Customer Retention Vs Renewal
The Long term and Short Term approach!
We all know that customer retention is an important indicator of a company’s growth process; a higher retention rate is one of the indications that the company is viable, sustainable and can generate long-term value for its customers.
Most times, CSMs (myself included) see the word “retention and renewal” as interchangeable, even when these two words are different in the real sense;
Renewal - The action of getting a customer to sign up for another fixed term - including the steps the customer goes through and the outputs the customer receives. Actions in renewal can include; contacting a customer that’s due to renew their account, processing a customer payment and updating the prices/terms e.t.c.
Retention, on the other hand, talks about the percentage of customers that are always willing to stick to the company - it is more concerned with how many customers were retained regardless of whether the customers were up for renewal or not.
With ‘retention’ the emphasis is on the ongoing management of a customer to stop them from actively cancelling at any time. (The retention process is long term and can be linked to the entire client experience that leads to renewal).
Famous words in retention;
a. Customer Retention - number of existing customers.
b. Revenue Retention (Often called the Recurring Revenue - The dollar value generated from existing customers). This is further broken down into 4;
Monthly recurring revenue - revenue generated from existing customers on a monthly basis
Annual recurring revenue - revenue generated from existing customers yearly/annually.
Gross recurring revenue - revenue from existing customers minus churn and downgrades. (Downgrades mean when customers purchase a lower plan than their initial subscription).
Net recurring revenue - revenue from existing customers plus cross-selling/upselling.
That being said, next week our focus will be on productive ways to improve your retention rate.
Top Job Picks:
a. Platform Success Manager - (100% remote - Application opened 4 days ago)
b. Senior Customer Success Manager (100% remote - Application opened 2 days ago)
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