What’s the key ingredient for growing your B2B business without needing to acquire new customers? Customer retention. After all, the more revenue you generate from your existing customers, the less pressure you put on your customer acquisition efforts. In other words, you’ll be less pressured to acquire new customers if your existing ones continue to buy.
- Customer retention rate
It takes time to see how effective your retention strategy is working. To do this, add up the number of customers you had at the beginning of a period, then all the customers that onboarded in between, then the number you had at the end of the period.
Subtract the number at the end from the newly acquired, and divide that solution by the number of customers you had in the beginning. If you have a relatively small customer list, semi-annual or annual tracking will suffice.
Retention Rate Formula : Customer Retention Rate = (Customers at the End of the Period) – (New Customers Acquired) / Customers at the Start of the Period
- Your customer success team’s primary objective is to proactively ensure customers aren’t having problems using your product or service, let alone approaching the point where they downgrade their subscription.
If revenue churn does occur, it’s possible that your customer may be on the brink of leaving — and your operations or services team must quickly take action to prevent this from happening.
Your revenue churn rate is the percentage of revenue you’ve lost from existing customers in a given period. For example, revenue churn can result from an order cancellation, a plan downgrade, or an end to a business relationship.
Monthly Revenue Churn Rate = [(MRR at Start of Month – MRR at End of Month) – MRR in Upgrades during Month] / MRR at Start of Month