Service Renewal Metrics: Definitions and Benchmarks

by Apr 24, 2019

Service renewal metrics indicate the level of performance for retaining the number of service contracts and the rate that recurring revenue is retained and grown.

Service Renewal Metrics

Tracking service contract renewal performance and recurring revenue retention is essential to help identify the factors that lead to customer and revenue retention and attrition. Measuring both the number of contracts and revenue retained is an important indicator of customer relationship health.

Two important service renewal metrics are Contract Renewal Rate and Recurring Revenue Rate both are defined and described below.

Contract Renewal Rate

Contract Renewal Rate indicates the percent of contracts due to expire in a specified period that are successfully renewed.

Contract Renewal Rate provides a good indication about the number of relationships your able to sustain and can help identify attrition and retention trends and underlying causes.  When possible, examine Contract Renewal Rates by key customer segments to identify relationship trends by customer type, geography, product family, length of relationship, etc.


For Period = Q1

Contract Renewal Rate = Contracts Successfully Renewed / Contracts Due to Renew

Contracts Due to Renew Q1 = 100

Contracts Successfully Renewed Q1 = 90

Contract Renewal Rate = 90%

Recurring Revenue Rate

Recurring Revenue Rate provides an indication of how much recurring relationship value has been retained, grown or been lost.  

Unlike Contract Renewal Rate, where 100% is the maximum performance level, Recurring Revenue Rate can exceed 100% indicating that the value of an existing relationship has increase from the previous period.

Recurring Revenue Rate can be applied to a specific timeframe (e.g. quarterly, annually, etc.) or applied to tracking Monthly Recurring Revenue (MRR) and Annual Recurring Revenue (ARR).  This is critical for tracking the financial health of recurring revenue relationships.


For Period = Q1

Recurring Revenue Rate = Recurring Revenue at End of Term / Recurring Revenue at Beginning of Term

Recurring Revenue Beginning Q1 = $100

+ Recurring Revenue Added in Q1 = $50

$45 from new customers

$5 from expansion of existing relationships

Recurring Revenue Lost in Q1 = $30

$25 due to customer churn

$5 due to downgrade of existing relationships

= Recurring Revenue End Q1 = $120

Recurring Revenue Rate = 120% (20% growth)

Best Practices

  • Establish both contract renewal and recurring revenue metrics.
  • Monitor contract renewal rates to identify trends in relationship retention or attrition.
  • Examine contract renewal rates by key customer segments to determine variations in retention or attrition performance by customer type.
  • Compare contract and recurring revenue rates to indicate changes in buying behaviors.
  • Measure the rate of growth or reduction in revenue month-to-month or year-to-year.
  • Investigate the root cause for loss of contracts and revenue.


Featured: Service Renewal Best Practices

Service renewal performance is fundamental to overall corporate financial health.  Existing service relationships represent a predictable recurring revenue stream and provide the foundation from which to grow revenue.  Before you can grow relationship value however, you must be able to retain what you have.

Login or register to get a copy.

Login to Access the Full Report

If you don’t have an account, create a free* membership.


*Membership level determines your access to ServiceXRG research and other member services. Paid memberships include access to research and playbooks. Free memberships include access to some reports and discounts to others. Please visit our membership page for a list of available membership programs.

Related Articles

Beyond Service Metrics – Focus on What Really Matters

If you are an executive at an information technology company you have a lot to think about on a day to day basis, but there are 5 more things that you need to be aware of.
Your service organization is an incredible source of metrics and measurements that describe ongoing interactions with your customers. They can tell you about the top concerns of your customers, the challenges they face using your products and the features they want to see in the future.

Service interactions with customers offer a wealth of insights into how to sustain and grow customer relationship value and create opportunities to differentiate your products. Of all the metrics your service team tracks there are 5 important areas that you should key a close eye on.

read more

Three Critical Metrics to Retain and Grow Customer Relationship Value

If you inventory all the metrics used by your customer-facing organizations – Sales, Marketing and Service – you will find an impressive collection of data elements that describe how you interact with your customers. Marketing metrics describe the ability to reach and influence customers; Sales metrics provide insights into the time and efficiency to book revenue; and Service metrics describe the volume, timeliness, and effectiveness of interacting with them. Add to this, insights provided from customer satisfaction assessment efforts. As an industry we have a lot of customer data, but does it tell us everything we need to know about how to engage and sustain long term profitable relationships?

read more

Recurring Revenue Rate

The amount of recurring revenue a company receives may increase, stay the same, or decline for a given period. Recurring Revenue Rate indicates the percent change in the amount of recurring revenue at the end of a specified period compared to the recurring revenue at the beginning of the same period. Measuring recurring revenue rate is essential to help identify the factors that lead to revenue retention and attrition and provides an indicator of the overall state of customer relationship health.

read more

Service Revenue Generation Metrics

The ability to accurately track the effectiveness of Service Revenue Generation activities is essential to maximizing revenue from new and existing customers. There are three primary opportunities to capture service revenue including the sale of new contracts at the time of the initial product sale (Attach); renewal of existing service contracts (Renew); and as reinstatements (Win Back) of contracts that have been previously cancelled by customers. This article presents a consistent set of metrics and definitions to help companies measure the overall of service sales and renewal policies, programs and personnel.

read more

How Effective are Your Renewal Practices?

Use ServiceXRG’s Contract Renewal Assessment tool to get an immediate evaluation of your current renewal practices and performance. The assessment takes just a few minutes and will provide you with a customized performance scorecard with recommendations for improving contract renewals.

read more

Pin It on Pinterest

Share This