3 Powerful Retention Metrics for Software-as-a-Service (SAAS)

It’s time to crunch those numbers! One of the beauties of running a digital software as a service, is that you have access to track and create a series of metrics that allow you to get a deep view of your customers’ behavior and habits. But with so many to choose from, which ones should be on your dashboards as retention marketers? Let’s look at the following three examples and see why they matter to SAAS.

Churn Rate

We’ve written an article on how to calculate your retention rate, so you can get the math from that article. But a consistent measure of this metric is your baseline of success. There are things to note about churn rate though. First, segmentation and cohorts are very important in tracking your rates. Never track your customers as a whole. And second, finding the right range of time to review that rate can really make a difference in your ability to predict and prevent churn.

Lifetime Value (LTV)

Lifetime value is the ability to understand how much this user could present in value. We’ve posted a spreadsheet in this post that can help you start calculating that value. Having a baseline LTV for your customer helps you put a dollar value on your churn number. If you know you have a 5% monthly churn, and it’s approximately 3K per customer lost in LTV, you can understand the impact. If you can combine that with your customer acquisition rate and cost to acquire, you can really start to see a front-to-back revenue outlook for your product.

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Churn Funnels

Now this one is a little bit harder to quantify into one metric, since what we are talking about is a funnel – a series or steps a customer takes before the churn. You can read about our churn model here, but once you have yours created, you can start to measure how many users hit those steps and start to preemptively do something about it. If you can track how many users are not logging in, you can do some email or social conversations with them to encourage them to do so. Having metrics along the funnel will help you see the tide of churn before it breaks on the shores of your product health and profit.

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