Sales

9 Customer Retention Metrics You Need to Start Tracking ASAP

Don’t know which customer retention metrics to track to reduce churn and maximize your revenue? Start with these 9 metrics recommended by 20+ sales pros.

Maham S. Chappal Maham S. Chappal on December 17, 2020 (last modified on December 21, 2020) • 10 minute read

Retaining customers is critical for businesses.

Did you know that retaining a customer is 5x cheaper than gaining a new one?

Whether your customers have made one purchase or ten, you want to encourage them to come back and buy from you again.

Make repeat purchases. Reduce churn. Maximize your revenue. Hoot your brand’s horn.

In order to maximize your customer retention efforts, you need to start understanding, tracking, and analyzing key metrics.  

We’ve got 20+ sales experts on board to tell us which key customer retention metrics you need to start tracking right now and why.

  1. User Frustration Rate
  2. Customer Lifetime Value
  3. Repeat Customer Ratio
  4. Customer Loyalty Rate
  5. Customer Churn Rate
  6. Monthly Recurring Revenue Churn
  7. Monthly Active Users
  8. Existing Customer Revenue Growth Rate
  9. Gross Revenue Churn

Excited? Let’s get started.

1. User Frustration Rate

“Our customer retention directly correlates to what we call user frustration rate”. Explains Strider’s Heather Briggs.

“Essentially the Frustration Checkout & Abandonment Level is inverse to the revenue generated weekly and the number of customer transactions. The lower the frustration rate (less than 3%) the higher the weekly revenue and increased number of transactions.”

2. Customer Lifetime Value

Andrew Ruditser of Maxburst, Inc. shares, “One important metric that every marketing agency should measure to track their customer retention rate is customer lifetime value (LTV)”. 

What exactly is customer lifetime value?

“This is the estimated value a customer has contributed to your company during their lifetime. Meaning, it measures the amount of revenue that one customer has given you and will continue to give you.

This is an important metric to track because it is much easier to increase the expected revenue a valued customer will contribute to your company over their lifetime rather than acquiring new customers.

Since that person is already a loyal customer, it’s easier/cheaper to focus on their wants and needs rather than attracting new customers who might not continue to remain loyal and contribute to your company. Knowing your customer lifetime value will help you calculate your returning customers rate too.” Explains Ruditser.

Drewbie Wilson of PhoneSites agrees and adds, “We want to know how long our clients stay with the program in order to track MRR. 

We are always looking for ways to improve the product so we can keep our clients longer. The longer they stay, the more money we make.”

Beekeeper’s Alexandra Zamolo believes to measure customer retention, one extremely valuable metric that they never ignore is customer lifetime value.

“As a company that offers a service, we aren’t in the business to make a quick sale and move one. We offer extended customer service to our customers, and we work with them to sign up for our services again at the end of their term.

This is why a customer’s value in the sense of longevity is something we have to monitor. If a customer doesn’t re-sign, then we have to look at whether they just are no longer in need of the service, or if we need to look a little deeper into our processes and practices.” Explains Zamolo.

3. Repeat Customer Ratio

“To measure customer retention”, says Amir Yazdan of GroMD, “one of the best metrics to employ is keeping an eye on Repeat Customer Ratio.”

While it may be nice for a customer to make one purchase, “it’s equally as important to ensure that they remain a customer, and not simply a one-time purchaser.

Be sure to add them to your email or newsletter list, and provide them with how-to guides and posts on using the product purchased. Then, you can also supply them with information on other products that might also be a good fit for their individual needs.” Explains Yazdan.

Bojoko’s Viljanen Bojoko is of the same mind and says, “This metric is slightly more advanced than what Google Analytics can give us directly. GA gives us data about all Returning Visitors, but we see a small problem here.

This data can show multiple sessions from the same returning visitors if the user has taken a break from using our website. This can make the data a little bit distorted, so in our opinion, it’s more reliable to follow the returned visitors after the first day.”

And if the ratio falls too low, “This is a good indicator that somewhere in the customer journey, they aren’t satisfied.

This means that we’re able to reflect on our own work, look into what we could improve upon, and action any changes that might be beneficial.

We can then use the repeat purchase ratio as a benchmark and watch in increase as we make the right changes to the customer journey.

This can be through the use of things like marketing email, easier checkouts, increasing the range of stock, or even lowering prices.” Explains James Lewin of Imaginaire.

Andrea Loubier of Mailbird says they like to know whether their customers are resigning for their services and that Repeat Purchase ratio is very important to them.

“We want to ensure that our customers are happy with our email client, and one of the simplest ways to monitor that is whether or not they resign after their contract has ended. In doing so, they’re actually saying that our service has made their business more productive, and that’s exactly what we like to hear.” Says Loubier.

4. Customer Loyalty Rate

“It’s one thing for a customer to make a one-time purchase on your site. That basically means that they love your products – and that your marketing strategies have paid off. However, it’s quite another for a customer to return to make additional purchases.” Explains Sally Rong of RELLERY.

“When this happens, this definitely has something to say about your product line, your customer service team, and your follow-up strategy. When you become the go-to site for a particular type of purchase, then you’re being very successful in the area of customer retention.”

Over 60% of our respondents agree with Rong that loyal customer rate is among the most important metrics to track. Right after loyal customer rate are CLV and repeat purchase ratio.

Top Customer Retention Metrics

5. Customer Churn Rate

“You don’t just want to get new customers, you want to have repeat customers.” Explains Jonathan Aufray of Growth Hackers.

“If you want to find out whether a customer is loyal to your brand, check when was the 1st time they purchased from you and when was the last time. If they only purchased once, it means there’s no customer retention. If they purchased a product or service 6 months ago and again this month, you have a 6-month retention and that’s awesome.”

Kasper Langmann of Spreadsheeto says, that measuring the customer churn rate helps small businesses, “Evaluate the happiness of our customers and determine if there is any problem. If the churn rate is greater than 5 to 7%, it shows us that the products and services we offer fail to meet our customers’ expectations or goals.” Explains Langmann.

Sonu Bubna of Shopper.com is of the same opinion and says, “Although it may sound ridiculous to focus on lost customers, their feedback on what’s wrong with your product or what can be improved to delight them is important for continued business growth.

It is quintessential to know your CCR, in order to build a strong retention strategy. Some level of churn is accepted in the business, however, if the CCR is over 5% for a B2C business, it’s important to assess your customers’ happiness and their journey of using your product.”

Bubna further describes their experience and adds, “When we launched Shopper.com, our CCR was miserably high. A high CCR impacts the business badly, where you spend money on bringing the customers, but for some reason, you are unable to retain them.

Unless and until you know why a large percentage of your customers leave, there’s no point in spending more of the marketing budget in bringing even more customers. The first step is to fix the problem, so even the existing marketing budget will get you a higher ROI.”

Editor’s note: This Profitwell Churn Overview Dashboard allows you to track the top sources of churn for your SaaS business. Use this dashboard to see your churn month by month, learn whether customers are churning delinquently or voluntarily, where should more time on addressing churn, and more.

Profitwell Churn Overview Dashboard

6. MRR Churn

“We’re a SaaS, so MRR is what we live off of.” Explains Brand24’s Mike Sadowski. 

“The sum we get from that metric is the number of users who fail to pay in a new time period. I believe that it’s extremely important when it comes to customer retention, as it shows how much exactly we’re losing in terms of revenue. Moreover, having an understanding of what your MRR churn means allows for planning great data-driven product strategies.”

Kelsey Chan of CocoSign explains, “CocoSign is a SaaS company. We offer an electronic signature solution on a subscription basis. It’s our only source of revenue for now. This makes our monthly recurring revenue (MRR) the primary indicator of how well we’re doing, and by extension MRR churn – the amount of customers we lose each month – our primary customer retention metric.

We have an amount we can afford to lose monthly due to unavoidable cancellations or delinquencies. If the monthly MRR goes past that amount, we take immediate action.”

And why does Greg Kozera of ELM Learning like tracking revenue churn? “Because, let’s face it, it IS the bottom line.”

Kozera further adds, “When we look at the Revenue Churn, we can also get a clear idea on when purchases are being made, in what geographic area and the average amount spent. All of this is vital when determining how to strategize our next marketing plan.”

Editor’s Note: Need an easy and straightforward way to monitor your churn rate and MRR growth? Download this free Stripe MRR + Churn dashboard template to ensure you are retaining customers at the same time as you’re acquiring new ones.

The stripe MRR + Churn dashboard template

7. Monthly Active Users

Sanne Kruis of The Next Ad describes their experience and says, “Our business model works with a freemium model. Therefore, activity on the platform is the key metric to measure. 

The more monthly active users, the higher our customer growth rate will be. Secondly, we look into the value per each customer. Users spending more advertising spend, will bring in revenue.”

8. Existing Customer Revenue Growth Rate

Milkwhale’s Andre Oentoro believes, “An increasing rate of Existing Customer Revenue Growth Rate is important because it shows that your team is doing a good job. 

However, if it drops, then you’re not doing a good job at keeping your customers happy. A stagnant rate is also something to be concerned about.” 

Oentoro further adds that the existing customer revenue growth rate is a, “Great way to identify any problems you’re going through.”

9. Gross Revenue Churn

“Gross Revenue churn is the fundamental commercial metric to tell you whether you can retain your recurring revenue. To keep it under control is like making sure you have enough oxygen to breathe.

In other words, it’s vital.

Other metrics like NRR and NPS would indicate maturity and health of your business but to keep it alive you have to sustain a predictable low gross revenue churn rate.” says Kat Fisher.

Wrapping up

While bringing in new traffic and new customers is essential for a business to grow, retaining existing customers is equally important.

After all, loyal customers spend 67% more than new ones.

So, if you still haven’t employed a robust customer retention strategy and started tracking your customer retention metrics, now’s the time to start.

About the author
Maham S. Chappal
Maham S. Chappal Maham S. Chappal is a content writer for SaaS and marketing brands in B2B. She’s been published in several leading publications including Social Media Examiner. She loves writing in-depth, research-backed content that drives traffic, increases brand awareness, and boosts ROI. When she’s not writing, you’ll find her engrossed in the latest John Grisham novel. You can find her on LinkedIn or on mahamschappal.com

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