According to Harvard Business Review, acquiring a new customer is anywhere from five to 25 times more expensive than retaining an existing one, and in the cutthroat world of SaaS, customer loyalty isn’t just “nice to have”—it’s survival.
Loyal customers renew subscriptions, advocate for your product, and drive expansion revenue. But how do you measure loyalty in a way that actually helps your Customer Success (CS) team act? Let’s cut through the noise and focus on the metrics that matter most.
In this article, we will cover what customer loyalty means for SaaS and why it’s so essential for customer success teams and the success of your business.
What is Customer Loyalty in SaaS?
Customer loyalty is the likelihood that your users will stick with you, renew subscriptions, and advocate for your product—even when competitors dangle shiny alternatives. Unlike traditional businesses, SaaS loyalty isn’t just about repeat purchases; it’s about:
- Renewals: Will they commit for another year?
- Expansion: Can you upsell them to a premium plan?
- Advocacy: Will they refer others or leave a glowing review?
In simple terms, loyal customers are the ones who prefer you over other alternatives. They don’t want to take their business elsewhere. They are immune to price cuts or discounts your competitors offer.
Source: digitalsilk
Slack’s 90%+ retention rate isn’t magic. It’s built on stickiness: users adopt the product deeply (daily logins, integrations, workflows) and can’t imagine switching.
Different factors may contribute to such customer behavior. For example, 80% of people prefer businesses that offer them personalized experiences.
Why Measure Customer Loyalty?
Assessing customer loyalty enables you to see that you’re on the right track. It helps you measure the effectiveness of your current strategies. Plus, you get to identify the room for improvement.
The strategies you deploy or the experiences you offer may lose their effect as time passes. Tracking customer loyalty helps you see what’s working and what’s not. It enables you to devise efficient strategies that improve customer retention.
Ignoring loyalty metrics in SaaS is like flying blind. Here’s why it’s non-negotiable:
- Predictable Revenue: 70-95% of SaaS revenue comes from existing customers (ProcessStreet). Loyalty = stability.
- Lower Churn Costs: A 7% monthly churn rate can halve your customer base in a year.
- Upsell Opportunities: Loyal customers are 50% more likely to try new features (HubSpot).
- Free Marketing: 92% of people trust referrals from friends—loyal users are your marketing team (Nielsen).
Example: When Zoom tracked NPS (Net Promoter Score) during the pandemic, they discovered that ease of use drove loyalty—leading them to double down on UX improvements.
The following are a few important metrics to measure customer loyalty.
12 Metrics to Measure SaaS Customer Loyalty
To see if your customers are loyal to your brand, you can’t rely on your intuition. You need data to know where you stand and how you can do better.
There may be several factors affecting customer satisfaction. But, we have picked some of the most important metrics for you to measure customer loyalty. They will help you make necessary improvements to your strategies.
Customer Loyalty Measurement Framework: You can measure emotional (e.g., advocacy) and behavioral loyalty (e.g., retention and purchasing) using different measurement approaches (e.g., subjective and objective).
1. Net Revenue Retention (NRR)
What it is: The percentage of recurring revenue retained from existing customers—including upsells and cross-sells—after accounting for downgrades and churn.
Why it matters: An NRR >100% means your customers are growing with you, driving predictable recurring revenue.
The average annual NRR rate lies between 85% – 135%, with more than 50% of SaaS companies surveyed by OpenView in 2020 reporting an NRR Rate of 95% – 115%.
To calculate the retention rate, subtract new customers from active customers. Now, you divide the total by the number of customers at the start of a particular period.
Pro Tip: Track NRR monthly. If it dips below 100%, dig into why—are customers failing to see ROI, or is support lagging?
Businesses are so busy acquiring new customers that they forget about existing ones. Net Revenue Retention (NRR) helps you maintain the right balance. Generating new leads is necessary to grow. But your existing customers fuel your financial stability.
2. Churn Rate
It’s a nightmare for you when customers leave you faster than you onboard new ones. Onboarding a new customer costs more than retaining one. So, there’s no point in acquiring new customers if they don’t end up staying.
To know the pace at which your customers are turning away from your brand, it’s best to keep an eye on your churn rate. It’s a fitting indicator to assess customer loyalty. It represents people who end up taking their business elsewhere.
The median SaaS churn is 5-7% monthly; <3% is elite according to Recurly.
SaaS Twist: Split churn into voluntary (canceled subscriptions) and involuntary (payment failures). The latter is often fixable with better dunning workflows.
To calculate your churn rate, divide the customers who left by the total number of customers.
The goal here is to keep your churn rate as low as possible. An increase in churn indicates a drop in customer loyalty. If voluntary churn spikes, survey departing customers. Did pricing, features, or onboarding fail them?
3. Customer Satisfaction Score (CSAT)
A customer satisfaction score indicates the happiness of your customers with your solutions. Plus, it showcases the experience of your customers and indicates their likelihood to stay.
By definition it’s a 1-5 scale rating of customer happiness post-interaction (e.g., support ticket).
Why does it matter for SaaS? CSAT predicts renewals—customers rating “4” or “5” are 80% more likely to stay (HubSpot).
To calculate the customer satisfaction score, you should reach out to your customers. Ask them to rate the solutions you offer on a scale of one to five.
If a customer gives you one, it means that they’re very dissatisfied with the experience you offer. If a customer gives you five, it means that they’re very satisfied with your products or services.
If a majority of your customers choose a high score for you, it indicates enhanced brand loyalty. If a majority picks a low score, it means that you need to identify the area of improvement. On average, companies with CSAT >85% retain 2x more customers according to Qualtrics.
Strategic Insights:
- Close the Loop: CSPs like Custify auto-flag low scores for CSM follow-ups within 24 hours.
- Product Alignment: Canva revamped its editor after users rated it “3/5,” boosting satisfaction by 40%.
- Example: Zendesk ties CSAT to agent bonuses, ensuring swift, high-quality resolutions.
4. Customer Lifetime Value (CLV)
Keeping your customers loyal to you may take a lot of effort. Remember, your competitors are always eyeing your customer base. They offer exclusive deals and discounts to entice your customers.
So, it’s best to come up with exclusive offers of your own from time to time or incentivize customer loyalty. But you would not want to put your company’s financial stability at stake. So, it’s essential to identify valuable customers worth retaining.
This is where customer lifetime value comes into play. It helps you estimate the revenue you will likely generate from your customers.
To calculate customer lifetime value, you need to find your customer value first. For this, multiply the average sales value by the average transactions by customers.
Now, take the customer value and multiply it by the average customer lifespan. To measure the average customer lifespan, you take the sum of all customer lifespans. Now, divide the total by the number of customers.
Strategic Insights:
- Tiered Retention: Amazon Prime focuses on high-CLV users with personalized perks.
- Pricing Strategy: Calendly uses CLV to justify freemium-to-paid upgrades.
- Example: A customer paying 100/month with a 2 year lifespan has a CLV of 2400.
- Interesting Stat: A 10% CLV increase boosts profits by 30% (Harvard Business Review).
Customer lifetime value helps you pay attention to the most valuable customer segments. So, it enables you to overcome customer retention challenges.
5. Customer Engagement Score
The customer engagement score highlights the way your customers interact with your brand. Different factors may come into play here.
By definition, CES is a weighted score tracking product usage (logins, feature adoption). Your goals dictate the definition of customer engagement for you. So, the input indicators in the formula may vary as per your preferences.
Not all indicators representing customer engagement may have the same level of importance. So, based on the importance of the indicators, you come up with different weights.
First, multiply the weight of an indicator by the number of occurrences of the input. Then, combine the scores for indicators to get the final customer engagement score. It’s how you calculate the customer engagement score.
Strategic Insight:
- Predictive Analytics: Dropbox flags users with low engagement for re-engagement campaigns.
- Gamification: Duolingo uses streaks and badges to boost daily logins.
- Example: A user logging in daily and using 3+ features scores “85/100”—a retention target.
- Interesting Stat: 70% of SaaS buyers say engagement impacts loyalty (Salesforce).
6. Upsell Rate
Another indicator that helps you assess customer loyalty is the upsell rate. It represents the percentage of customers upgrading plans or buying add-ons. For example, if 200/1,000 users upgrade, the upsell rate is 20%.
A customer purchasing different products or services is more loyal compared to others. These customers are happy with the experiences you offer. Hence, they decide to buy items besides the ones that fulfill their needs.
Why does it matter for SaaS? Upsells drive 20-30% of revenue for mature SaaS companies (OpenView).
It won’t be wrong to call these people high-value customers. They bring you more business and help you generate more revenue.
Learning how to upsell isn’t something easy to master. But pitching your solutions to happy customers often works. It enables you to enhance your profit margins.
Here’s how you calculate the upsell rate. You divide the number of customers with multiple purchases by the total number of customers.
Strategic Insights:
- In-App Nudges: Notion prompts free users with, “Unlock unlimited docs for $8/month.”
- Usage-Based Upsells: Snowflake charges per data query, encouraging tier upgrades.
- Stat: Upsells offset churn by 27% in high-growth SaaS (McKinsey).
7. Repeat Purchase Rate
A loyal customer comes back to you and purchases the same product or service over and over. It shows that they are happy with the experience you offer. Hence, they don’t consider taking their business elsewhere.
An indicator that represents such customer behavior is the repeat purchase rate.It is the percentage of customers making additional purchases (e.g., add-ons). In this case, your customers keep preferring you over other players in the industry.
These customers keep coming back to you. Plus, they are likely to recommend your solutions to others.
Divide the number of repeat customers by the total number of paying customers. You will get the repeat purchase rate,
Strategic Insights:
- Loyalty Programs: Shopify offers “VIP Support” for repeat app store buyers.
- Bundling: Zoom bundled phone services into Meetings, driving repeat buys.
- Example: A 70% repeat rate means 700/1,000 customers expand their spend.
- Interesting Stat: 40% of SaaS revenue comes from repeat purchases (ProfitWell).
8. Net Promoter Score (NPS)
Another indicator you can use to measure customer loyalty is the net promoter score (NPS). It showcases the likelihood of your customers recommending your solutions to others. It’s a -100 to +100 score measuring referral likelihood.
Why does it matter for SaaS? Promoters drive 80% of referrals (Bain & Company).
People rely on the recommendations of others when buying something. They want to learn from the experiences of others to avoid making bad buying decisions.
Knowing the likelihood of your customers recommending your solutions to others is important. It helps you identify the room for improvement and ensure lasting customer relationships.
Ask your customers about the possibility of them recommending your solutions to others. It will give you the NPS.
For this, you conduct an NPS survey. The findings from the survey help you classify customers into three categories. You can label them as promoters, passives, or detractors.
The survey insights help you assess customer loyalty. Plus, you get to identify customer segments that require your attention.
Strategic Insights:
- Segment by Tier: Enterprise clients may score lower but have higher CLV.
- Detractor Recovery: Intercom offers discounts to detractors, improving scores by 15%.
- Example: An NPS of 50 means promoters outnumber detractors by 50%.
- Interesting Stat: SaaS companies with NPS >50 grow 2x faster (Retently).
9. Active Engagement Rate
One of the best ways to enhance customer loyalty is to come up with loyalty programs. Here, you offer incentives or exclusive rewards to your loyal customers.
This way, you motivate your customers to keep coming back to you. You also encourage them to recommend your brand to others and get more traction.
The active engagement rate represents the percentage of customers participating in loyalty programs, webinars, or communities. Why it matters in SaaS? According to Gallup, engaged users renew 3x more.
For example, you announce certain rewards for your loyal customers. Engaged customers are the ones who claim the rewards.
Here’s how you calculate the active engagement rate. You divide engaged customers by the total number of customers.
Strategic Insights:
- Community Building: Salesforce’s Trailblazer Community drives 70%+ retention.
- Exclusive Content: HubSpot Academy’s certifications boost engagement by 40%.
- Example: 300/1,000 users joining a webinar = 30% engagement rate.
- Interesting Stat: 60% of SaaS users say communities reduce churn (CMX).
10. Customer Loyalty Index
The customer loyalty index enables you to keep an eye on your customers’ loyalty. Your customers may switch loyalties over time. There can be different reasons for that.
The customer loyalty index helps you track such changes and make informed decisions. By definition, it’s a 0-10 composite score from surveys on renewal intent, referrals, and satisfaction.
To gather relevant data, you can conduct customer surveys and access valuable insights. You can ask your customers different questions to assess their loyalty. You can inquire about the things that may make them consider other solutions in the industry. You can also ask them about their willingness to recommend your solutions to others.
Source: CleverTap
You can go with a similar approach as an NPS survey and ask your customers to respond on a scale of zero to ten.
Strategic Insights:
- Predictive Power: Gartner uses CLI to forecast churn 6 months in advance.
- Actionable Insights: A CLI drop triggers win-back campaigns (e.g., personalized demos).
- Example: A CLI of 8.5/10 signals strong loyalty.
- Interesting Stat: Brands with CLI >8 retain 90%+ customers (Gartner).
11. Customer Health Score
What is it? A predictive metric that quantifies the overall “well-being” of a customer relationship by analyzing product usage, support interactions, and sentiment signals. It acts as an early warning system for churn and identifies upsell opportunities.
Why does it matter?
A customer health score is a custom-built metric specific to a customer, indicating the status of a particular retention or growth goal. Customer health scores are typically tied directly to KPIs or product features and are expressed on a scale of 1 to 100, color coded from red to green, or a combination of the two. Health scores are often used to tell whether a customer’s in danger of churning and trigger automations to proactively save them.
How Custify Elevates Tracking:
Custify automates health score calculations by integrating data from your CRM, product analytics (e.g., Mixpanel), and support tools (e.g., Zendesk). It:
- Assigns dynamic weights to factors (e.g., feature adoption matters more for enterprise accounts).
- Triggers alerts when scores drop (e.g., “Account XYZ’s health fell 20% this month”).
- Recommends actions (e.g., “Send a CSM to review underused features”).
Strategic Insights:
- Proactive Retention: Zapier uses health scores to identify at-risk free-tier users and offer personalized onboarding calls, reducing churn by 18%.
- Expansion Signals: HubSpot targets “healthy” accounts with upsell campaigns for premium features, driving a 25% increase in ARPU.
Practical Example:
A SaaS company notices a mid-tier customer’s health score dropped from 75 to 50. Custify’s dashboard reveals the decline stems from a 50% drop in a particular secondary feature usage and two unresolved support tickets.
The CSM intervenes with a training session and resolves tickets, boosting the score to 80 within a month.
Interesting Stat: Companies using health scores see 30% faster response to churn risks and 20% higher upsell conversion.
12. Product Adoption Rate
Product adoption rate is the percentage of customers actively using a specific feature or your entire product. It measures how well users integrate your solution into their workflows.
Why does it matter?
Adoption = value realization. If customers don’t use your product, they won’t renew. For example, if only 30% of users adopt your AI reporting tool, they’re not experiencing its full ROI—putting renewals at risk.
Formula:
Aim for >70% adoption on core features.
How Custify Elevates Tracking:
Custify tracks adoption in real-time by:
- Monitoring feature usage (e.g., API calls, button clicks) via integrations with tools like Pendo or Amplitude.
- Segmenting adoption by user role (e.g., admins vs. end-users).
- Sending automated nudges (e.g., in-app guides, emails) to inactive users.
Strategic Insights:
- Onboarding Optimization: Notion increased adoption of its “Templates” feature by 50% with interactive checklists during onboarding.
- Feature Education: Calendly hosts monthly “Power User” webinars to boost adoption of advanced scheduling settings, resulting in a 35% uptick in usage.
Use case example: a project management tool uses Custify to discover that only 40% of users adopt its “Time Tracking” feature. They launch a targeted email campaign with video tutorials and offer a free consulting session. Adoption jumps to 65% in 60 days, and renewal rates for adopters increase by 15%.
Interesting stat: Implementation of gamified adoption paths increases 30-day retention by 34% through dopamine-driven engagement. (Zippia)
Final Thoughts
Maintaining a loyal customer base is not as easy as it sounds. Your competitors may try different tactics to steal your customers from you. To prevent this, you need to keep on offering seamless experiences to your customers.
It’s also important to keep an eye on the changing needs or preferences of your customers. These insights help you come up with viable retention strategies.
In this article, we covered the ten important metrics to measure customer loyalty. The indicators will help you devise stellar strategies to boost customer loyalty. Plus, they will help you establish strong relationships with the intended audience.
