Customer Retention Rate Metric

Measure The Ability of Your Organization to Retain Customers With The Customer Retention Rate KPI

Customer Retention Rate is one of the most important KPIs (if not the most important KPI next to the New Sales KPIs) to subscription based businesses, because it impacts (1) recurring revenue, (2) customer satisfaction levels (which impacts account expansions and referrals) and (3) the growth of the business.

It's hard to overstate the value of customer retention for any organization, as research shows that a modest 5% increase in customer retention can increase profits anywhere from 25% to 95% (source: The Economics of E-Loyalty). In addition to this fact, generating revenue from loyal customers is considerably less expensive than acquiring new customers. To track revenue generated from retained customers, use the Gross Revenue Retention Rate KPI to understand the stability of your revenue.

The targets associated with the Customer Retention Rate KPI can vary greatly from business to business. Add this Klip to your Excel dashboard.

Monitoring SaaS KPIs on a Dashboard

Once you have established benchmarks and targets for measuring Customer Retention, you’ll want to establish processes for monitoring this and other SaaS KPIs. Dashboards can be critical in this regard.

Learn more about how to track your Customer Retention Rate on a SaaS Dashboard.

Customer Retention in Retail and eCommerce

The Customer Retention KPI measures the ability of your organization to retain customers over the long term and to generate recurring revenue from existing customers. It's hard to overstate the value of customer retention for any organization, as research shows that a modest 5% increase in customer retention can increase profits anywhere from 25% to 95% (source: The Economics of E-Loyalty). In addition to that fact, generating revenue from loyal customers is considerably less expensive than acquiring new customers.

Successful customer service strategies are focused on going that extra mile and seek to exceed customer expectations so they become loyal brand advocates. In the age of social media, a review on Google or Yelp can make or break a business. Consider tying your customer retention KPI to social media measurements to gain a better understanding of customer sentiment and to help nourish positive engagements.

The values associated with this KPI may vary greatly in significance from one business model to another. For instance, a SaaS startup that generates revenue based on subscription licensing needs a high retention rate (>98%) to successfully grow the business and sustain it over the long run. On the other hand, while customer retention is equally important to automobile dealerships, they can still grow the business even if they have a lower customer retention rate (a rate which may spell disaster for a SaaS startup).

Key terms

• Retention rate: The number of customers that make repeat purchases from your organization.
• Attrition rate: The number of customers that no longer make purchases from your organization.

Success indicators

• A high or increasing customer retention rate.
• Positive brand sentiment on social media platforms.