How to Measure Customer Retention and Churn

While companies often focus on trying to “save” a customer on the verge of churning, as Skilljar CEO Sandi Lin explains, “that’s like trying to avoid a breakup with a last-minute attempt at therapy.”

The alternative, Lin continues, “is to work on building a healthy relationship over days, weeks, months, and years. This is a lot harder, but it creates stronger continuous alignment between customer and company that pays off in the long run.”

Measuring customer retention and churn in an ongoing manner is critical to building that healthy relationship with customers. You’ll be able to spot trends, identify red flags early, and make data-informed decisions to proactively improve your customer experience.

So, how do you measure customer retention and churn? What metrics should you look at? There are a number of indicators to consider — we refer to these as Business Impact metrics.

Business Impact metrics help you measure the impact of your training program on customer retention, lead generation, and revenue. In this article, we’ve broken down these measurements by retention drivers.

If you’re looking for customer retention strategies that go beyond metrics to measure, download our free guide here.

First, What is Customer Retention and Churn?

To measure something, you first need to be aligned internally on what you’re measuring. So how is customer retention defined? According to Customer Success software company (and Skilljar customer) Gainsight:

“Customer retention refers to the strategies used to keep customers from spending their money elsewhere. When a customer leaves, it’s known as churn. A successful customer retention strategy will build symbiotic business relationships, drive brand equity, and encourage customer loyalty amongst your customer base.” – Gainsight

For organizations to stay competitive — particularly in the SaaS industry — they can no longer assume that their users will just “figure it out” after the purchase is made.

For truly impactful, long-term adoption and engagement, businesses must empower their customers (and their employees and partners) with the right, most relevant information to understand how to derive value from the product. The creation and dissemination of tailored, on-demand resources and other training methods, can equip customers with the information and skills to achieve their business goals. This will improve customer retention and promote expansion.

Measuring Retention & Churn: Metrics to Use

Customer Onboarding

Long-term customer success and retention are often a direct reflection of a customer onboarding experience.

The metrics below will help you track how successfully users are onboarding to your product.

You should pay close attention to the delta between the number of software licenses sold and the number of users taking training and logging on to the product. You should also monitor the tasks you’ve outlined for users to derive value from your product in the first 90 days. If you’re not seeing users complete these tasks, that’s a red flag.

Metrics

• Time-to-first-value / cycle between key implementation milestones (kickoff, readiness, launch, etc)
• Attach rate
• Average number of users and completion rates by account
• Customer satisfaction (CSAT score)
• Net promoter score (NPS)
• Revenue accrual from paid onboarding and training programs
• Revenue (or the number of account) managed per Customer Success Manager

Audience

When monitoring these metrics, consider sharing it with the below stakeholders in your organization (or stakeholders with similar roles).

• VP, Product
• VP, Customer Success
• Chief Customer Officer
• COO
• CEO

Continued Engagement & Expansion

Training is not only an excellent way to deliver continuous value to your customers, it also makes engaged customers more likely to succeed with your product (and renew in the future). To measure the ROI of ongoing customer education, consider these metrics. They can be particularly helpful when addressing stakeholders from the Customer Success and Sales teams.

Metrics

• Number of students enrolled in training
• Number of course completions or certifications
• Number of hours engaged with training
• Customer satisfaction (CSAT score)
• Net promoter score (NPS)
• Training revenue
• Number of customer renewals and upsells
• Customer retention levels / churn rate
• Reduction / impact on Customer Support tickets

Audience

When monitoring these metrics, consider sharing it with the below stakeholders in your organization (or stakeholders with similar roles).

• CEO
• VP, Customer Success
• VP, Customer Support
• VP, Global Services
• Chief Customer Officer
• CFO
• COO

Ready for 5 customer retention strategies that work? Get our guide here.