It’s not only cheaper to retain existing customers than it is to gain new ones, it’s usually easier too. On top of that, it’s estimated that an increase of just 5% in customer retention can lead to a revenue increase of no less than 25 to 95%.
In this post, we’ll look at key customer retention metrics to track and share a list of things that influence them – and that you can improve on if needed.
For a deeper dive into metrics to track success, read our article on SaaS metrics.
What Is the Customer Retention Metric?
The customer retention rate (CRR) refers to the percentage of users that keeps using your SaaS month after month. It’s the opposite of your customer churn rate.
Table of Contents
7 SaaS Customer Retention Metrics that Require Your Attention
1. CAC – Customer Acquisition Cost
Your customer acquisition cost tells you how much it costs you on average to gain a new user, whether they’re a paying customer, on a free trial, or signed up to the freemium version of your SaaS. The lower your CAC, the more quickly you’ll be able to break even.
That’s why it’s important to not just know your overall CAC but also your CAC per acquisition channel. Once you realize that some marketing and sales channels are much more cost-efficient in bringing in new users, you can focus on those and discard or lower your efforts on others.
Customer acquisition efforts are directly impacted by customer advocacy and loyalty through improving the brand experience. Through our software, Synup, we are able to use data surrounding brand experience and reputation to help guide our strategies better and manage our costs more effectively. We found that loyalty and advocacy also impact referral rates, which is a very underrated metric that a lot of companies ignore when looking at retention rates. These figures show a more accurate representation of loyalty and satisfaction. This impacts customer acquisition costs, as it significantly lowers the costs of onboarding new customers through other means. As a B2B brand, we directly speak to the decision makers of companies, so trust and loyalty are important to our target market, and emphasizing that is even more important.
Ashwin Ramesh, CEO of Synup
2. CCR – Customer Churn Rate
Your customer churn rate indicates how fast users are canceling their subscriptions within a given period. A high or increasing customer churn rate points to either a decrease in customer satisfaction or a weak position in regards to your competitors.
In my experience, there are two key factors that will help you reduce your customer churn rate. The first is continual product development, and the second is ensuring you have incredible product education.
Product development should come as standard with any SaaS product, you should always be speaking to customers and iterating in order to make your product better.
But then ensuring you have an amazing knowledge base with your products is crucial, too. Feature pages are great, but if you can build an amazing library of content teaching people how to get the most out of your content, that will go far.
Ryan Jones, Marketing Manager with SEOTesting
But sometimes it’s not so obvious why your customers are churning. This is why it’s great to request exit feedback: so you can pinpoint exactly what went wrong. And sometimes, it’s due to situations beyond your control.
“To dig deeper into customer churn, look for any patterns in your churn rates. These could be seasonal around budget review time, or you may find that certain acquisition channels or customer demographics tend to churn more than others. Consider how to demonstrate value to these specific audiences at key times, such as renewal periods. At the same time, make sure you have strong onboarding processes that are personalized to users to address their specific pain points from the start.”
3. CLTV/LTV – Customer LifeTime Value
Customer lifetime value is the retention metric that indicates the average revenue a customer brings you across the entire time that they’re signed up with you.
If it goes down, that can point to
- Increased customer churn.
- New users signing up to your freemium or lower plans.
- Existing customers downgrading rather than buying add-ons.
If it goes up, that can mean
- You’ve established your brand well and people are willing to pay for the value you offer.
- Existing users are happy and willing to pay for an upgrade.
- Existing users are happy and stay on for longer.
Customers do not leave a bad product. Rather, they leave when it becomes too much of a hassle to stay. Once we implemented a minor pricing adjustment. Customers had to call support to change plans to make this adjustment. It seemed a reasonable ask at that point in time. Lo behold, churn spiked 15% that quarter. Why? The customers didn’t want to deal with the hassle. Making a call and getting in touch with customer support would require their time and effort, which they lack. So we went back and we updated it to a self-serve process and churn went right back down. The lesson or should I say, the takeaway was simple. If your product feels like work, people will find an easier alternative. At times, fixing churn isn’t about adding new features or better pricing. It’s just about getting out of your own way.
Christian Hed, Chief Marketing Officer of Dstny
4. CCR – Cumulative Cohort Revenue
A common way to calculate whether you’re making enough from your customers to offset your CAC is to divide your LTV by your CAC. The higher the number, the better – or so it goes. However, OpenView has made a good case for calculating cumulative cohort revenue instead as the LTV/CAC formula assumes that customer churn rate is constant and that every user will eventually churn.
While LTV/CAC remains a popular metric, it’s limited by its inability to account for real-world variables like customer churn and contract length. A cohort-based approach allows businesses to better understand how customers behave over time, particularly in industries with varying contract lifetimes. By grouping customers who started at the same point and tracking their behavior, companies can see how long it takes for customers to churn, how their value evolves, and adjust strategies accordingly. This method offers a more accurate picture of customer profitability than a one-size-fits-all ratio.
Batul Resheq, Head of Revenue
5. RCR – Repeat Customer Rate
The repeat customer rate is also referred to as the loyal customer rate (LCR) as it indicates customer loyalty. It’s the percentage of all of your customers that has made a repeat purchase from you within a given period. This could be as simple as someone renewing (or not canceling) their monthly subscription.
For SaaS, this is a better metric to track than repeat purchase rate (RPR) which is more commonly used in eCommerce to indicate the percentage of customers that come back to the store for a new purchase once they’ve already bought something from that store in the past.
As a marketer for a pest control supplier, I see Repeat Customer Rate as a key retention metric that reveals not just if customers return, but how they do it. Do they prefer phone orders for expert advice, or start there and shift online for convenience? This metric is influenced by factors like product effectiveness, customer experience, and ease of reordering. Identifying these patterns helps us boost retention by streamlining reordering, personalising follow-ups, and ensuring both channels work together to keep customers coming back.
6. MAU – Monthly Active Users
Getting people to sign up is one thing, having them actively use your product is still another. Don’t we all have subscriptions to things we haven’t looked at in months?
Happy customers are active customers. They use and choose to continue to use your product.
MAU is an important metric that tells you whether you are offering a “nice to have” product or an essential product. Because with this metric, you understand whether your product is providing value to people. If MAU is not growing, it means your business is not growing. But to increase this, you need to focus not only on numbers but also on how to engage users. B2B SaaS companies have to prioritize tracking MAU, analyzing behavior, and optimizing engagement for sustainable growth.
7. NPS – Net Promoter Score
Net promoter score is calculated by pro-actively asking your customers to tell you, on a scale of 1 to 10, how likely they are to recommend your product. While it can be a good indicator of customer (dis)satisfaction, it’s important to note that someone who says they’d recommend you won’t actually do so, and someone who is one of your biggest advocates might not take the time to fill in a survey.
Ensure you regularly ask customers how they feel about your services, not just once a year with a mass survey. Identifying your happiest customers through customer touchpoint-triggered Net Promoter Score (NPS) surveys allows you to focus upsell efforts on users who are most satisfied with your service. Happy customers are far more likely to expand their usage or purchase additional products.
Valtteri Ylimäki, CFO and Co-Founder of Trustmary
Factors That Influence Customer Retention
- Pricing structure.
- User-friendliness.
- Quality of your product.
- Quality of your customer support.
- Whether or not you have a loyalty program.
- Whether or not your cart system saves payment details.
- Your reputation in comparison to that of your competitors.
Keeping Track
Tracking the customer retention metrics in this post will help you quickly see whether you’re losing customers you could be keeping. Combine them with our list of factors that influence customer retention to figure out where you can make improvements.
Want to know what else to track to grow your SaaS in a profitable yet sustainable way? Check out our guide on SaaS metrics.
