Customer growth rate is a litmus test for the health of your business.
Like your favorite houseplant, you can understand a lot about your business development from your customer growth rate. The higher your customer growth rate, the better the outlook for your business.
Here’s everything you need to know about customer growth rates – including how to calculate your customer growth rate and strategies to increase customer growth in your organization.
Skip ahead:
What is customer growth rate?
Customer growth rate is a key metric used to measure the speed at which a company acquires and retains customers for their product or service. Your customer growth rate is an important indicator for the health of your business – a positive growth rate shows there is demand for your product and your customer base is growing.
Why is it important to track customer growth rate?
Your customer growth rate is a key performance indicator (KPI) you can use to understand demand for your product or service within a given time period.
Here are 5 top reasons to track customer growth in your business.
-
Key indicator for business health
Your customer growth rate is an important indicator for your business’ health. A healthy business will have a good customer growth rate showing there is market demand for your products and services – and that you’re successfully finding and converting that demand into paying customers on your books.
- Predict recurring revenue
Customer growth is a helpful metric for predicting annual recurring revenue (ARR) for subscription-based businesses. If your customer base increases, your ARR will also increase. By tracking your customer growth rate over time, you can better understand your revenue growth month-on-month and make predictions for future growth. - Track seasonal changes
By measuring your customer growth rate over time, you can start to understand how your customer growth shifts through the year, allowing you to track and predict seasonal changes. This can help you plan your customer engagement strategies better through the year. - Understand customer engagement
High customer growth rates suggest good customer engagement from both your audience and your customers. This can be thanks to a combination of factors including your marketing efforts, your customer education, and positioning. If your customer base is growing, it’s a positive sign for customer engagement. And the opposite is true too. - Attract investment
If you’re looking to attract investment for your business, high customer growth rates are a positive indicator to investors that your business has scalability. This will be one of many factors investors may use.
How to calculate customer growth rate
To calculate customer growth rate in your organization, you need to have data on how many customers you’re acquiring each month.
Here are the metrics you need to track:
- Customers at End of Month: This is the total number of customers your business has at the end of a given period – usually one calendar month.
- Customers at Start of Month: This is the total number of customers your business has at the start of a given period – usually one calendar month.
When you’ve got this information, you can use the following formula to find out your customer growth rate.
Customer growth rate formula
The customer growth rate formula is:
Customer Growth Rate = ((Number of Customers at End of Month – Number of Customers at Start of Month) / Number of Customers at Start of Month) * 100
Here’s a worked example of the formula in action:
If your company had 5,000 customers at the start of January and 5,500 customers at the end of January, the customer growth rate formula would look like this.
Customer Growth Rate = ((5,500 – 5,000) / 5,000) * 100 = 10%
In this example, your customer growth rate is 10% meaning your business has had 10% growth in the number of customers during January. Not a bad start to the year.
3 factors that influence customer growth rate
There are several factors that can influence your customer growth rate in any given period. Here are 3 factors to keep in mind.
- Acquisition strategies: Depending on the acquisition strategies your business is using, your customer growth rate may go up or down.
- Customer retention: To increase your customer base, you need to be retaining the customers you’re acquiring. If your customers are churning, it will negatively impact your customer growth rate.
- Market conditions: There are external factors that also impact customer growth rate, including seasonal changes, industry trends, competition, and economic changes. Many of these might be outside your control.
What can negatively impact customer growth rate?
There are also a range of common headwinds that can impact customer growth rate in your business. Here are 3 factors that keep customer growth rates low.
Lack of customer engagement
Poor customer engagement can negatively impact customer growth rates by impacting customer acquisition, retention, expansion, and advocacy.
If your customers aren’t engaged with your product and your business, you’re going to struggle to keep your customer growth rate increasing. This may be due to a range of different factors, including poor user experience, inadequate customer support, or lack of onboarding and customer education.
High customer churn
If you only focus on the number of people you’re getting in the door, you’re not getting the full picture. You also need to take a look at the number of customers who are leaving you after signing up or who are choosing not to renew their contracts.
Customer churn can have a big impact on your customer growth rate. It’s important to know your customer churn rate in relation to your customer growth rate in order to understand the health of your business overall – and shift the focus from customer acquisition to customer retention.
To better understand customer churn in your organization, use the following formula to calculate customer churn:
Customer churn = (Lost Customers / Total Customers at the Start of Time Period) x 100
If your customer churn rate is too high, it might be time to look at strategies to reduce customer churn asap, such as introducing a customer education program.
Poor customer success
If your customers aren’t hitting their goals with your products, it can have a serious impact on your customer growth rates. Poor customer success influences customer growth rate in a range of different ways, including:
- Fewer referrals: If your customers aren’t getting the outcomes they want from your product or service, they’re unlikely to refer you to their friends and colleagues. Fewer referrals means fewer new customers.
- Less brand advocacy: When customers are satisfied, they’re more likely to share their wins, write positive reviews, and post about your products online. But like referrals, your customers are also less likely to become brand advocates if they’re not succeeding.
- Lower renewals: At its most extreme, poor customer success can negatively impact renewals, leading to higher churn. This can have a big impact on your customer growth rate if left unchecked.
Customer success is a key factor in helping to increase customer growth rates – especially when it comes to customer retention and advocacy.
6 strategies to increase customer growth rate
Here are some strategies you can deploy to help boost your customer growth rates – and increase recurring revenue in your organization.
1. Optimize your customer acquisition channels
Customer acquisition is a key factor impacting customer growth rates. To increase your customer growth rate, review your customer acquisition channels and how you currently promote your products and services.It might be time to test out new customer acquisition channels or shift your time and budget towards the channel that’s getting you the best returns. For example, if you’re seeing the best results from organic search, it’s a good indicator to invest more into your SEO and content. Take a look at what’s working for you.
2. Leverage customer referrals
A really effective way to increase customer growth rate is to leverage your existing customers to get more referrals and transform them into brand advocates.
Here are a few tips to help you do just that.
- Use customer education: IDC found that referrals were one of the top three reported benefits of customer education programs. When you help customers understand the value of your product, they’re more likely to recommend you to their friends.
- Create a referral program: Build a formal customer referral program to make the process of getting referrals easier and more efficient – create customer referral templates to allow your customers to make referrals fast.
- Offer incentives: Incentivize your existing customers to refer their friends and colleagues by including extra goodies in your referral program – including rewards like coupons, freebies, merch, and more.
Your existing customers are your biggest asset. Use them to help you acquire more customers – and boost your customer growth rate.
3. Use social proof
Social proof is a powerful marketing and sales tool to get more customers on your books – and it’s an essential tool for subscription-model businesses. Your prospective customers want to know who’s already using and loving your products before they buy.
Here are a few tips for using social proof to boost your customer growth rate:
- Highlight your existing customers: Use social proof from your existing customers – like testimonials, customer logos, and case studies – across all your marketing channels to help customer acquisition.
- Get user-generated content: Happy customers are your secret weapon. Use UGC like video reviews, recommendations, and community-content to build human-to-human connections with your prospective customers.
- Show off integrations: If your product integrates with other products, highlight them to build trust and credibility with your audience. And don’t forget to tell your existing customers too.
Social proof can be used to acquire and retain more customers, boost referrals and advocacy, and increase customer growth over time.
4. Streamline customer onboarding
First impressions matter. When new customers get on board with your business, provide a comprehensive onboarding program to make sure they get off to a good start with your products.
The best customer onboarding programs are slick, seamless, and timely. Deliver impactful learning experiences from day one to help your customers see what’s possible with your products and services and help them get inspired.
There are a range of customer onboarding strategies that can have great results, including:
- Self-led online courses
- Video onboarding
- Knowledge hub
- Onboarding webinars
Give your customers a dedicated place they can go to learn how to get started with your product – and ideally get personalized help if they need it. This can help to increase customer retention and boost referrals. The result? It’s good news for your customer growth rate.
5. Review positioning and benefits messaging
To increase customer growth rate in your organization, conduct a review of your positioning and messaging to speak to your ideal customers.
This might include:
- Defining what makes your brand unique
- Talking to customers
- Researching what your competitors are doing
You may need to test and tweak your positioning and messaging several times to find what speaks to your audience, especially in the early days of offering a new product or service.
6. Focus on customer success
Retaining your existing customers is key to keeping your customer growth rate high. To boost renewals, focus on delivering quick wins to customers as soon as possible to help them see instant value in your products and services.
There’s a huge range of customer success strategies you can use to help your customers achieve their goals and objectives, including:
- Customer education: Customer education is a critical tool to boost customer success in your organization at every stage of the customer journey – including onboarding, adoption, renewals, and expansion.
- Personalized customer support: Some customers will need extra help from your team – that’s where personalized customer support comes in. If possible, provide omnichannel customer support so your customers can get in touch on the channels that work best for them, including email, live chat, and more.
- Expansion offers: Well-timed expansion offers can help boost customer success by giving your customers the features and functionality they need to hit their goals. If you have a close relationship with your customers, you can understand when expansion is the right path for them and use add-ons, upsells, and cross-sells to help customers get maximum value from your products.
These customer success strategies are just some of the ways you can increase customer retention by delivering continuous value throughout the customer lifecycle, not just around renewal time.
The role of customer education in customer growth
Customer education is a top strategy for customer growth – helping you to attract, acquire, and retain more customers. Here’s how customer education can boost your customer growth rate.
Acquiring customers
The right customer education program can attract new customers to your business – helping them learn something new, improve their skills, and achieve their goals.
By creating educational content targeted at your prospects and their pain points, you can set up your products as the no-brainer solutions to their problems.
Retention and renewal
Renewal is a critical stage in the customer journey for any subscription-based business. And it’s one of the biggest factors impacting customer growth.
With a comprehensive customer education program, you can deliver continuous value to your customers with deeply impactful and inspiring learning experiences. By prioritizing customer education, you can build stronger, longer-lasting relationships with your customers built on superior service, regular value, and deeper engagement.
Account expansion
Customer education can also increase customer expansion rates by providing timely knowledge to customers that help them get maximum value from your products. With the right customer success program, customer expansion becomes a natural part of the conversation.
That’s why 51% of executives report they’re prioritizing customer education for expansion in 2024 – to win more upsells, cross-sells, and add-ons.
For example, a customer academy that helps your customers learn how to do better in their jobs then becomes a channel to upsell a more advanced product that helps them put their newly acquired knowledge into practice.
Start tracking your customer growth rate today
Customer growth rate has a big role to play in recurring revenue businesses. If you’re part of a subscription-based business, your customer growth rate is a good indicator for your annual recurring revenue (ARR).
It’s simple—if you acquire new customers and retain your existing customers, your ARR will increase over time, which is good news for your business.
Customer growth rates give businesses insight into their performance. They indicate the number of customers you’re acquiring compared to the number who are churning.
Investing in your customer success is about more than meeting expectations—it’s about exceeding them. By enhancing your support and customer service, optimizing onboarding and resources, and implementing a customer education program, you can scale success while empowering your customers with self-serve resources and tailored learning paths.
Ready to take your customer success strategy to the next level?
Download the Ultimate Guide to Customer Success today and unlock actionable insights to elevate your impact!
Discover how your business can leverage customer education to enhance customer success today.
When your customers win, so does your business.
Platforms like Thinkific Plus are making it easier than ever for growing businesses to build and launch their first customer education academy. With specialized tools for content creation, engagement, and analytics for continuous improvement, enabling your customers and fostering business expansion is more achievable than ever.
Ready to embark on this transformative journey?
Request a demo of Thinkific Plus and start shaping the future of your customer experience today.
