How do you build a bank of loyal customers? Customer retention is the lifeblood of sustainable growth for any type of business. If you’re a product manager or growth marketing professional, you’re likely well aware that acquiring new customers is far more expensive than retaining existing ones. But how do you measure customer retention? The answer lies in retention KPIs (Key Performance Indicators).

In this comprehensive guide, we’ll dive deep into the world of retention KPIs, exploring what they are, why they matter, and how you can use them to boost your customer retention rates. Whether you’re a SaaS business owner, product manager, or customer success professional, this article outlines all the strategies you need to boost your retention efforts — and keep your customers happy.

What are Customer Retention KPIs?

Retention KPIs are specific metrics that help businesses measure and track how well they retain their customers over time. These indicators provide valuable insights into customer behavior, satisfaction, and loyalty, which help companies make data-driven decisions to improve their retention strategies.

Here are just some of the reasons why it’s vital to understand and monitor customer retention KPIs:

• They help identify areas of improvement in your product or service
• They provide early warning signs of increased customer churn rate  
• They allow you to measure how effective your customer retention strategies are
• They lead to more accurate revenue forecasting and business planning

Put simply, when you know what your customers want, you know how to retain them. Now, let’s explore the customer retention metrics and KPIs that every SaaS business should track.

10  Customer Retention KPIs and Metrics

1. Customer Retention Rate (CRR)

The Customer Retention Rate is the most fundamental metric for measuring customer retention. It shows the percentage of customers who remain with your business over a given time period. If you choose only one metric to measure, make it Customer Retention Rate.

Formula:

CRR = ( ( C₁ - ΔC ) / C₀) x 100

C₀ = Number of customers at the start of the period
C₁ = Number of customers at the end of the period
ΔC = Number of new customers acquired during the period

Why it’s important: Customer Retention Rate provides a clear picture of how well you’re retaining customers over time.  A high Customer Retention Rate suggests strong customer loyalty, which is always good for business.

How to improve it:

• Enhance your onboarding process to highlight customer value from the get-go
• Regularly engage with customers through personalized communication
• Continuously improve your product based on customer feedback
• Offer high-quality customer support

2. Monthly Recurring Revenue (MRR)

Monthly Recurring Revenue is a valuable metric for subscription-based businesses. It represents the predictable revenue generated from your customer base each month.

Formula:

MRR = Number of customers x Average revenue per customer

Why it’s important: Monthly Recurring Revenue helps you measure your business’s financial health and levels of growth. MRR is also a key indicator of customer retention, as it reflects both new and retained customer revenue.

How to improve it:

• Focus on upselling and cross-selling to existing customers
• Implement a tiered pricing strategy to capture different customer segments
• Reduce churn rate by addressing pain points and improving customer satisfaction

3. Customer Lifetime Value (CLV)

Customer Lifetime Value shows the total revenue a business can expect from a single customer account throughout their relationship with the company.

Formula:

CLV = Average Purchase Value x Average Purchase Frequency x Average Customer Lifespan

Why it’s important: Customer Lifetime Value helps you understand the long-term value of retaining customers. CLV can also help with decisions on customer acquisition costs and retention strategies.

How to improve it:

• Boost user engagement with personalized experiences (Example: You could send a customized email on their birthday)
• Offer loyalty programs or rewards for long-term customers
• Continuously add value to your product or service (like new features)
• Provide exceptional customer service to build strong relationships

4. Product Stickiness

Product Stickiness measures how often users engage with your product. To calculate it, use the ratio of Daily Active Users (DAU) to Monthly Active Users (MAU).

Formula:

Product Stickiness = DAU / MAU

Why it’s important: Turns out, it’s good to be sticky. In fact, a high stickiness ratio indicates that users find your product valuable and interact with it regularly, which suggests they’re more likely to stay using it.

How to improve it:

• Identify and promote your product’s sticky features
• Use in-app messaging to lead users to these features
• Gamify some elements to encourage regular usage
• Use behavior data to regularly optimize the user experience 

5. Repeat Purchase Rate (RPR)

While more commonly used in e-commerce, the Repeat Purchase Rate can be adapted for SaaS businesses to measure the percentage of repeat customers (those who renew their subscriptions or upgrade their plans).

Formula:

 RPR = Number of Repeat Customers / Total Number of Customers

Why it’s important: A high Repeat Purchase Rate indicates strong customer loyalty, meaning they’re happy with your product or service.

How to improve it:

• Build an easy-to-follow customer onboarding process
• Provide excellent customer support
• Regularly release new features or improvements
• Offer incentives for long-term commitments, new subscriptions, or upgrades (e.g., 10% discount)

6. Expansion MRR

Expansion MRR measures the additional annual recurring revenue (ARR) from existing customers through upselling, cross-selling, or plan upgrades.

Formula:

Expansion MRR = MRR from upgrades + MRR from cross-sells - MRR from downgrades

Why it’s important: Expansion MRR is a big indicator of customer satisfaction and the potential to expand your existing customer base.

How to improve it:

• Identify upsell opportunities based on customer usage patterns
• Create clear upgrade paths with tangible benefits
• Educate customers on advanced features that might require upgrades
• Offer time-limited promotions for upgrades or additional services

7. Customer Satisfaction Score (CSAT)

As the name suggests, Customer Satisfaction Score measures how satisfied customers are with your product or service, typically on a scale of 1-5 or 1-10.

Formula:

 CSAT = (Number of satisfied customers / Total number of survey responses) x 100

Why it’s important: Because the Customer Satisfaction Score gives direct feedback on customer satisfaction, it helps you spot any problem areas and fix them before the churn rate rises.

How to improve it:

• Regularly collect customer feedback — and act on it
• Respond to customer complaints quickly and provide a rapid solution
• Keep up with user needs, constantly improving your product 
• Offer 24/7 customer support and education

8. Net Promoter Score (NPS)

Net Promoter Score measures customer loyalty by asking how likely customers are to recommend your product or service to others, typically on a scale of 0-10.

Formula:

NPS = % of Promoters - % of Detractors

Promoters = Customers who rate 9-10
Passives = Customers who rate 7-8
Detractors = Customers who rate 0-6

Why it’s important: Like RPR, Net Promoter Score is a strong indicator of customer loyalty. It can predict your customer retention rate and potential growth through word-of-mouth referrals.

How to improve it:

• Follow up with detractors to address their concerns
• Promote your best case studies and testimonials
• Use feedback to continuously improve your product
• Create a referral program to encourage promoters to spread the good word

9. Customer Health Score

The Customer Health Score is a metric that combines various indicators to predict the likelihood of a customer continuing to use your product or churning.

Formula: The exact formula differs by company, but typically includes factors such as:

• Product usage frequency
• Feature adoption
• Customer support interactions
• NPS or CSAT scores
• Payment history

Why it’s important: Customer Health Scores keep you one step ahead, so you can quickly identify at-risk customers and act before they churn.

How to improve it:

• Develop a clear scoring system based on key indicators of customer success
• Use automation tools to alert customer success teams when scores drop
• Adopt targeted interventions for customers with low health scores
• Regularly review and refine your health score criteria

10. Revenue Churn Rate

Revenue Churn Rate tracks the percentage of recurring revenue lost due to cancellations or downgrades over a certain time period.

Formula:

Revenue Churn Rate = (MRR at start of period - MRR at end of period) / MRR at start of period

Why it’s important: Revenue Churn Rate helps you understand the impact of customer churn on your business’s bottom line. It can also highlight any revenue issues with specific customer segments or pricing tiers.

How to reduce it:

• Implement a customer success program
• Offer incentives for longer-term subscriptions, such as discounts or company swag
• Regularly communicate the value your product provides (e.g., through social media or email campaigns)
• Address customer concerns quickly and effectively

Tip: You don’t need to remember every rate formula by heart — just bookmark this article and refer back to the list whenever you need. 

How to Measure Customer Retention

Now you’ve figured out how to calculate customer retention KPIs and metrics, you’re ready to optimize the process. Here are some top tips to measure customer retention the right way:

1. Define your time period: Do you want to measure customer retention rate monthly, quarterly, or annually?
2. Choose your metrics: Select the KPIs that are most relevant to your business model and goals.
3. Set up tracking: Use customer relationship management (CRM) software, analytics tools, or specialized retention tracking software to collect and analyze your data.
4. Establish benchmarks: Research industry standards and set realistic goals (consider the SMART method here) for your retention metrics.
5. Review and analyze: Set up a regular cadence to review your customer retention metrics and analyze trends.
6. Segment your data: Look at retention rates across different customer segments, such as pricing tiers, industries, or user personas.
7. Act on insights: Use the data you collect to inform product decisions, customer success strategies, and overall business planning.

Strategies to Improve Your Customer Retention Rate

So, you’ve ticked “Measure retention KPIs” off your list. What's next? It’s time to put your plan into action. We’ve touched on some of these above, but here’s a handy list of proven customer retention strategies:

1. Personalized onboarding: Tailor the onboarding experience so new users get a good first impression. Tip: Tools like Userflow can help you create interactive guides and tutorials.
2. In-app messaging and email campaigns: Use targeted communications, like in-app notifications and customized emails, to pique users’ interest. These channels are the best way to highlight new features and provide insider tips.
3. Top-notch customer service: It’s a given that you should respond to customer inquiries quickly, but you can also take it a step further and reach out to users who may be struggling.
4. Use customer feedback and surveys: Real customer feedback can be a goldmine for product improvements. Collect these nuggets and turn them into actions that will make your product better.
5. Regularly update and improve your product: Keep an eye on market trends, as well as what your competitors are doing, and use these insights to decide new features and enhancements for your product.
6. Create a customer loyalty program: Who doesn’t love a perk? Offer exclusive benefits to your loyal customers, such as early access to new features or bespoke pricing.
7. Provide educational resources: Share webinars, tutorials, and knowledge base articles, so your users get the most out of your product. This is especially important when introducing a new feature, as it will increase user uptake.
8. Build a community: Create forums, user groups, or events where customers can connect and share best practices.

How Userflow Can Boost Your Customer Retention Rate

At Userflow, we’re big on customer retention. Our whole platform is designed to help SaaS companies improve their retention metrics, right from the very start of the user journey. Here’s how Userflow can help you track and boost your customer retention rate:

• Interactive onboarding: Personalize the onboarding experience with step-by-step guides, tooltips, and checklists to improve product adoption and reduce time to value.
• User segmentation: Target specific user groups with tailored in-app messaging and guides based on their behavior, role, or other attributes.
• Product usage tracking: Monitor how users interact with your product, identifying areas of high engagement and potential friction points.
• NPS and CSAT surveys: Easily implement in-app surveys to gather feedback and measure your customer satisfaction score.
• Feature adoption tracking: Track how users adopt features and create targeted campaigns to increase usage.
• Analytics and reporting: Access detailed analytics on user behavior, guide completion rates, and other key metrics to inform your retention strategies.
• Integration capabilities: Connect Userflow with your existing tools like Segment, Intercom, or Salesforce to create a unified view of your customer data.

No more guesswork needed — with Userflow in your corner, you can take a data-driven approach to master your retention KPIs and metrics, ultimately boosting your customer retention rates.

FAQs on Customer Retention KPIs

Q: How often should I measure retention KPIs and metrics?
A: It depends on your business model. Most SaaS companies should review retention metrics at least monthly. However, some metrics, like product usage, should be monitored daily or weekly.

Q: What’s a good customer retention rate?
A: Retention rates vary by industry but for SaaS businesses, a retention rate of 35-45% over a 12-month period is considered good. Anything above 50% is excellent.

Q: How do I know which retention KPIs are most important for my business?
A: Focus on metrics that match your business model and growth stage. Early-stage startups might prioritize Product Stickiness, while more mature companies might focus on Customer Lifetime Value.

Q: Can improving retention KPIs impact customer acquisition?
A: Absolutely! Happy, retained customers are more likely to refer new customers. What’s more, focusing on retention can help you optimize your customer acquisition costs as it ensures you target the right customers.

Q: How do I balance focusing on retention vs. acquisition?
A: While both are important, many successful SaaS companies follow the 40/40/20 rule: 40% of resources on acquisition, 40% on retention, and 20% on brand building. However, the exact balance will depend on your growth stage and business goals.

The Last Word on Customer Retention KPIs

Convinced on the importance of customer retention KPIs? By focusing on key metrics like Customer Retention Rate, Monthly Recurring Revenue, Net Promoter Score, and Customer Lifetime Value, you gain valuable insights into user behavior, so you know exactly what steps to take to reduce customer churn rate.

Remember, improving retention is not a one-and-done deal — it’s an ongoing process that requires continuous monitoring, analysis, and optimization. That’s why it’s a good idea to have a tool like Userflow on hand, so you can streamline the process and create tailored experiences that keep your customers coming back for more.

Ready to send your customer retention rate skyrocketing? Sign up for a free trial of Userflow today and see how our comprehensive suite of tools can help you track, analyze, and improve your retention KPIs. Your future self (and your customers) will thank you!