Terms

Renewal Rate

Renewal rate is the percentage of customers who choose to extend their contract or subscription at the end of its term. It is a critical metric for subscription-based companies as it directly reflects customer satisfaction and the perceived value of a product or service.

Importance of Renewal Rate

A high renewal rate is a strong indicator of business health and customer satisfaction. It shows that customers find long-term value in your product, which translates to stable, recurring revenue. This metric allows businesses to spot trends and potential growth pitfalls early on.

Tracking renewal rates is crucial for financial planning and growth. It helps forecast future revenue, leading to more accurate sales and marketing budgets. Since retaining customers is significantly cheaper than acquiring new ones, a high renewal rate directly boosts profitability.

Factors Influencing Renewal Rate

Several key factors determine whether a customer decides to renew their subscription. These elements range from the product's core utility to the overall customer experience. A company's proactive efforts in these areas can significantly impact its renewal rates.

  • Product Stickiness: The degree to which your product is integrated into a customer's daily workflow and solves a critical need.
  • Customer Success: Proactive support and guidance that help customers achieve their desired outcomes with your product.
  • Pricing Strategy: A clear and fair pricing structure that aligns with the value customers receive.
  • User Experience: The overall ease of use and satisfaction a customer has when interacting with your product and company.

Renewal Rate vs. Retention Rate

While often used interchangeably, renewal and retention rates measure different aspects of customer loyalty based on user intent.

  • Renewal Rate measures the active choice to continue a contract at its end. It's ideal for forecasting revenue from fixed-term agreements and is often preferred by enterprises with large contracts and mid-market companies optimizing their renewal process. However, it can be more complex to calculate and doesn't capture customers who remain subscribed passively.
  • Retention Rate is a broader metric tracking customers who haven't canceled over a period, including passive auto-renewals. It provides a high-level view of customer loyalty and is useful for businesses with ongoing subscriptions. Its main disadvantage is that it may not distinguish between active and passive customer decisions.

Strategies to Improve Renewal Rate

This is how you can improve your renewal rate.

  1. Enhance product stickiness by ensuring your product is essential to your customers' daily operations.
  2. Invest in customer success to help users achieve their goals and see the full value of your service.
  3. Identify at-risk customers and proactively engage them with tailored offers or additional support.
  4. Streamline the renewal process by addressing payment failures and standardizing communication.
  5. Continuously communicate your product's value through updates and educational content.

Impact of Renewal Rate on Business Performance

The renewal rate is a critical health indicator for any subscription business, directly influencing financial stability and growth prospects. It reflects customer satisfaction and the long-term value they derive from your product.

  • Pros: High renewal rates lead to predictable revenue and lower customer acquisition costs. This signals a healthy business with strong customer loyalty and creates opportunities for upselling.
  • Cons: Low renewal rates result in higher churn, which shrinks recurring revenue and increases pressure to acquire new, more expensive customers. This often indicates problems with product value or customer satisfaction.

Frequently Asked Questions about Renewal Rate

What is considered a good renewal rate?

A "good" renewal rate varies by industry, but a benchmark for SaaS companies is often 90% or higher. Anything above 80% is generally considered healthy, while lower rates may signal issues with customer satisfaction or product value that need addressing.

How is renewal rate calculated?

Calculate it by dividing the number of customers who renewed their subscription by the total number of customers up for renewal during a specific period. Multiply the result by 100 to get the percentage.

When should I focus on renewal rate over retention rate?

Focus on renewal rate for businesses with fixed-term contracts, like enterprise SaaS. It measures active customer decisions to recommit, providing a clearer signal of perceived value and future revenue compared to the more passive nature of retention rate.

Other terms

Oops! Something went wrong while submitting the form.
00 items

Marketing Play

A marketing play is a repeatable tactic used to achieve a specific marketing goal, like generating leads or driving engagement.

Marketing Play

AI-Powered Marketing

AI marketing uses artificial intelligence to analyze data, automate decisions, and deliver personalized customer experiences at scale.

AI-Powered Marketing

Data-Driven Marketing

Data-driven marketing uses customer data to inform marketing decisions, optimize campaigns, and deliver personalized experiences to consumers.

Data-Driven Marketing

Sales Playbook

A sales playbook is a guide that outlines your sales process, best practices, and tools to help reps sell more efficiently and consistently.

Sales Playbook

Subscription Models

Subscription models are a business strategy where customers pay a recurring fee at regular intervals for access to a product or service.

Subscription Models

Smarketing

Smarketing is the process of aligning your sales and marketing teams. This integration focuses on shared goals to improve lead quality and drive revenue.

Smarketing

Lead Management

Lead management is the process of capturing, nurturing, and qualifying leads to guide them from initial interest to sales-ready.

Lead Management

Email Deliverability

Email deliverability is the ability for your emails to successfully land in your recipients' inboxes instead of their spam folders.

Email Deliverability

Application Programming Interface

An Application Programming Interface (API) is a set of rules that lets different software applications talk to each other and share information.

Application Programming Interface

Quality Assurance

Quality Assurance (QA) is the systematic process of ensuring a product or service meets specified quality standards from development to delivery.

Quality Assurance

Customer Retention Cost

Customer Retention Cost (CRC) is the total amount a company spends to keep an existing customer over a certain period of time.

Customer Retention Cost

Regression Testing

Regression testing ensures that new code changes don’t negatively impact existing features. It's a key step to maintain software quality after updates.

Regression Testing

Cross-Selling

Cross-selling is a sales tactic of encouraging customers to purchase products or services that are related to what they're already buying.

Cross-Selling

Predictive Lead Scoring

Predictive lead scoring uses AI to analyze data and rank leads by their likelihood to convert, helping sales teams prioritize their efforts.

Predictive Lead Scoring

Sales Manager

A Sales Manager leads a sales team, setting goals, analyzing performance, and developing strategies to drive revenue and meet targets.

Sales Manager

Lead Enrichment Tools

Lead enrichment tools are platforms that automatically add missing data to your leads, like contact info, firmographics, and buying signals.

Lead Enrichment Tools

B2C2B

Learn about B2C2B, including how B2C2B transforms sales, key strategies for B2C2B success, & differences between B2C2B and B2B2C.

B2C2B

Draw on Sales Commission

A draw on commission is an advance payment a salesperson receives against future earnings, which is later repaid from earned commissions.

Draw on Sales Commission

System of Record

A System of Record (SoR) is the authoritative data source for a specific type of data. It acts as the single source of truth for an organization.

System of Record

Email Verification

Email verification is the process of confirming that an email address is valid and deliverable, which helps improve campaign performance.

Email Verification

Net 30

Net 30 is a common payment term where a client has 30 calendar days from the invoice date to pay for goods or services in full.

Net 30

Revenue Operations (RevOps)

Revenue Operations (RevOps) is a business function that aligns a company's sales, marketing, and customer service teams to drive predictable revenue.

Revenue Operations (RevOps)

Behavioral Analytics

Learn about behavioral analytics, including implementing behavioral analytics successfully, & key metrics in behavioral analytics.

Behavioral Analytics

Sales Process

A sales process is a structured set of steps that a sales team follows to move a prospect from an initial lead to a closed customer.

Sales Process

Sales Objections

Sales objections are reasons or concerns raised by a potential customer as to why they are hesitant or unwilling to make a purchase.

Sales Objections

BANT Framework

Learn about BANT framework, including implementing BANT in sales strategy, advantages of the BANT methodology, & BANT vs. other qualification models.

BANT Framework

AI Sales Script Generator

An AI sales script generator is a tool that uses artificial intelligence to create personalized sales scripts for any outreach scenario.

AI Sales Script Generator

Price Optimization

Price optimization is the process of finding the ideal price for a product or service to maximize profitability or other business objectives.

Price Optimization

Call for Proposal

A Call for Proposal (CFP) is a document that solicits proposals, often through a bidding process, for a specific project or service.

Call for Proposal

Account-Based Advertising

Account-based advertising is a hyper-focused B2B strategy that targets key accounts with personalized ads across multiple channels.

Account-Based Advertising

Sales Forecast Accuracy

Sales forecast accuracy is a key metric that compares your predicted sales revenue against the actual sales revenue you ultimately achieve.

Sales Forecast Accuracy

B2B Data Platform

Learn about B2B data platform, including key benefits of B2B data platforms, choosing the right B2B data platform, challenges in implementing B2B data platforms.

B2B Data Platform

Kanban

Kanban is a visual project management method that uses a board to visualize workflow, limit work-in-progress, and maximize team efficiency.

Kanban

Employee Engagement

Employee engagement is the emotional commitment an employee has to their organization, motivating them to contribute to the company's success.

Employee Engagement

Buying Cycle

The buying cycle is the journey a customer takes from first realizing they have a need to making the final purchase decision.

Buying Cycle

Hybrid Sales Model

A hybrid sales model blends traditional and digital sales methods to engage customers across multiple channels and buying preferences.

Hybrid Sales Model

Google Analytics

Google Analytics is a web analytics service that tracks and reports website traffic, offering insights into user behavior and marketing effectiveness.

Google Analytics

Sales Sequence

A sales sequence is a series of automated touchpoints sent to prospects over time to guide them through the sales funnel.

Sales Sequence

Territory Management

Territory management is the process of segmenting customers into groups by geography or other factors to optimize sales efforts and resources.

Territory Management

Data Cleansing

Data cleansing, or data scrubbing, is the process of detecting and correcting inaccurate records from a dataset to improve data quality.

Data Cleansing

Dialer

A dialer is software that automatically dials phone numbers for agents, boosting call efficiency and connecting them to live prospects faster.

Dialer

Expansion Revenue

Expansion revenue is the extra money a business makes from its current customers via upgrades, new products, or additional services.

Expansion Revenue

Value Statement

A value statement is a clear, concise declaration of the unique benefits a company provides to its customers, outlining its core purpose.

Value Statement

Sales Engineer

Sales Engineers blend deep technical knowledge with sales acumen, demonstrating a product's value and solving customer problems to drive revenue.

Sales Engineer

Sales Kickoff

A sales kickoff (SKO) is an annual event for a sales team to celebrate wins, align on goals, and get motivated for the upcoming year.

Sales Kickoff

Segmentation Analysis

Segmentation analysis is the process of dividing a broad market into smaller, distinct groups of consumers with similar needs or characteristics.

Segmentation Analysis

Sales Conversion Rate

Sales conversion rate is the percentage of prospects who take a desired action, like making a purchase, turning them into customers.

Sales Conversion Rate

Sales Enablement

Sales enablement provides sales teams with the necessary tools, content, and information to help them sell more effectively and efficiently.

Sales Enablement

Letter of Intent

A Letter of Intent (LOI) is a document declaring the preliminary commitment of one party to do business with another, outlining the chief terms.

Letter of Intent

After-Sales Service

After-sales service is the support provided to customers after they've purchased a product. It includes things like warranties, training, or repairs.

After-Sales Service

Latency

Latency is the delay between a user's action and a system's response. It's the time it takes for a data packet to travel to its destination.

Latency

Deal-Flow

Deal flow refers to the stream of business proposals and investment opportunities that a company or investor receives.

Deal-Flow

Lead Enrichment Software

Lead enrichment software adds crucial data to your leads, like contact info and firmographics, to help you better understand and engage them.

Lead Enrichment Software

Reverse Logistics

Reverse logistics is the process for goods moving from the customer back to the seller, covering returns, repairs, recycling, and disposal.

Reverse Logistics

Edge Locations

Edge locations are globally distributed data centers that cache content close to users, reducing latency and delivering web content much faster.

Edge Locations

Sales Prospecting Software

Sales prospecting software automates the process of finding, contacting, and tracking potential customers to help sales teams build their pipeline.

Sales Prospecting Software

Challenger Sales

The Challenger Sales model is a methodology where reps teach prospects, tailor their pitch, and take control of the sales conversation.

Challenger Sales

Outside Sales

Outside sales reps sell products/services in person, traveling to meet clients and close deals face-to-face, outside of a traditional office.

Outside Sales

Product-Led Growth

Product-Led Growth (PLG) is a business strategy where the product itself drives user acquisition, conversion, and expansion.

Product-Led Growth

Outbound Lead Generation

Outbound lead generation means proactively reaching out to potential customers who haven't yet expressed interest to introduce them to your brand.

Outbound Lead Generation

Touches

Touches are the individual interactions you have with a prospect throughout the sales process, from emails and calls to social media messages.

Touches

Text message marketing

Text message marketing is a strategy where businesses send promotional messages, offers, and updates to customers via SMS or MMS.

Text message marketing

Cross-Site Scripting

Cross-Site Scripting (XSS) is a web security vulnerability that allows attackers to inject malicious scripts into trusted websites.

Cross-Site Scripting

Account Management

Account management is the post-sales practice of building and nurturing long-term relationships with a company's most valuable clients.

Account Management

Dynamic Pricing

Dynamic pricing is a strategy where businesses set flexible prices for products or services based on current market demands and other factors.

Dynamic Pricing

Logo Retention

Logo retention is a key B2B metric that measures a company's ability to retain its customers, or 'logos,' over a specific period.

Logo Retention

Bounce Rate

Learn about bounce rate, including understanding bounce rate implications, key factors affecting bounce rate, & reducing your bounce rate effectively.

Bounce Rate

Applicant Tracking System

An Applicant Tracking System (ATS) is a software application that manages your entire hiring and recruitment process from a single dashboard.

Applicant Tracking System

Big Data

Learn about big data, including understanding big data characteristics, benefits of leveraging big data, & challenges in managing big data.

Big Data

Headless CMS

A headless CMS is a back-end content repository that delivers content via API to any front-end, decoupling the content from its presentation layer.

Headless CMS

Freemium Models

A freemium model offers a product's basic features for free, enticing users to upgrade to a paid version for more advanced capabilities.

Freemium Models

Ad-hoc Reporting

Ad-hoc reporting is the creation of one-off reports to answer specific business questions as they arise, providing instant, targeted insights.

Ad-hoc Reporting

Contact Discovery

Contact discovery is the process of finding accurate contact details for potential leads, including names, emails, phone numbers, and job titles.

Contact Discovery

Compounded Annual Growth Rate

Compounded Annual Growth Rate (CAGR) measures the mean annual growth of an investment over a specified period of time longer than one year.

Compounded Annual Growth Rate

Account-Based Sales Development

Account-Based Sales Development (ABSD) is a focused strategy where SDRs target key stakeholders within specific, high-value accounts.

Account-Based Sales Development

Ballpark

Learn about ballpark, including estimating with ballpark figures, understanding ballpark estimates in sales, & ballpark estimates vs. precise quotes.

Ballpark

Omnichannel Marketing

Omnichannel marketing creates a seamless, unified customer experience by integrating a company's various communication and sales channels.

Omnichannel Marketing

Fulfillment Logistics

Fulfillment logistics is the entire process of getting an order to a customer, from storing inventory to picking, packing, and final shipment.

Fulfillment Logistics

Consideration Buying Stage

The consideration buying stage is where potential customers have defined their problem and are now actively researching and evaluating solutions.

Consideration Buying Stage

Sales Cycle

A sales cycle is the series of steps a company takes to close a new customer. It starts with prospecting and ends with a signed deal.

Sales Cycle

Marketing Funnel

The marketing funnel is a model illustrating the path potential customers take, from initial awareness to making a purchase.

Marketing Funnel

End of Day

End of Day (EOD) refers to the close of business hours. It's a common deadline for tasks and reports to be completed before the workday ends.

End of Day

High Availability

High availability (HA) describes a system's capacity to function continuously with minimal downtime, ensuring consistent operational performance.

High Availability

Sales Engagement

Sales engagement is the sum of all interactions between a seller and a prospect, aimed at building a relationship and moving a deal forward.

Sales Engagement

Brand Loyalty

Learn about brand loyalty, including how to build brand loyalty, benefits of brand loyalty, measuring brand loyalty, & strategies for increasing loyalty.

Brand Loyalty

Buyer Intent

Learn about buyer intent, including understanding buyer intent signals, strategies to capture buyer intent, & buyer intent vs. customer interest.

Buyer Intent

Value Chain

A value chain is the series of business activities required to create and deliver a product or service, from conception to the final customer.

Value Chain

Objection

An objection is an explicit expression by a prospect that presents a barrier to moving forward in the sales process.

Objection

LinkedIn Sales Navigator

LinkedIn Sales Navigator is a premium tool helping sales teams find and engage with the right leads and accounts on the LinkedIn network.

LinkedIn Sales Navigator

Performance Plan

A performance plan is a formal document outlining an employee's goals, expectations, and metrics for success over a specific period.

Performance Plan

Lead Velocity Rate

Lead Velocity Rate (LVR) is the growth rate of your qualified leads, measured month-over-month. It's a key indicator of future revenue.

Lead Velocity Rate

Buyer Intent Data

Learn about buyer intent data, including sourcing and interpreting buyer intent data, & key metrics in buyer intent analysis.

Buyer Intent Data

Lead Generation Software

Lead generation software helps businesses automate finding and capturing potential customers' contact information to build sales pipelines.

Lead Generation Software

Technographics

Technographics is data that outlines a company’s technology stack, helping B2B teams identify prospects based on the software and hardware they use.

Technographics

Forecasting

Forecasting uses historical data to make informed predictions about future trends, helping businesses anticipate outcomes and plan accordingly.

Forecasting

Average Revenue per Account

Average Revenue per Account (ARPA) is the average revenue generated from each customer account, usually measured on a monthly or annual basis.

Average Revenue per Account

Pay-per-Click (PPC)

Pay-per-click (PPC) is an ad model where you pay a fee each time your ad is clicked. It's a method of buying targeted visits to your website.

Pay-per-Click (PPC)

Electronic Signatures

An electronic signature is a digital method for getting consent on electronic documents. It's a legally binding way to sign agreements online.

Electronic Signatures

Cloud-based CRM

A cloud-based CRM is a customer relationship management tool hosted online, letting teams access and manage customer data from anywhere.

Cloud-based CRM

Account

An account is a company or organization that you're targeting for sales. It can be a prospective, current, or even a past customer.

Account