SaaS Customer Retention Rate (CRR)

In the business landscape, Customer Retention Rate (CRR) represents an important guideline for future steps that a company should take. It is an integral part of the entire information system on the basis of which companies evaluate their previous performance. So this blog is dedicated solely to CRR. What it means, how it is measured, and what specific steps need to be taken to maximize it will be the focus in the next few paragraphs.

What is the SaaS Customer Retention Rate? 

CRR is a number that testifies to how many customers the company currently has compared to the previous time. A month is usually taken for a period of time. It should be noted that the number obtained is not the most precise. It serves more as a starting point for further action, indicating whether your product is gaining in popularity on the market or not, whether the number of customers increases or drops and to what extent.

So, once again, Customer Retention Rate definition:

  • CRR = the difference in the percentage of customers between the two time periods

How to calculate the Customer Retention rate?

To calculate retention rate in SaaS business you need to use the same formula as other similar customer retention metrics, such as User Retention Rate and Monthly Revenue Retention. By dividing the total number of customers (for the previous period of time) by the total number of customers (for the current period of). As we mentioned, the month is usually taken as a time determinant.

So, in practice, for example, you can measure the current month (September) with the previous month (August). The figure obtained is multiplied by 100 and the percentage difference between the two time periods is obtained.

Keep in mind that the obtained number could be deceiving. Because the SaaS customer retention number is higher than 100%, it does not automatically mean that the accomplished profit is higher and vice versa. Why? Simply put, not all customers are of the same importance. If you lose high-paying customers but only get a couple of low-paying ones. So you gained more customers, but did your profit go up or down? Not likely, and even if it does, profit will move up just a little bit.

  • CRR= Total number of current customers ÷ Total number of past customers × 100

Practical steps to boost your CRR

In one of our previous blog posts we discussed SaaS Customer Onboarding and why is it important. Well, Customer Onboarding is playing a key role here. It’s all about keeping your newly-signed customers happy and transforming them into long-term and paying kind of customer. So by taking care of Customer Onboarding indirectly you would take care of the CRR number too.

  • Quick, informative Customer Onboarding process is a key to keep your SaaS churn low

So what to do exactly? Keep your Onboard experience simple, fast, and informative so that you can minimize your Customer Churn Rate (CCR). Make sure that you stay in touch with a customer through emails, or simply by being there for them when they need help. In other words, your customer support must be on point. Guide your customer through your app and make sure that you get valid feedback. Analyze it and act accordingly. Once customers feel like their opinions matter and they know they will be heard you will transform it into a long-term one. The cherry on top is that good words spread fast, so satisfied customers will recommend your app to friends.