In the SaaS industry, business performance is measured in ways that are relatively new and always evolving as eCommerce grows and expands. Acquiring customers, onboarding them, increasing their revenue stream, and convincing them to stick around: all are challenges that SaaS businesses face every day.
Customer retention is vital to the overall health of your SaaS business; it will be what drives your company’s growth and ensures stability, not just from recurring revenue but also from word-of-mouth recommendations which lead to new accounts.
Our fourth installment in our metrics series, the newly published The Definitive Guide to SaaS Metrics: Retention & Renewals, teaches you about the importance of measuring the success of your retention initiatives. The metrics, we cover in this episode include:
Customer churn rate is among the most crucial KPI’s for a SaaS company, illustrating the level of engagement and commitment by your customers over the short and long-term. Calculating customer churn rate is straightforward, and will help uncover how your churn rate is fluctuating over time as well as help you understand why your customers are leaving you.
Customer retention rate benefits are significant. It can cost your business five times more to acquire a new customer than to keep an existing one, and your repeat customers will spend, on average, almost 70% more than your new customers.
Customer renewal rate is the number of customers who renew, and obviously is key to maintaining your subscription business profitable.
Cost-To-Service (CTS) is the money spent on resources to provide your product and services to customers, and will impact your margin, so it is important that it’s not overlooked.
Customer Lifetime Value (CLV, CLTV, or LTV) is the amount you predict a customer will spend on your products or services over time. This can get complicated depending on your business model.
Customer engagement score can be determined in different ways depending on your product and business model. Knowing your score is important: the more engaged your customers are the more likely they will be to renew their subscriptions.
Gross MRR churn rate shows the percentage of revenue lost to cancelled or downgraded subscriptions.
Net MRR churn rate is an essential metric to understand the health of your SaaS business, and to determine whether your business model is sustainable.
Volume of support tickets is important to measure because it can identify trends among customers and their pain points and give you direction for how your product could be improved.
Net Promoter Score (NPS) can be calculated via a customer survey, and is helpful to uncover how many of your customers would recommend your product or service to others. A low score means you have work to do, while a high score can help you acquire new customers through their recommendations.
Read 2Checkout’s The Definitive Guide to SaaS Metrics: Retention and Renewals eBook to better understand these metrics and how they are calculated, so that you can perfect your SaaS company’s marketing and sales strategies.