What is Customer Retention and Expansion?

Customer retention and expansion are about keeping your current SaaS clients over time and convincing them to make plan upgrades. The approach involves offering related products or advanced versions, providing additional features within the software, and addressing factors related to user subscription retention. Net revenue retention measures both: SaaS Capital’s 2025 survey found a 102% median for private B2B SaaS companies with annual contracts of $25,000 to $50,000. This tactic is part of SaaS growth strategies.

For SaaS companies, maintaining current customers is far less expensive than continuously acquiring new ones; hence, it is imperative to concentrate on client retention. The SaaS business model is connected to its sustainability and the generation of recurring revenue.

A good SaaS retention rate depends on contract size and on what is measured. SaaS Capital’s 2025 survey of private B2B SaaS companies measures retained revenue, not customers: those with annual contract values of $25,000 to $50,000 had a median net revenue retention of 102%, and the top quartile 111% (SaaS Capital, 2025). Net revenue retention counts upsells, so it can exceed 100%; a customer retention rate cannot.

The formula for calculating your SaaS customer retention rate is subtracting new customers from a specific period from the total number of customers at the end of the same period, dividing that by the number of customers at the start of the period, then multiplying the result by 100.

In order for your SaaS retention strategy to offer the expected results, consider the following factors:

• High-quality software: Does your SaaS software offer a solution to a relevant challenge faced by your target audience?
• Usability level: How user-friendly and intuitive is your software?
• Customer assistance: Do you offer customers prompt and helpful guidance and support?
• Value and price alignment: Does your price tag match the value your software delivers?
• Regular product innovation: How often do you release software updates and feature additions?

Six practices are identified as having an influence on SaaS client retention rates:

• Consider your customer onboarding process and ensure that your users can access your product.
• Make customer service a priority for your SaaS business by quickly addressing issues.
• Collect user feedback and implement it to demonstrate to users that you are listening.
• The content should include details regarding forthcoming updates, new features, and any promotions.
• Adjust upsell and cross-sell initiatives to align with user specifications.
• Watch usage signals, such as falling logins, to spot at-risk accounts early.