I’ve been pouring over 10Ks lately looking at public subscription businesses looking and how they talk about customer retention and attrition. A few observations:
- Terms: customer retention rate, renewal rate, attrition rate, churn.
- Time Frames: yearly, quarterly, monthly
- Methods: When calculating attrition rate, some calculated it as net churn rate (lost customers)/(original+new customers) while others calculated it as gross churn rate (lost customers/original customers), and many didn’t say how they calculated it.
- Carbonite: “As a result of our easy to use, cost-efficient, and high quality solutions, we have consistently had a 96%-97% quarterly customer retention rate.” “We define average quarterly retention rate as the percentage of customers on the last day of the prior quarter who remain customers on the last day of the current quarter. For annual periods, retention rate reflects the average quarterly retention rate over the year. (June 15, 2011 amended SEC filing)”
- Concur: “For 2010, our customer retention rate for subscription services exceeded 96%.”
- Constant Contact: “We benefit from a high level of customer loyalty. From January 2005 through December 2010, at least 97.4% of email marketing customers in a given month have continued to subscribe to our products in the following month.”
- Kenexa: “During the year ended December 31, 2010, our customers renewed approximately 84% of their contracts which represents 88% of the aggregate value of multi-year subscriptions for our on-demand talent acquisition and performance management solution contracts subject to renewal.”
- Salesforce: “The increase in subscription and support revenues was due primarily to new customers, upgrades and additional subscriptions from existing customers and improved renewal rates as compared to a year ago.”
- Success Factors: “During 2009 and through 2010, our customer retention rate was greater than 90%. We calculate our customer retention rate by subtracting our attrition rate from 100%. We calculate our attrition rate for a period by dividing the number of customers lost during the period by the sum of the number of customers at the beginning of the period and the number of new customers acquired during the period.”
- Taleo: “Our list prices for application services have remained relatively consistent on a year-over-year basis, and renewals of application services for medium and larger more complex organization, on a dollar-for-dollar basis, remained strong at approximately 97%.”
One way to gain deeper understanding of retention and attrition is to learn from others. The more we can use common terms and methods of calculation, the easier that shared learning will become.