For a traditional business model, the relationship between the customer and the business ends when the sale is complete or the customer purchases the product.
The subscription-based model is different.
How?
The relationship between the customer and your company can last for many years since the customer can be subscribed to a monthly or yearly plan.
So, for SaaS businesses, it’s important to understand how to retain existing customers as you acquire new ones.
For example, Subscription based SaaS business need to focus on the manage their subscribers effectively. It improve retention rates for SaaS business.
Fot this, you can invest in a robust tool that streamlines subscription management for SaaS businesses to keep your customers happy and increase revenue for your business
Successful customer retention can give your B2B SaaS the following benefits:
- Helps to improve the profitability and growth of your business
- Helps you gain positive user reviews
- Improves advocacy and customer referrals
- This can lead to happy and loyal customers
But how do you know whether you’re achieving customer retention with your marketing strategy?
Well, it’s by tracking the 8 key metrics can help you boost customer retention.
1. Retention Rate
Retention rate is the most obvious B2B SaaS metric to help you assess the relationship you have with your customers.
This metric indicates the percentage of customers who stay subscribed to your product for a given period—whether monthly or annually.
Retention rate = Number of subscribers at the end of the tracking period / Number of subscribers at the beginning of the tracking period.
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2. Churn Rate
Churn Rate can be measured in two ways:
- Customer Churn Rate. This indicates the percentage of subscribers who cancel their subscriptions over a certain period.
Customer Churn Rate = Total number of customers who have churned over a certain period / total number of customers at the beginning of the tracking period.
- Revenue Churn Rate. This represents the percentage of revenue you have lost over a particular period due to customers who have canceled their subscriptions.
Revenue Churn Rate = (Total recurring revenue at the beginning of the tracking period – Revenue lost due to churn during the same period) / The total recurring revenue at the beginning of the tracking period.
3. Net Dollar Retention (NDR)
Also known as Net Revenue Retention (NRR), this metric represents the amount of revenue gained from customers over a given period.
NDR = (Total recurring revenue at the end of the tracking period – Revenue lost due to churn) + Expansion Revenue (revenue gained from cross-selling and upselling) / Total recurring revenue at the beginning of the tracking period.
4. Activation Rate
One of the customer retention strategies for B2B SaaS businesses is to consistently deliver value to your customers.
Delivering value to customers from the time they start their subscription or sign up for a trial version can help to encourage them to upgrade to a paid plan and retain them.
Activation Rate is a customer engagement metric that indicates how well you’re delivering value to your customers.
To calculate Activation Rate, you need to establish an action that indicates whether the product delivered value to the customer or not and then divide the total number of users who performed the action by the total number of users.
Simplify your calculations, you need to use a recurring billing solution. Nevertheless, choosing a suitable platform can be challenging. Attrock prepared a list of the best recurring billing software for B2B SaaS.
5. Customer Engagement Score (CES)
CES is yet another key B2B SaaS retention metric that indicates how your customers engage with your product.
Similar to Activation Rate, you need to establish actions that show how well your customers are engaged with your product.
For example, a SaaS based pharma tools help pharma brands to boost their digital HCP engagement so that they can get relevant audience for their product and services.
6. Average Customer Lifespan (ACL)
You also need to measure your average customer lifetime.
This metric indicates the duration, on average, that your customers stay subscribed to your software before they cancel.
This metric is a great indication of your product’s ability to meet and satisfy customer needs.
Calculating Average Customer Lifetime is simple.
You add the number of years the customers have been using your product and get the average.
7. Customer Lifetime Value (CLV)
Another valuable metric to track is CLV. It represents the total amount of revenue gained from a customer during the time they are subscribed to your SaaS product.
Here, you need to use your ACL and Average Revenue Per User (ARPU).
ARPU is the total recurring revenue divided by the number of customers you have during the tracking period.
So, CLV= Average Customer Lifetime × ARPU.
8. First Call Resolution Rate (FCRR)
How your customer support addresses your customers’ concerns will determine whether they will continue using your product or cancel their subscriptions.
FCRR is a metric that indicates how well your customer support team is solving customer concerns when they reach out for the first time.
The higher the FCRR, the better support your customers are getting from your support team.
Conclusion
Tracking your customer retention is essential in helping your B2B SaaS business increase revenue and grow. However, you need to understand and track the right B2B SaaS retention metrics.
