Customer retention is one of the most important aspects of sustaining long-term success. While acquiring new customers often feels like the main focus, retaining existing customers is not only more cost-effective but also leads to greater stability and growth for businesses. Retaining customers allows companies in the SaaS landscape to benefit from recurring revenue, which increases CLV and improves the customer base's overall profitability.
In fact, studies have shown that retaining existing customers is significantly more cost-efficient than acquiring new ones. This is why the focus on customer retention has become critical for success. By measuring and improving retention metrics, SaaS companies can better understand their customer base, anticipate potential churn, and make data-driven decisions to improve the customer experience.
This guide explores the most important customer retention metrics and KPIs for 2025 and covers how they can be used to increase customer loyalty and improve long-term business performance.
Why has customer retention become so important?
Customer retention has always been fundamental for business success, but when it comes to B2B SaaS, it has become more important than ever. The advent of subscription-based models ties customer loyalty directly to a company's financial health. Not to mention, the SaaS industry is incredibly competitive, which makes holding on to existing customers a must.
Many businesses are realizing that a smaller, well-engaged customer base can often be more profitable than a larger base with a high churn rate. Retaining customers is not only a great cost-saving measure but also a pathway to upselling opportunities and greater word-of-mouth referrals.
Customer Acquisition vs Customer Retention
For established companies with a solid customer base, retention should often take precedence because the CLV of existing customers can contribute significantly to revenue without the added cost of customer acquisition. On the other hand, startups and early-stage companies may need to prioritize acquisition to build a customer base before they can shift their focus toward retention.
It's worth noting that customer acquisition and retention are not mutually exclusive. They should instead complement one another. Focusing too much on one over the other can lead to inefficiencies. For instance, acquiring new customers while neglecting retention strategies can lead to high churn, which reduces the value of the customers acquired.
Top Customer Retention Metrics in B2B SaaS
A strong customer retention strategy involves tracking key metrics that provide insights into customer satisfaction and loyalty. These metrics help businesses gauge the effectiveness of their retention efforts and identify areas for improvement. Key metrics to focus on include:
- Customer Retention Rate (CRR)
- Net Revenue Retention (NRR)
- Customer Churn Rate
- Customer Lifetime Value (CLV)
- Gross Revenue Retention (GRR)
- Existing Customer Revenue Growth Rate
Customer Retention Rate (CRR)
Measuring customer retention can be calculated using the CRR formula. CRR measures the percentage of customers a business retains over a given period.
CALCULATION
CRR = (Customers at end of period - New customers acquired / Customers at start of period) x 100
OR CRR = (E - N / S) x 100
A high CRR points to strong product-market fit, customer satisfaction, and effective engagement strategies. Industry benchmarks for SaaS typically range between 85%-95%.
Net Revenue Retention (NRR)
NRR measures how much revenue a company retains from existing customers over a given period, including expansions (upsells, cross-sells) and downgrades (churn, contractions).
CALCULATION
NRR = (MRRstart + Expansion − Churn / MRRstart) × 100
EXAMPLE
A business starts with $100,00 in Monthly Recurring Revenue (MRR) at the start of the period. Customers then purchase add-ons or upgrade their plans, which generates an additional $20,000. However, some customers then downgraded their plans and reduced revenue by $5,000. Following that, other customers canceled, which led to $10,000 in lost revenue.
NRR = (100,000 + 20,000 - 15,000) / 100,000) x 100
NRR = 105%
Companies with an NRR greater than 100% grow without acquiring new customers, while those with an NRR less than 100% are losing more revenue than what existing customers provide. Best-in-class SaaS businesses aim for NRR 110-120%.
Customer Churn Rate
Customer Churn Rate measures the percentage of customers who stop using your service over a specific period.
CALCULATION
Churn Rate = (Customers Lost / Customers at Start) × 100
EXAMPLE
A company has 1,000 customers, but 50 cancel their subscriptions, so (50 / 1000) x 100 would come out to a churn rate of 5%.
Lower churn indicates a quality product and strong customer relationships. The ideal churn rate for B2B SaaS is typically under 5% annually.
Customer Lifetime Value (CLV)
Customer Lifetime Value (CLV) estimates the total revenue a business can expect from a customer over their entire relationship with the company. It’s an important metric for long-term planning, as it helps businesses understand customer profitability and determine how much they should invest in acquisition and retention strategies.
CALCULATION
CLV = Average Revenue Per User / Churn Rate
(Note: ARPU is calculated by dividing Total Revenue and Total Customers)
EXAMPLE
Let's assume a company's ARPU is $500 per month and they have a churn rate of 5% per month. This would mean their CLV is equal to 5,000 / 0.05, which is $10,000.
A high CLV means that customers are staying longer and generating more revenue, which leads to higher profitability, more predictable income streams, and better decision-making when it comes to marketing strategies.
CLV-to-CAC Ratio
To ensure profitable growth, businesses need to compare CLV to Customer Acquisition Cost (CAC). The ideal CLV-to-CAC ratio should be at least 3:1, as this means the revenue generated from a customer should be three times the cost to acquire them.
CLV-to-CAC Ratio = CLV / CAC
For example, if your CLV is $10,000 and your CAC is $3,000, your ratio is 3:1.
Gross Revenue Retention (GRR)
Gross Revenue Retention (GRR) measures a company’s ability to retain revenue from existing customers over a given period. It provides a clear picture of customer stability and the impact of churn or downgrades. It's worth noting, though, that this formula excludes expansion revenue from upsells, cross-sells, or upgrades.
CALCULATION
GRR = (MRRstart − Churned MRR / MRRstart) × 100
Where:
- MRRstart = Monthly Recurring Revenue at the start of the period
- Churned MRR = Revenue lost due to customer cancellations or downgrades
EXAMPLE
A SaaS company starts the month with $100,000 MRR. Throughout that month, they lose $8,000 MRR due to churn. The company's GRR in this situation would equal (100,000 - 8,000 / 100,000) x 100, which is 92%. A GRR below 80% points to high churn and revenue contraction risks, while best-in-class SaaS companies keep GRRs of over 90%.
Existing Customer Revenue Growth Rate
Existing Customer Revenue Growth Rate measures the revenue growth generated from existing customers through upsells, cross-sells, and expansions over a specific period. Unlike Net Revenue Retention (NRR), which also accounts for churn, this metric focuses on the positive revenue impact.
CALCULATION
Growth Rate = (Expansion MRR / Total MRRstart) × 100
Where:
- Expansion MRR = Additional revenue from existing customers
- Total MRRstart = Monthly Recurring Revenue from existing customers at the start of the period
EXAMPLE
A SaaS company starts the month with $100,000 MRR from existing customers. During that month, $10,000 MRR comes from upsells and expansions. So, the company's growth rate would equal (10,000 / 100,000) x 100, which would equal 10%. This is considered a low-to-healthy score, but anything below 10% indicates a low growth rate. The best SaaS companies aim for a rate between 20-30%.
Strategies to Improve Retention
In addition to careful monitoring and analysis of SaaS metrics, it’s important to adjust your company’s approach when it comes to keeping customers satisfied.
Reduce Churn
Reducing churn is essential for maintaining a loyal customer base. By addressing issues early on and ensuring customers understand the value of your product, you can improve retention and enhance customer satisfaction.
- Enhance customer onboarding to demonstrate product value.
- Use analytics tools like session replays and heatmaps to identify friction points.
- Implement proactive customer support.
- Develop a feedback loop to improve the customer experience.
Boost Engagement
Keeping your customers engaged is key to sustaining their interest and increasing product adoption. Engaging users with the right features, communication, and community-building efforts can turn occasional users into brand advocates.
- Measure and improve feature adoption rates.
- Leverage product demo tools like TestBox to quickly create demo environments and product demos to showcase new features.
- Use personalized communication to increase active user metrics.
- Implement gamification elements to encourage regular use.
- Leverage community building to foster a sense of belonging among users.
Leverage Upselling
Upselling and cross-selling can unlock new revenue streams and enhance the value customers get from your product or service at the same time. By identifying the right opportunities and communicating value, businesses can turn existing customers into long-term partners.
- Identify key opportunities for upselling and cross-selling.
- Train sales teams to highlight added features and benefits to existing customers.
- Use tools like TestBox to showcase product capabilities in additional use cases ICPs may be interested in.
- Customize pricing models to align with customer segments.
- Monitor success through metrics like NRR and customer feedback.
Optimize Pricing
Regularly optimizing your pricing and experimenting with new structures ensures that you're offering the right value while maintaining competitiveness.
- Align pricing strategies with customer value and market positioning.
- Regularly review pricing models to ensure competitiveness.
- Implement tiered pricing to accommodate different customer needs.
- Use pricing experiments and A/B testing to find optimal pricing structures.
Benchmark Context
As explored throughout this guide, several industry benchmarks exist for customer retention metrics. Below is a summarized list:
- Customer Retention Rate (CRR) = 85-95%
- Net Revenue Retention (NRR) = 110-120%
- Customer Churn Rate = -5% annually
- Gross Revenue Retention (GRR) = +90%
- Existing Customer Revenue Growth Rate = 20-30%
- CLV-to-CAC ratio = 3:1
These benchmarks provide a reference point for evaluating retention strategies and identifying areas that need improvement. For example, if your churn rate is higher than the industry average, it may indicate issues with onboarding, product adoption, or customer support. If your NRR is lower than competitors, it might suggest unrecognized upsell opportunities. By using benchmark data, businesses can focus on initiatives that will have the most impact on retention and growth.
Improving Retention Through Better Demos and POCs
One of the most effective ways to improve retention? Start with better product experiences.
High-fidelity demos and proof-of-concept (POC) environments don’t just help close deals—they set the tone for everything that follows. When customers know what they’re getting and have hands-on experience with how it works for their use case, they’re more likely to adopt quickly, expand over time, and stay for the long haul.
Here’s how smarter demo and POC strategies drive stronger retention:
- Tailor demos to specific churn risks—highlight features tied to underused functionality or common drop-off points.
- Reinforce value with real product usage—let customers see new capabilities in action, using realistic data that mimics their environment.
- Highlight customer success in context—weave in relevant case studies or usage benchmarks during demo re-engagement.
In a world where expectations shape experience, the best way to retain customers is to show them the full value of your product early—and often.
Want to put your product at the center of your retention strategy? Book a TestBox demo to see how we can help.
