Logo retention rate
What is logo retention rate (LRR)?
The logo retention rate (LRR) metric gauges the percentage of the current customer base that remains active from the previous period, typically measured over a specific timeframe like twelve months (LTM or TTM) for B2B SaaS companies. LRR assesses the continuity of customer relationships and is vital for understanding customer retention trends. Depending on contract durations and upsell strategies, some companies may choose to calculate LRR at shorter intervals, such as one quarter.
Logo retention rate (LRR) is an essential metric for evaluating the health, growth, and long-term sustainability of a business. This measurement is particularly significant for Software-as-a-Service (SaaS) Business-to-Business (B2B) companies, which heavily invest in customer acquisition during their early stages. The LRR reflects the percentage of existing customers or clients that a company manages to retain over a specific period, regardless of the revenue generated by each client.
A high LRR indicates that the company has been successful in retaining a significant number of its existing customers. This suggests that customers are satisfied with the company's offerings and services, leading them to continue their business relationships. A strong LRR is an indication of positive customer loyalty and effective customer retention strategies.
Conversely, a low LRR can be likened to a "leaky bucket" situation, where the company continuously acquires new customers but struggles to retain them over time. This situation can lead to a diminishing customer base and adversely affect the company's long-term growth prospects.
Measuring the LRR provides valuable insights into the company's ability to maintain customer loyalty and satisfaction. It helps identify areas that require improvement in customer support, product offerings, or overall customer experience. Furthermore, understanding the LRR allows businesses to assess their customer retention efforts accurately and make informed decisions to enhance customer satisfaction and loyalty, ultimately contributing to sustainable business growth.
How is logo retention rate calculated?
LRR is expressed as a percentage of the starting active accounts. It includes the starting active accounts minus any churn.
Another way to think about LRR is shown in the chart below which visualizes the churn component of the LRR calculation.