpful to measure your FCR every month so that you can stay on top of customer service issues.
Doing so will also help you identify the impact of recent training programs or reforms.
F. Acceptable Ranges
FCR varies by industry. Per a 2019 report from callcentrehelper.com, the average benchmark for FCR is between 70-75%.
However, the value of this benchmark can depend on the purpose of the call. For example, an FCR that’s lower than 70% for complaint or claim calls may not indicate a major customer service issue. Whereas, a low FCR for less complex calls, like inquiries, could indicate an issue.
G. Example
If an agent resolves 160 calls out of 200 calls on the first attempt in a month, their FCR would be 80%.
FCR = 160 / 200 * 100 = 80%
This would imply your agent is doing a fairly good job. However, you should categorize their FCR based on different call types to understand if they’re performing well in different situations. If not, they could benefit from some training exercises or tips.
5. Customer Lifetime Value
Let’s review what you should know about customer lifetime value.
A. What Is Customer Lifetime Value?
Customer lifetime value (CLV) projects how much a customer will spend on your service throughout their time as a paying customer.
B. Who Should Use Customer Lifetime Value?
SaaS and e-commerce companies who want to evaluate how much revenue they can earn from each paying customer. This is especially important for SaaS platforms that have started to establish themselves and want to turn profitable.
C. Why Is Customer Lifetime Value Important?
It helps you identify the value of every customer (based on their subscription tier) and the revenue they bring if they’re retained.
D. How to Measure Customer Lifetime Value
Customer Lifetime Value = Average Monthly Recurring Revenue per User (ARPU) / Customer Churn Rate
Be sure to factor in the ARPU and customer churn rate for the same period. Moreover, if you offer different pricing tiers, you can calculate the lifetime value for customers in each pricing tier.
E. How Often Should You Measure It?
You can calculate lifetime value when you change your pricing plans, offer discounts, add paid services, or do anything that impacts your bottom line.
F. Acceptable Ranges
There’s no set range for an ideal CLV since it’s a metric that helps you understand how much value you gain from your customer. Usually, the higher the value is — the better for your company.
G. Example
For instance, if your typical customer subscribes to a $25 monthly plan and you face a customer churn rate of 4% (0.04), then your CLV is $625.
CLV = 25 / 0.04 = 625
Now, if you compare the CLV of customers in different market segments, you can assess the product-market fit for your company.
Consider this: A design SaaS company initially markets their product for artists and maintains an average CLV of $200. However, after rebranding and remarketing the product, they earn a higher CLV of $400 from social media users. Although there are more factors to consider here, you could see that the social media users are a better market-fit for the company.
But that’s not all…
You can get more insights from your CLV when you track it along with the next metric.
6. Customer Acquisition Cost
Below is all you need to know about customer acquisition costs.
A. What Is Customer Acquisition Cost?
Customer acquisition cost (CAC) refers to the amount businesses spend to acquire a new customer. It includes the costs for:
- Marketing and sales professionals’ salaries
- Marketing and sales tools
- Sales commissions
- Overhead costs associated with attracting new leads, like ad spend and office supplies
B. Who Should Use Customer Acquisition Cost?
SaaS businesses looking to optimize their marketing budget.
It’s also useful for companies that want to track their marketing and sales spending in relation to the customers it brings.
C. Why Is Customer Acquisition Cost Important?
CAC helps justify your budget for acquiring new customers, ensuring healthy returns on investment for your business.
D. How to Measure Customer Acquisition Cost
Customer Acquisition Cost = Total cost of acquiring new customers / Number of newly acquired customers
E. How Often Should You Measure It?
You should track your CAC for a month, quarter, and year to identify fluctuations in your marketing approaches.
F. Acceptable Ranges
Ideally, your CLV to CAC ratio (called the golden ratio) should be 3:1, meaning a customer should bring revenue worth at least three times the amount you spend on acquisition.
So, if a customer brings $6,000 in revenue, you should be spending no more than $2,000 on acquisition.
G. Examples
Consider this: Your company spends $1,000 on acquiring new customers annually and gains 50 customers.
Then, your customer acquisition cost is $20.
CAC = 1,000 / 50 = 20
If your customer lifetime value is at least thrice this amount ($60), it means your business is running optimally in terms of marketing spend. However, if the CLV was $40 or less then it could help to take a detailed look at what goes into your CAC, and how you can reduce it.
Moreover, when you track it over time, you can see what period is ideal for acquiring customers and when you’d need to spend more to do so.
7. Existing Customer Revenue Growth Rate
Here’s everything you need to know about existing customer revenue growth rate:
A. What Is Existing Customer Revenue Growth Rate?
Existing customer revenue growth rate measures the earnings your customer success efforts generate.
B. Who Should Use Existing Customer Revenue Growth Rate?
SaaS businesses who want to know the efficiency of their customer retention and success strategies.
This is especially useful for companies that want to know if they need to add more services or improve the offerings of their current services.
C. Why Is Existing Customer Revenue Growth Rate Important?
According to Salesgrowth.com, recurring revenue from existing customers can make up as much as 75% of your annual revenue.
Measuring this rate can tell you if you need to invest more in customer success or other customer retention strategies.
D. How to Measure Existing Customer Revenue Growth Rate
Existing Customer Revenue Growth Rate = Monthly Revenue Rate at end of month – Monthly Revenue Rate at start of month / Monthly Revenue Rate at start of month * 100
E. How Often Should You Measure It
This metric is usually measured every month.
F. Acceptable Ranges
There’s no set standard for a good existing customer revenue growth rate.
However, it’s a good sign if it’s increasing month over month. This indicates your customer retention and success strategies are working.
But if it’s plateauing or decreasing, it means you need to invest more in your SaaS customer retention strategy or improve your plan offerings.
G. Example
Suppose you have an MRR of $10,000 at the start of the month that increases to $12,000 at the end of the month due to subscription upgrades. This will lead to an existing customer revenue growth rate of 20%.
Existing Customer Revenue Growth Rate = 12,000 – 10,000 / 10,000 * 100 = 2,000 / 10,000 * 100 =20%
Then, in the next month let’s assume that $12,000 MRR increases to $13,000. The existing customer revenue growth rate becomes 10% for the month.
Although your business sees an increase in MRR from the beginning of the month, it means your customer revenue growth is decreasing (20% to 10%). A decrease over several months can indicate you need to invest in improving your customer experience.
Now, a declining or plateauing growth rate can mean your customers are happy with their existing plans and the offerings they receive. However, you could consider offering additional services if you want to increase the revenue you earn from existing customers.
8. Loyal Customer Rate
Consider these important aspects before tracking loyal customer rate:
A. What Is Loyal Customer Rate?
Loyal customer rate is the number of people who made a repeat purchase during a given period.
B. Who Should Use Loyal Customer Rate?
This metric only applies to non-subscription-based SaaS companies that want to assess their loyal customer base. It can also help these companies assess the effectiveness of their loyalty programs.
It’s less valuable for subscription-based companies since it’s hard to define loyal customers based on fixed subscription plans and intervals.
C. Why Is Loyal Customer Rate Important?
It measures the percentage of your customer base that’s shown loyalty to your service. Retaining this customer base is important since they have the highest lifetime value and are likely to share positive reviews of your product.
D. How to Measure Loyal Customer Rate
Loyal Customer Rate = Number of customers who made multiple purchases in a given period / Total number of customers during that period * 100
E. How Often Should You Measure It?
You can calculate this metric on a monthly, quarterly, or yearly basis, depending on the service you offer.
F. Acceptable Ranges
There’s no set standard for a loyal customer rate, but it’s always good to have a high percentage of loyal customers.
G. Example
Let’s say you have 20,000 customers in a month and a fourth of those customers (5000) made multiple purchases during that month, then you would have a loyal customer rate of 25%.
Loyal Customer Rate = 5,000 / 20,000 * 100 =25%
Now, according to the 80-20 rule, 20% of your repeat customers are responsible for 80% of your revenues. So, a loyal customer rate of 25% isn’t bad.
Moreover, if you track this metric over many months, you can tell if your loyalty programs or customer success operations are making headway. If they are, you’ll see an increase in your loyal customer rate. If not, you’ll probably need to consider making changes to your loyalty campaigns.
But remember, it’s beneficial to understand and nurture your loyal customers (regardless of how many you have) to improve the revenue you can gain from them.
9. Time Between Purchases
Let’s explore the essentials of time between purchases.
A. What Is Time Between Purchases?
Time between purchases helps you identify the average period before customers make another purchase from you.
B. Who Should Use Time Between Purchases?
SaaS businesses who don’t follow a subscription model and want to assess how quickly they can earn more revenue from customers.
Why isn’t this metric useful for subscription-based SaaS companies?
That’s because the time between purchases is usually fixed in the subscription model and such companies don’t need to track how long it takes for customers to resubscribe.
C. Why Is Time Between Purchases Important?
It indicates customer satisfaction with your product or platform.
D. How to Measure Time Between Purchases
Time Between Purchases = Sum of individual purchase rates / Number of repeat customers
Purchase rate is the sum of the number of days between purchases divided by the number of purchases. For example, if a customer buys a service a week from the first purchase, the purchase rate is 3.5 days.
But if a customer buys something again after 14 days, the purchase rate becomes 7 days [(7 + 14) 3].
E. How Often Should You Measure It?
Like the loyal customer rate, you could track this metric on a monthly or yearly basis depending on the services you offer.
F. Acceptable Ranges
There’s no set standard for time between purchases. However, a high period between purchases indicates low customer satisfaction and a low period indicates high satisfaction.
G. Example
Let’s say you have three customers.
- Customer 1, your most loyal customer, has made 5 purchases in 25 days. Their purchase rate is 5 days.
- Customer 2 has made 3 purchases in 30 days. Their purchase rate is 10 days.
- Customer 3 has made 2 purchases in 24 days. Their purchase rate is 12 days.
This makes the sum of individual purchase rates 27 (5+10+12) and your average time between purchases 9 days.
Time Between Purchases = 27 / 3 = 9
A time between purchases of 9 days would be good since it indicates that your customers are satisfied with your services and are willing to purchase it often. It also means that your customers aren’t going to your competitors to test their services.
However, a high number would mean your customers aren’t too keen on purchasing your company’s services, and that they may seek out other alternatives. In such cases, you could consider improving your product and customer service or implementing a rewards program.
However, it’s important to note that these figures heavily depend on the kind of SaaS platform you run. Certain SaaS offerings don’t lend themselves to frequent purchases and this metric isn’t as important an indicator in these cases.
10. Days Sales Outstanding
Below is all you need to know about days sales outstanding.
A. What Is Days Sales Outstanding?
Days sales outstanding (DSO) estimates the number of days it takes for you to receive payments from customers. It’s usually applied to a set of outstanding invoices in a particular period.
B. Who Should Use Days Sales Outstanding?
SaaS companies who want to know the efficiency of the financial team’s collection process. This is usually more important for established SaaS businesses.
C. Why Is Days Sales Outstanding Important?
This metric helps you maintain a steady cash flow.
D. How to Measure Days Sales Outstanding
Days Sales Outstanding = Accounts receivable / Revenue for a period Number of days in that period
If you calculate it for a year, it would become:
Days Sales Outstanding = Accounts receivable / Annual revenue * 365
E. How Often Should You Measure It?
You can track this metric on a monthly, quarterly, or yearly basis.
F. Acceptable Ranges
In general, it’s best to have a low DSO that’s under 45 days.
A high DSO can indicate poor customer satisfaction or an ineffective retention strategy. It could also mean your sales team is nurturing or closing customers with bad credit.
G. Example
Suppose your company made $100K in sales this year, but $25K is still to be collected. This would make your annual DSO 91 days.
Days Sales Outstanding = 25,000 / 100,000 * 365 = 91 days
91 days is a high DSO. It could lead to a potential cash flow problem that might affect your company’s business growth. However, if you track DSO on a monthly basis, you could determine if it’s increasing or decreasing over time and whether your efforts to reduce it are sufficient.
11. Net Revenue Retention
Consider these points before you start tracking net revenue retention:
A. What Is Net Revenue Retention?
Net revenue retention (NRR) or net retention measures your total revenue after subtracting revenue churn. It estimates your ability to retain customers and the revenue they generate.
Fun fact: In the US, net revenue retention is also called net dollar retention (NDR).
B. Who Should Use Net Revenue Retention?
SaaS businesses who want to evaluate the overall efficiency and effectiveness of their retention strategies.
It’s also useful for businesses who track customer retention churn, as it gives them a broader picture of the impact of customer retention.
C. Why Is Net Revenue Retention Important?
This retention metric is the inverse of revenue churn. It lets you know if you’ve gained or lost customer value over time.
D. How to Measure Net Revenue Retention
Net Revenue Retention = Starting MRR + Change in MRR / Starting MRR * 100
Starting MRR (monthly recurring revenue) is the MRR from the previous month.
Change in MRR is the change (from upsells, downgrades, and churn) in your starting MRR compared to the current period.
Note: While calculating net retention, the change in MRR should comprise the same set of customers as those in your starting MRR.
E. How Often Should You Measure It?
You should track NRR every month.
F. Acceptable Ranges
According to klipfolio.com, a good net revenue retention benchmark for SaaS companies (based on your target customer size) is at least 90% -125%.
G. Example
If you have an MRR of $3,000 at the end of a month and see an extra $500 in the next month due to upgrades and downgrades.
Then, your net revenue retention would be 117%.
Net Revenue Retention = 3,000 + 500 / 3000 * 100 = 117%
This score indicates that your business offers customers good value, which leads to renewed subscriptions and additional revenue. If your score is lower than 90%, then it could help to invest in better retention and customer experience strategies.
When you pair this value with your customer retention and churn rates, it indicates whether your customer success operations are garnering positive or negative cash flow.
12. Net Promoter Score
Here’s what you need to know about net promoter score:
A. What Is Net Promoter Score?
Net promoter score (NPS) estimates your customers’ general satisfaction and willingness to recommend your SaaS product to others.
This customer satisfaction score ranges from -100 to +100 and can be gauged through feedback or surveys.
B. Who Should Use Net Promoter Score?
SaaS businesses that want to know if their customers are happy with their product or services. This can be equally useful to new and more established companies.
C. Why Is Net Promoter Score Important?
It’s a source of customer feedback, giving you insights into how and what you can improve.
D. How to Measure Net Promoter Score
Net Promoter Score = % of Promoters -% of Detractors
It’s based on survey responses measured on a scale of 1 to 10, where customers can be divided into:
- Detractors: Respondents with negative opinions who give you a score between 1-6.
- Passives: Respondents with a neutral opinion who give you a score between 7-8.
- Promoters: Respondents with positive opinions who give you a score between 9-10.
E. How Often Should You Measure It?
You can measure it on a quarterly basis.
F. Acceptable Ranges
Churnzero.com says a good NPS for the SaaS industry is 28% or higher. However, a high NPS doesn’t guarantee customer retention or revenue growth.
G. Examples
If, based on your survey, you have 60% promoters, 25% passives, and 15% detractors, then you would have an NPS of 45%.
Net Promoter Score = 60 – 15 = 45
In general, a higher promoter score percentage will help your business grow. However, if you have more detractors than promoters, it’s a sign you need to improve your service. You could use your survey or feedback results to determine what will make your customers happier.
Now that you know what to measure, let’s explore what you can do to improve your customer retention.
3 Tips to Improve Customer Retention Metrics
Follow these tips to maximize your customer retention metrics:
- Segment your data by cohorts: Separating data by customer cohorts, like start dates, subscription plans, etc., can give you meaningful results instead of broad averages. It’ll help you identify behavioral patterns that offer actionable insights to improve your retention rate and average revenue.
- Nail your product-market fit: The right product-market fit can improve gross retention, lower acquisition costs, and increase revenue growth. However, the wrong one can mean you gain customers that’ll be harder to retain.
- Perfect your onboarding process: It’s easy to lose customers during the first few weeks of usage. However, your onboarding process can be the determining factor that prevents early customer churn. It can improve the customer experience by addressing issues and helping users achieve their goals.
Next, let’s review common queries about retention metrics.
4 FAQs About SaaS Retention Metrics
It’s common to have a lot of queries about a complicated topic like SaaS retention metrics. That’s why we’ve answered some common questions that you may have about it.
1. What Are the Benefits of Tracking Retention Metrics?
Tracking retention metrics has several benefits, including:
- Offering insights on how to optimize your retention strategies and acquisition budgets to ensure a healthy ROI.
- Providing a reliable perspective of your company’s financial health to make data-backed decisions for sustainable growth.
- Understanding customer behavior and preferences to make better SaaS business decisions.
2. What Are Good Retention Metrics?
The ideal retention metrics can vary based on the industry and your customer base.
Typically, the greater your customer base, the higher your retention metrics should be. In fact, as per klipfolio.com, the net retention rate should be about 90% for SaaS SMBs and 125% for SaaS enterprises.
3. What’s the Difference Between Customer Acquisition and Retention?
Customer acquisition refers to strategies to attract new customers. Conversely, customer retention includes strategies that aim to keep existing customers.
The former focuses on marketing efforts, while the latter focuses on improving customer satisfaction.
4. What Is Cohort User Retention?
Cohort user retention is a way to measure retention for groups of users with common characteristics, like new users, users on same-tier subscription plans, repeat purchases, etc.
This data lets you track how well you retain users with similar circumstances. It also helps you identify possible strategies to improve retention for specific cases.
For example, if you find your retention metrics are low for new users, you could reassess your onboarding.
Retain The Attention of Your Target Audience
Tracking SaaS retention metrics is crucial since the industry heavily depends on customers who subscribe to your service.
These metrics offer insights that can help you improve your net retention rate and ensure better customer experiences.
But if your customer acquisition strategy is letting you down, you could reach out to Startup Voyager to boost the organic traffic to your website.
Our team of specialists can help you create compelling, high-quality content to help you grab the attention of your target audience.