I have spent a fair amount of time over the last few years playing with SaaS metrics, particularly cohort analyses and measuring things like the trailing twelve month retention (RTTM), customer acquisition cost (CAC) and life time value (LTV). Those 3 metrics are a fundamental part of any product offering and are really the pulse of a SaaS business. But what represents a decent rate of retention, 90%? (hint: NO)
As anyone who has had the misfortune to end up in a conversation with me on the subject will of noticed, I may of developed a few opinions on the best way to measure these metrics (more on that in upcoming posts) and also on quite how much difference a couple of percent makes. It is this latter point that these charts aim to provide some insight into. The first chart shows the difference on the expected lifetime value of a customer paying $50 a month for various levels of retention between 91% and 100%. Its pretty clear that the biggest effect occurs past the 95% mark with the gradient of the LTV curve increasing sharply as it heads towards 100% – seems like that part of the curve is where you would want to be!!
These next 2 charts just rehash that data. The first one shows the LTV normalised to the 91% value just to make the relative amounts easier to see and the second shows the expected subscriber months.
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