Retention measures a company’s customer bases’ expansion, contraction, and churn relative to a fixed earlier period (12 months by default, adjustable with the Trailing Period setting). This non-cohorted view of retention gives insights into customer behavior over a set period of time.
Trailing 12 Month Retention = ARR (or count) of customers active in month x and month x+12 ÷ ARR (or count) of customers active in month x
Many people find trailing period retention more intuitive than cohorted retention because the x-axis is dates instead of the nebulous “Month 12”, and because there’s just one number for the current period. Trailing 12 month retention also makes it easy to double-click on what's happened just in the last year, versus across the entire history of the business, and to see the impact of making changes in a business, such as hiring a Customer Success Manager, 3 or 6 months later.
However, because trailing period retention combines data from companies at different stages of their customer journey, it can hide some of what’s going on within your customer base. The most acute example of this is if you look at retention for the trailing 1, 3, or 6 months: most SaaS companies have annual contracts, so customers are really only at risk of churning every 12 months. This means that if you look at customer retention compared to 3 months ago, only a small percentage of your customers have had the opportunity to churn, while all have had the opportunity to expand. This allows you to simultaneously have high churn and high Net Dollar Retention. Especially if you’re growing fast and your newer cohorts are larger than older ones, non-cohorted retention may obscure a real churn issue in the business. Only when growth slows will the full extent of this “leaky bucket” issue become apparent.