Customer retention is a major focus for businesses across almost every industry. After all, there is a limit to the number of new customers that you can acquire, since, you know…the population of the Earth isn’t infinite. It’s just common sense that you should try to keep the customers that you’ve already attracted. In this brief guide, we’re taking a look at how you can better understand your customer retention rates by using metrics like net revenue retention (NRR). Let’s jump in.
How do you measure customer retention?
In order to understand how many customers you’re keeping, you will need to use retention metrics. In order to collect and analyze this data, most companies use software that will do the heavy lifting. When choosing a platform to help you do this work, it’s important to look for:
Ease of Use
First and foremost, any tool that you select should be intuitive and simple to use. After all, your customer success team is busy, and no one wants to take the time to learn yet another complicated program. They need to be able to easily access the data so they can actually use it!
Workflow and Customer Journey Tools
ou need to be able to build workflows and customer journeys to be able to understand where customers are being lost, where there is opportunity to upsell and cross-sell, and to focus your efforts on the activities that actually work.
Flexibility
Any tool that you select needs to be able to adapt to your specific business needs. You need to look for the ability to customize your platform to suit you and your team.
Automations and Integrations
The best thing about technology is how much time it can save you! Make sure the platform you’re considering includes automation of tasks that don’t need to be done manually and integration capabilities with your existing tech stack.
Reporting and Presentation Abilities
What’s the use of having data if you can’t report or present it? It’s important to consider these functions when looking at a solution.
Collaborative environment
A shared working space that encourages transparent collaboration between you and your customers is becoming increasingly important as customers expect excellent service from their software solutions.
Security
Customer data is sensitive and important data. Your platform needs to have security externally and internally. Look for the ability to assign roles, limit access, and of course, a platform with strong external protection.
What are retention metrics?
When looking at what metrics measure retention, you’ll find that these five metrics are the most common ones. They are:
Net Revenue Retention (NRR)
This metric looks at your total revenue minus any downgrades, cancellations, and churn. It’s important to note that total revenue includes any upgrades or upsells.
Annual Revenue Retention (ARR)
This is essentially the same as NRR, but looking at it over each year rather than monthly or quarterly.
Churn Rate
This is the measurement of how many customers stop doing business with you over a given period of time.
Gross Revenue Retention (GRR)
While similar to NRR, GRR is the measurement of revenue minus downgrades, cancellations, and churn. The revenue in GRR does not include upgrades or upsells.
Net Expansion Rate
This metric only looks at the sum of the revenue from add-ons, upgrades, upselling, and cross-selling.
These are just a few of the metrics you can use to understand your customer retention.
What is a good retention metric?
Here at Planhat, we’ve found that one of the best retention metrics is net revenue retention. NRR is particularly useful for customer success teams because it helps them target the accounts that are most likely to increase in value over time. Once those accounts are identified, you can easily engage and upsell, putting your customer success team into more of a sales position rather than existing to simply assist customers.
Viewing customer success as a part of sales is something we really believe in at Planhat. Instead of taking a defensive approach to customer success (waiting for them to come to you with issues), we think that a proactive tactic of bringing opportunities to your best customers is the best strategy. Using the NRR metric is essential in helping you identify those customers and implement this technique.
What is a good customer retention rate?
Planhat: Retention metrics made mimple
Go To Market & Field Researcher
Planhat
Christoffer is a seasoned commercial leader with over 10 years of experience in B2B sales and business development. At Planhat, he served as Senior Account Executive, helping enterprise teams adopt a more data-driven, customer-centric approach through its customer platform. He joined Planhat as a Business Developer and has was instrumental in its early international growth. Prior to this, Christoffer led sales teams at Vainu and Cerberus AB, bringing deep expertise in sales intelligence, prospecting strategy, and team leadership.
