Customer Retention Goal: Retain & grow healthy customers. Highlights:
Retaining customers usually generates higher net value vs. acquiring new customers.
Gross revenue retention is the generally the most telling measure of longterm customer health.
NRR is a broader measure of growth + retaining customers.
For balanced results, monitor all three (ARR growth, GRR and NRR)
Customer Retention Metrics
Retained customer count = Count of customers still active for at least 12 months ÷ count of customers active as of 12 months ago.
ARR growth = ∑ current ARR / ∑ LY ARR
Gross revenue retention rate (GRR) = ∑ LY ARR for all customers still active for at least 12 months / ∑ LY ARR. Max is 1 (100%). Measures all lost accounts, and excludes all existing customer growth. GRR can feel like a punishing metric, though there’s no better metric to take a hard look at the truly lost accounts. Were these accounts that didn’t fit the current product model, or were these mishandled? Can/should any be recovered?
Net revenue retention rate (NRR) = ∑ ARR for all customers still active for at least 12 months ÷ ∑ ARR as of 12 months ago.
NRR reflects growth in existing accounts offset by churned or retracting accounts. Long term accounts present opportunities to build stronger customer relationships, generally less likely to churn and more likely to grow over time.
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