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.

We’re here to help.

Reach out anytime to start the conversation about improving your service renewal metrics. Use the chat button at bottom right, send an e-mail, or click on my calendar to schedule a specific time.


Service Renewal Best Practices

Featured Playbook: 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.  But before you can grow relationship value, you must be able to retain the customers you have now.

Login or register to get a copy.

Meet the Recurring Revenue Challenge–
Starting NOW

Exclusive White Paper:

Using Services to Retain and Grow Recurring Revenue

Related Articles

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

GUEST POST: Sell Services Faster and More Accurately

Company executives understand that selling services alongside core product offerings leads to greater alignment and customer value, while subsequently decreasing the likelihood of customer churn and loss of recurring revenue. Well-defined services and the means to sell them are imperative. so why is selling services so difficult? This article introduces 10 ways to help Sales teams sell services.

read more

How to Measure Net Recurring Revenue

Net Recurring Revenue is a comprehensive indicator that reveals the extent to which you are retaining, expanding and growing customer relationship value. Examining the specific underlying elements that contribute to the calculation of Net Recurring Revenue provides the necessary insights to identify the root causes of churn, attrition and contraction. In addition, examining the reasons for revenue growth presents opportunities to embrace and expand practices that encourage expansion of relationship value.

read more

Pin It on Pinterest

Share This