For example, let’s say we want to measure my company’s monthly churn rate. At the beginning of May, I had 1,000 customers, but by the end of the month, 64 customers churned. In this case, my churn rate for May would be 6.4% (64/1,000=0.064=6.4%).
When measuring your churn rate, remember to exclude any new customers you acquired during the month from your existing total. These customers will count toward your existing customer total during the next assessment you conduct.
Also, be sure to include any new customers who churned ig database during the time period with your overall churn total. Since these customers' churn occurred during the evaluation period, you should include them when measuring your churn rate.
►5. Monthly recurring income
Monthly recurring revenue, or MRR, is a great metric to determine how much your customer base, or their spending, has
This metric describes the amount of money your customers spend on your products and services each month. You can compare this value over time to determine whether your customers are having success with your products or not. This is particularly useful for SaaS companies that operate on a subscription model.
An additional MRR metric that can be calculated is your Expansion MRR. Expansion MRR shows you how much additional revenue you are generating from customers outside of their monthly subscriptions. This can give you a good idea of how effective your upgrades and customer loyalty programs are.
How to calculate monthly recurring revenue
To calculate monthly recurring revenue, you just need to multiply your total number of monthly active customers by your average revenue per user. This should give you an idea of how much money you’re generating each month.
For example, if I have 1,000 monthly active customers and my average revenue per customer is $750, my monthly recurring revenue would be $750,000 ($1,000 x $750 = $750,000 MRR).
To calculate expansion MRR, you’ll need to add up all of the revenue that was generated from non-recurring purchases. These would be things like upsells and cross-sells, loyalty programs, and additional purchases that customers make on a one-time basis.
By adding these values together, you’ll see how much your customers are actually spending on your premium offerings. If you’re doing it right, you know that customers aren’t just enjoying your product or service — they’re thriving because of it.
►6. Customer lifetime value
Customer lifetime value (CLV) is one of the most fundamental customer success metrics you can measure for your business. It shows you the total revenue you can expect a single customer to generate over the course of their relationship with your company.
Businesses can use CLV to determine the value of their customers over time. If the value is increasing, your business knows that its products and services are contributing to your customers’ success. If it’s declining, your business may need to reevaluate its offerings and look for flaws in the customer experience.
How to calculate customer lifetime value
CLV takes the value of a customer’s revenue and compares that number to the customer’s expected lifetime. It can be calculated in two steps.
Step 1: Multiply the average purchase value by the average purchase frequency rate.
Step 2: Take that value and multiply it by the average lifetime of your customers. This should leave you with the estimated amount of revenue a customer will spend at your business.
Let’s say my customers spend an average of $50 every time they shop at my store. My customers also visit my store about 3 times a month. Additionally, the average lifetime of my customers is typically two years before they stop shopping at my stores. From this we can determine that my CLV is $3,600 ($50 x 3 visits x 24 months = $3,600).