Assessing Customer Renewal Rates and Churn Trends

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Customer renewals rates are one of the key tenets for Software-as-a-Service (SaaS) startups. It’s important to track relevant details as to why a customer leaves so that these can be analyzed and addressed.

Here are some common categories for SaaS companies to track in order to assess customer churn trends:

  • Budget
  • Product functionality
  • Usefulness
  • Personnel change
  • Project needs

Another general question I like to track is whether or not the item was within our control. The idea is that some things, like budget, are outside our control, but product functionality is within our control. Another area to look at when assessing customer renewal rates is to look at the sales reps that brought in the account to see if certain reps are signing clients that aren’t good fits, and thus have higher churn rates. A third exercise is to do SaaS cohort analysis and look at renewal rates of groups of customers from defined time periods (e.g. how do customers signed in Q1 2011 compare to customers signed in Q4 2010).

What else? What other ways do you assess customer renewal rates and churn trends?

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