As a SaaS provider, you already know the importance of measuring your churn rate. Churn is the measure of the number of customers, users, revenue, or other factors moving out of a group over a period of time. Most of the time, it is a measurement of customers who unsubscribe from a SaaS product. Many SaaS companies measure customer churn rate, as it is one way to indicate customer success and growth. Over 2019, numerous SaaS companies were surveyed about churn, and the results guide reducing customer attrition and increasing customer success. In this article, we have put together 8 SaaS churn stats in 2020.
Churn, when applied to a customer base, refers to the proportion of contractual customers or subscribers who leave a supplier during a given time period. It is a possible indicator of customer dissatisfaction, cheaper and/or better offers from the competition, more successful sales and/or marketing by the competition, or reasons having to do with the customer life cycle.
How businesses measure churn
Optimal churn rate is an elusive figure since many factors go into customer retention, but five percent is often used as an example of an acceptable rate. According to a recent survey, two-thirds of companies have a churn rate above five percent.
While 69% of SaaS businesses measure churn by the number of customers, there are several other ways to use churn to measure business performance. User count, revenue, and product downgrade can also be used to measure churn. Not all businesses view churn the same way; for example, a reduction in customers might be acceptable after a product or pricing overhaul that results in more revenue. However, you measure churn in your organization, it should be meaningful to customer success.
Churn rates differ based on several factors
Some businesses have greater churn rates than others. For example, startups reported 60% churn rates in 2019. The takeaway, the more revenue, the less churn. Startups and small businesses, then, need to pay attention to churn, as managing customer attrition is key to breaking free of factors that hold newer businesses down.
Business size is not the only factor that impacts the churn rate. SaaS companies with month-to-month contracts tend to have higher churn rates overall, while those with longer contract terms, such as annual or greater have more loyal customers.
Churn rate is also tied closely to growth rate, as companies with low growth are more likely to experience high churn. Medium growth rate businesses experience an average rate of churn, but high growth companies are a mixed bag.
Churn rate also depends on sales and tech
Other helpful statistics for SaaS companies relate to how the business comes in the door. Channel sales have the highest rate of churn, at 17%. The average field sales churn is 11.8% and inside sales have a rate of 14%, indicating that the relationship-based sales efforts might help in increasing customer loyalty.
SaaS companies with mobile apps also see a marked improvement in churn rate, up to 41.5% increase in customer retention. The key is the active use of mobile apps, as this metric measured active mobile app logins.
These SaaS churn stats help guide businesses, providing awareness of the different types of customers, churn rate calculations, types of churn, and other factors.
In a subscription-based service or a SaaS company, the number of customers fluctuates on a monthly or annual basis. The objective is to reduce customer churn and to increase subscription renewals. The ability to forecast churn helps organizations take appropriate steps proactively! Most businesses focus on attracting new customers and miss out on retaining the existing ones.
SaaS businesses need to be aware of the different types of customers, churn rate calculations, types of churn, etc. to be better equipped to handle churn effectively.