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SaaS Definitions
Customer Metrics and Retention
Customer Metrics and Retention
Customer Metrics and Retention
Metric
Notes
Context and Analysis
Critical?
1
Net Promoter Score (NPS)
NPS measures customer experience and predicts business growth. Calculate your NPS using the answer to a key question, using a 0-10 scale: How likely is it that you would recommend [your product] to a friend or colleague? Read more about NPS
.Best viewed over time using a quality survey methodology and techniques, most likely leveraging a third-party. Changes in NPS over time are strongly correlated with net dollar retention on subscription revenue.
Yes
2
Total # of Customers
The total count of active customers in a given period.
Best viewed in conjunction with ARR and MRR information over time.
3
# of New Customers
The total number of new customers added in a given period.
Best viewed in conjunction with ARR and MRR information over time.
4
# of Churned Customers
The total number of churned customers lost in a given period.
Best viewed in conjunction with ARR and MRR information over time. It’s important to bucket churn in "avoidable" and "unavoidable" groupings over time. Investors will often drill down on individually churned customers, so keep records as to why customers churned.
5
Cohort Analysis
An analysis of recurring revenue where customers are grouped in time-based cohorts.
This is a critical piece of analysis. Typically customers are grouped according to the quarter in which you started to recognize MRR. The analysis is focused on revenue size for that cohort over the passage of time.
Yes
6
Net New Customers
# of New Customers - # of Churned Customers within a time period
7
% Customer Churn
# of Churned Customers / Total # of Customers (from the last month)
Needs be to viewed as a trend over time and benchmarked against other similar companies.
8
% ARR Churn
Churned ARR / Last year's Ending ARR
Needs be to viewed as a trend over time and benchmarked against other similar companies.
Yes
9
% ARR Expansion
Expansion ARR / Last year's Ending ARR
Needs be to viewed as a trend over time and benchmarked against other similar companies.
Yes
10
% Net ARR Churn
(Churned ARR - Expansion ARR) / Last year's Ending ARR
Needs be to viewed as a trend over time and benchmarked against other similar companies.
Yes
11
Customer Engagement Score
The average Customer Engagement Score across the customer base.
We prefer NPS to custom-made customer engagement scores as NPS is a more broadly used tool; however, NPS is not necessarily robust enough to provide granular insight.
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