Customer retention is the secret sauce that keeps the best SaaS businesses thriving.

When you’ve worked hard to win your customers, seeing them slip away can be frustrating (and costly).

So, this article will break down the essentials, from calculating different retention rates to improving these numbers and understanding what they really say about your business.

Here’s what we’ll dig into:

• What is customer retention, and how to calculate different retention metrics
• Average customer retention rate in SaaS—where do you stand?
• Tips for tracking retention (and improving it)
• What different retention rates reveal about your business

Ready to strengthen those customer bonds? Let’s dive in!

Understanding the different metrics of retention rates

Logo retention rate (Customer retention rate)

Logo retention rate, also known as the customer retention rate, gives a clear view of how many customers stay over a certain period.

This metric emphasizes the number of customers rather than revenue, making it a simple yet powerful indicator to measure customer loyalty and satisfaction for any saas business. It’s particularly useful for assessing customer success efforts and gauging whether customers are consistently finding value in the product.

For SaaS businesses, a high customer retention rate signals strong customer engagement and product-market fit, as customers who see long-term value are likely to stay. Logo retention provides a quick snapshot of customer experience quality and product “stickiness,” helping you spot any trends in customer churn early on.

By maintaining a high logo retention rate, you can build a loyal user base that’s essential for long-term growth.

Gross retention rate (GRR)

Gross retention rate (GRR) offers a look at the revenue stability from existing customers, excluding any upsells or expansions. Unlike logo retention, which focuses on the number of customers, gross retention measures the financial loyalty of your user base.

It reveals how well your customer retention approach is preserving revenue from paying customers, showing how effectively your product holds its core value without needing add-ons or upgrades.

GRR is essential for tracking customer satisfaction with the existing features and core product. A high GRR signals that the product’s current offering alone is enough to keep customers invested, reflecting a strong customer retention strategy.

If GRR is low, it may indicate product or service issues, with customers churning or downgrading because they’re not fully satisfied. In short, GRR measures how much revenue you’re able to retain, providing a solid foundation for revenue predictability and stability.

Net retention rate (NRR)

The Net Retention Rate (NRR) is a comprehensive indicator of revenue growth potential within the existing user base, factoring in all revenue changes, from upsells and cross-sells to downgrades and churn.

Unlike GRR, net revenue retention includes expansion revenue, giving SaaS businesses a clearer picture of how much their customer lifetime value (CLTV) is increasing over time.

For SaaS businesses, an NRR above 100% is ideal, as it means that existing customers are spending more, creating net revenue growth even if there’s some churn. NRR reflects the health of your customer experience and your ability to retain and expand relationships within your existing customer base.

This metric not only shows current loyalty levels but also reveals how well your SaaS product encourages customers to invest more, supporting sustainable revenue expansion.

What is a good customer retention rate?

In SaaS, a “good” customer retention rate can be a bit of a moving target, as it often varies by industry, business size, and customer base. However, as a general benchmark, SaaS businesses should aim for a customer retention rate of at least 85–90%.

Customer retention rates above 90% are typically considered strong, reflecting a high level of customer satisfaction and loyalty. Some top-performing SaaS businesses, particularly in the enterprise space, even maintain retention rates around 95% or higher.

Industry averages provide a helpful baseline. For example, B2B SaaS businesses tend to have higher customer retention rates than B2C, given their longer CLTV and the investment customers make in onboarding and implementation.

Industries like marketing tools often experience lower retention rates than CRM or project management software due to strong competition and easier switching, while sectors such as fintech and health tech may see higher retention given their integration and regulatory complexities.

Ultimately, the goal is to understand where your customer retention rate stands in comparison to your industry and peers. High retention rates signal that customers are seeing value and are likely to continue investing in your product.

If your customer retention rate is below the industry average, it’s worth examining your customer retention approach and focusing on ways to improve customer retention and reduce customer churn rate.

Tips for tracking customer retention

Run cohort analysis on top of your customer retention metrics

Cohort analysis is a technique that segments customers into distinct groups based on shared characteristics, most commonly the month or quarter they signed up.

This segmentation allows you to go beyond aggregate retention rates and track lifecycle patterns within each cohort, offering a granular view of how specific groups engage, churn, or expand over time.

With cohort analysis, you can track retention curves by cohort to reveal long-term behavior. For instance, if you analyze monthly acquisition cohorts, you might find that customers acquired during peak marketing campaigns exhibit higher initial engagement but churn faster, while organically acquired cohorts retain more steadily.

This method sheds light on potential seasonal impacts, onboarding effectiveness, or product experience differences that a single retention metric might obscure.

Cohort analysis also supports A/B testing of strategies such as pricing adjustments or feature rollouts. By observing retention shifts within each cohort after a change, you can quantify the effect of those changes on specific groups rather than on the customer base as a whole.

This approach enables data-driven optimization of your customer retention, ensuring it evolves with market shifts and aligns with customer expectations.

Segment your retention data by plan, region, or acquisition channel

Segmenting your retention data is like putting on a pair of glasses that brings your customer landscape into sharper focus. Not all customers interact with your SaaS product the same way, and segmenting by factors like subscription plan, region, or customer acquisition channel provides deeper insights into each group’s retention patterns.

For example, high-paying customers on annual contracts probably retain better than customers on month-to-month plans, or customers from one region might show stronger loyalty than others.

This segmentation helps you understand which customer base segments are most loyal, which ones may need more attention, and where to focus retention strategies for the best results.

Whether it’s tailoring customer support or tweaking features to suit a particular customer group, segmentation makes it easier to design a customer retention plan that boosts loyalty across your diverse customer groups.

Factors influencing your retention rates

Factor #1: Product quality and feature updates

Product quality is one of the cornerstones of customer retention—after all, customers are far more likely to stay with a product that consistently meets or exceeds their expectations. Regular feature updates and improvements help keep your solution fresh and engaging, letting customers know that the product is evolving with their needs.

This is particularly important in SaaS, where competitors often introduce new features, and loyal customers want assurance that they’re getting the best version of your product.

Delivering updates based on customer feedback can further enhance customer satisfaction. Not only does this build loyalty by showing that you’re listening, but it also improves the user experience by ensuring the product continues to offer value.

Prioritizing quality and valuable updates is essential for retaining customers over the long term, building a foundation of repeat customers who trust and rely on your solution.

To dive deeper into building a product that solves a real need, read Jobs to be done examples, theory & template for SaaS.

Factor #2: Customer onboarding and support

An effective customer onboarding process is like rolling out the welcome mat, helping new users get up to speed and start experiencing the product’s benefits right away. Smooth onboarding can dramatically reduce customer churn rate by setting the stage for a positive user experience from day one.

When customers understand how to use your product effectively, they’re more likely to see value and stick around.

Providing customer support throughout the onboarding process—and beyond—keeps customers engaged and minimizes frustration. Many SaaS products have found success with dedicated customer success teams that proactively support users, addressing questions and guiding them to achieve their goals.

Strong onboarding and responsive support can go a long way in building user loyalty and ultimately boosting your customer retention rate by helping users succeed with the product from the start.

Factor #3: Pricing alignment with customer value

Pricing is a huge factor in customer retention—if customers feel they’re getting excellent value for their investment, they’re more likely to stay. Aligning your pricing structure with the perceived value of your product helps keep customer satisfaction high.

For instance, usage-based or tiered pricing can make customers feel they’re paying fairly based on their specific needs, which can be particularly appealing for customers with different usage levels or budgets.

By offering flexible pricing options, you can increase customer lifetime value and reduce the likelihood of revenue churn due to customers feeling priced out. When pricing matches the value delivered, customers are more willing to continue their subscription, knowing they’re getting their money’s worth.

This alignment of pricing with value will help you increase customer retention rate and can turn satisfied customers into long-term, loyal customers.

What your B2B SaaS retention rates say about your business

A high logo retention but low gross retention

A high logo retention but low gross retention rate means that while most customers are staying, not all contribute equally to revenue—often pointing to smaller accounts staying on lower tiers while larger clients churn or avoid upgrades.

For SaaS companies, this signals a need to focus efforts on high-value accounts to maximize their retention. Additionally, revisiting pricing can help nudge smaller accounts to higher tiers.

Adding usage caps or feature limitations to lower tiers can encourage gradual upgrades, increasing monthly recurring revenue without abrupt pricing changes.

By prioritizing larger accounts and guiding smaller accounts to expand, you can enhance both user loyalty and revenue expansion.

A high or moderate net retention rate but low logo/gross retention rate

If your net retention rate is high or moderate but your logo retention and gross retention are low, this likely means that upsells and expansion revenue are offsetting the churn among lower-value customers.

Essentially, your company may be seeing substantial revenue expansion from loyal customers willing to invest in premium plans or additional features, even as others leave.

This combination indicates that your SaaS business has a strong product-market fit for certain customers but may need improvement in overall customer retention strategies.

It’s also a good sign of potential, showing that customer support teams are effectively encouraging existing customers to expand their usage.

A high gross retention rate but a low net retention rate

When gross retention rate is high but net retention rate falls short, this often points to customers sticking around but downgrading their accounts.

This situation might suggest that, while customers value the product enough to remain subscribed, they don’t see enough added value to justify higher-tier plans.

For SaaS companies, this signals a possible need to reassess the perceived value of premium features or revisit pricing strategy.

It could be worth exploring whether certain features should be restructured or highlighted differently to prevent revenue churn and encourage user loyalty at higher price points.

4 strategies to improve customer satisfaction

Strategy #1: Enhance customer success through dedicated support

A proactive customer success team can make all the difference when it comes to retaining customers. By providing personalized, dedicated support, success teams can address issues before they lead to dissatisfaction or churn.

This team’s role is to guide customers throughout their journey, helping them maximize the value they get from the product and ensuring a high customer satisfaction rate.

Setting up regular check-ins or onboarding sessions gives customers the chance to discuss any concerns, keeping them engaged and confident in their decision to stick with your service. This kind of hands-on approach builds loyalty and positions your team as a partner in the customer’s success.

Strategy #2: Regularly gather and implement customer feedback

Listening to your customers is one of the best ways to improve customer retention. Regularly gathering customer feedback through surveys, net promoter score (NPS) assessments, and one-on-one conversations provides insights into how well your product meets customer needs.

Understanding this feedback allows you to identify areas for improvement and create solutions that make your user base feel heard and valued.

Implementing feedback-driven changes can also foster loyalty, as customers appreciate when a company takes their suggestions seriously. By acting on insights gained from customer feedback, you show a commitment to continuous improvement, enhancing the overall customer experience.

Strategy #3: Use personalized communication and engagement

Personalized communication is key to building meaningful relationships with existing customers. By tailoring your messages to customer preferences, behaviors, and engagement history, you can create interactions that resonate more deeply.

This can be as simple as acknowledging milestones (don't forget to add some gamification techniques), sending targeted content that drives revenue expansion, or simply minimizing churn through all sorts of tactics (contact us so we can help you with that).

Such engagement not only boosts customer loyalty but also helps reinforce the value of your service. Customers who feel recognized and appreciated are more likely to continue their subscriptions, ultimately leading to a high customer retention rate.

Dig deeper into engagement strategy by reading Email marketing for SaaS: 12 indispensable flows.

Strategy #4: Identify customers at risk of churning

Predictive churn analytics uses machine learning to analyze customer behaviors, flagging early signs of disengagement before they turn into churn.

By examining usage patterns, login frequency, support tickets, and net promoter scores (NPS), you can proactively identify which customers might be at risk of leaving. This approach empowers customer support teams to take timely, targeted action, such as offering additional training, personalized support, or incentives to re-engage customers.

Predictive analytics transforms retention from reactive to proactive, enhancing customer lifetime value and improving overall customer satisfaction.

Transform existing customers into loyal advocates

Tracking and improving customer retention rates is essential for long-term SaaS success. By analyzing metrics like gross and net retention, you gain insights into customer loyalty and growth opportunities.

A strong retention strategy constantly adapts to meet evolving customer needs, helping you cultivate a loyal, engaged user base that drives revenue stability.

One of the most effective levers to increase customer retention? Email marketing. Consistent, tailored messaging keeps customers engaged and can even turn them into loyal advocates.

Reach out to our team to build impactful email campaigns that boost retention and strengthen customer connections. Contact us today!