User retention is the lifeblood of any SaaS business.
If your subscription base resembles a leaking bucket, this can present a major obstacle to growth.
A sticky subscription base is critical to the success of any healthy SaaS business.
You can leverage user retention metrics to keep a close eye on user retention and measure the risk of churn.
While user churn is a reality for any SaaS business, there are ways to minimize it.
User retention metrics enable you to understand the reality of the situation.
Once you know where you stand, you can begin to set retention benchmarks for success.
In this guide, we will break down everything you need to know about user retention metrics.
Why does SaaS user retention matter?
If you can successfully promote SaaS user retention and keep customers onboard, your SaaS business will inevitably have a long and fruitful future.
The key to a successful SaaS business is a sticky subscription base.
User churn can quickly eat into your profits and impede growth.
When customers churn, they take their recurring revenue with them.
This not only impacts your bottom line in the short term but also hampers your ability to reinvest in long-term growth.
To keep your business growing, you need to focus on SaaS user retention and do everything in your power to ensure customers stay subscribed.
Why is measuring user retention important?
Measuring user retention can provide you with plenty of useful data on your subscription base.
This data will offer clues as to why customers are churning and what you can do to prevent it.
If you are providing customers with consistent value, they are likely to stick around.
If you are not, they will churn.
The easiest way to increase the lifetime value of a customer is to raise the overall value proposition.
It's really that simple.
User retention metrics can help you identify areas where your value proposition needs improvement.
If you notice that users tend to unsubscribe after a certain number of months, you should consider elevating the value proposition to keep them subscribed for longer.
What are the best user retention metrics?
Monthly Recurring Revenue (MRR)
How could we begin a conversation about user retention metrics without discussing monthly recurring revenue (MRR)?
This is the bread and butter of any SaaS business.
To put it simply, MRR is the total revenue that a SaaS business can expect to receive on a monthly basis from its subscription service.
The churn rate is an equally important metric to consider when measuring user retention.
Churn is the percentage of customers who cancel their subscription or do not renew it within a given period of time.
For example, if 100 customers subscribe to your service and 10 of them cancel their subscription within the first month, your churn rate would be 10%.
Customer Lifetime Value (LTV)
The customer lifetime value (LTV) is the estimated total revenue that a customer will generate for your business during their lifetime.
This metric is important because it helps you understand the true value of a customer.
If you know how much revenue a customer is likely to generate, you can invest more in acquiring and retaining them.
Customer Acquisition Cost (CAC)
The customer acquisition cost (CAC) is the amount of money that a business spends to acquire a new customer.
When it comes to retention, CAC is important because it helps you understand how much you can afford to spend to acquire a customer.
How To Calculate User Retention Rate
Do you know how to calculate your user retention rate?
We've got you covered.Let's break it down.The formula looks like this:
User Retention Rate = ((E-N)/S) x 100N = The number of customers acquired during the period you are measuring.
S = The number of customers you have at the beginning.
E = The number of customers you have at the end.
Ideally, you need to keep your user retention rate above 90%.
If it falls below that, you should take an objective look at your business and see where you can increase your value proposition.
What is cohort user retention?
Cohort user retention is a way of measuring user retention that groups together users who share common characteristics.
This data enables you to track how well your SaaS retention strategy is working for specific groups of customers.
For example, you could measure cohort user retention by grouping together customers who signed up for your service in the same month.
This would enable you to track how well you are retaining customers over time.
If you notice that your retention rate is declining for a particular cohort, you can take steps to elevate the value proposition and improve user engagement.
What is the best user retention model?
When it comes to determining the best user retention model, we recommend using a framework that offers a complete view of the customer lifecycle.
The AARRR framework is a simple, yet effective way to measure user retention.
AARRR stands for acquisition, activation, retention, referral, and revenue.
This model enables you to track how well your business is doing at each stage of the customer lifecycle.
You cannot measure user retention without considering all of these factors.
The AARRR framework builds context around customer behavior and helps you identify areas for improvement.
How can you start improving app user retention?
Having access to churn prevention solutions is an important part of app user retention.
Raaft can play a pivotal role in reducing your SaaS churn by saving customers with retention flows.
When a SaaS user takes actions that indicate they may churn, Raaft will automatically extend offers to the customer in your retention flow.
The solution seamlessly integrates with your existing interface and requires no coding.
This means you can start reducing your SaaS churn in minutes, not days or weeks.
Raaft also offers a suite of other features that can help improve user retention.
You can leverage real-time analytics and cancellation insights to learn more about why users churn.
Are you ready to get the ball rolling and start saving users?
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