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How can you calculate renewal revenue?

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Renewal revenue is a key metric for measuring the performance and value of your customer relationships. It represents the amount of recurring revenue that you retain from your existing customers over a given period, usually a year. In this article, you will learn how to calculate renewal revenue and why it is important for your customer relationship management (CRM) strategy.

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1 What is renewal revenue?

Renewal revenue is the sum of all the subscription fees, service charges, and other recurring payments that your customers make to continue using your products or services. It does not include any new sales, upsells, cross-sells, or referrals that you generate from your existing customers. Renewal revenue reflects how loyal and satisfied your customers are with your offerings and how likely they are to renew their contracts or agreements with you.

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Tamás Kató

Digitális marketing és hirdetés stratéga | Célorientált szakért?, elk?telezett családapa
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One important indicator of customer loyalty and the worth of your offerings is renewal revenue. It is an essential component of your business strategy because it reflects the confidence and contentment of your customers. Understanding the elements that go into generating renewal revenue will help you assess how well your customer relationships are doing.

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2 How to calculate renewal revenue?

To calculate renewal revenue, you need to track two variables: the number of customers who renew their contracts or agreements with you and the average revenue per customer (ARPC). The number of customers who renew can be expressed as a percentage of the total number of customers who were eligible to renew in a given period. This percentage is called the renewal rate. The ARPC is the total revenue divided by the total number of customers in a given period. To calculate renewal revenue, you simply multiply the renewal rate by the ARPC by the number of customers who were eligible to renew. For example, if you have 100 customers who were eligible to renew in a year, and 90 of them renewed with an ARPC of $1,000, your renewal revenue is 90% x $1,000 x 100 = $90,000.

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Tamás Kató

Digitális marketing és hirdetés stratéga | Célorientált szakért?, elk?telezett családapa
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Knowing your average revenue per customer as well as your renewal rate are both necessary to calculate renewal revenue. The result of this calculation gives you a clear picture of the changing structure of the customers you serve. Developing ability in this process will help you better allocate resources and focus your CRM efforts to increase growth and retention.

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3 Why is renewal revenue important?

Renewal revenue is important because it indicates how well you are retaining and satisfying your existing customers, which is crucial for your long-term growth and profitability. Renewing customers are more likely to buy more from you, refer you to others, and provide positive feedback. They also cost less to serve and market to than acquiring new customers. By measuring your renewal revenue, you can assess the effectiveness of your CRM strategy, identify areas for improvement, and set realistic goals and expectations for your future revenue.

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4 How to improve renewal revenue?

To maximize renewal revenue, it's essential to deliver value and satisfaction to customers throughout their lifecycle. This can be done by providing consistent and high-quality products or services that meet their needs and expectations, communicating regularly and proactively to build trust, soliciting feedback and reviews to understand satisfaction levels, preferences and pain points, offering incentives and rewards for renewing contracts, as well as segmenting customers based on their renewal potential, behavior, and value. Utilizing these strategies can help you tailor your CRM strategy to maximize retention and revenue.

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5 How to benchmark renewal revenue?

To benchmark your renewal revenue, you need to compare it with industry standards, competitors, and your own historical performance. You can use various sources of information, such as reports, surveys, databases, or networks, to find out the average renewal rates and ARPCs for your industry or niche. You can also analyze your competitors' CRM strategies, offerings, and pricing to see how they compare with yours and identify any gaps or opportunities. Finally, you can track your own renewal revenue over time and see how it changes in relation to your CRM efforts, customer feedback, and market conditions.

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6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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Customer Relationship Management (CRM)

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How can you calculate renewal revenue?

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1 What is renewal revenue?

2 How to calculate renewal revenue?

3 Why is renewal revenue important?

4 How to improve renewal revenue?

5 How to benchmark renewal revenue?

6 Here’s what else to consider

Customer Relationship Management (CRM)

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How can you calculate renewal revenue?

1

2

3

4

5

6

1 What is renewal revenue?

2 How to calculate renewal revenue?

3 Why is renewal revenue important?

4 How to improve renewal revenue?

5 How to benchmark renewal revenue?

6 Here’s what else to consider

Customer Relationship Management (CRM)

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