Customer Churn

What is Customer Churn?

Customer churn, or customer attrition, for SaaS firms, is when a customer stops using your product, resulting in their non-renewal of the subscription. In other words, it is the end of the relationship between you and your customer.

What is an acceptable churn rate for SaaS?

The fact is that customer churn is unavoidable. No company in the history of business has retained every customer it ever acquired. However, you want to keep this figure as low as possible. 

To that end, on average, an acceptable churn rate is between 3% –8%. But these figures vary based on your industry, product, market, and the time of year.

What are the main reasons SaaS customers churn?
There are all kinds of reasons why customers decide to end their relationship with a business. However, the major culprits tend to be the following: 
  • Budgeting/finance issues
  • Customer’s needs have changed
  • Customer fails to see the value proposition of your product long term
  • Your SaaS fails to meet or exceed expectations
  • Poor customer service or response rates
  • The customer has moved to a competing product/service

What is the formula for churn rate in SaaS?
To calculate the Customer churn rate you need three values:
  • The period within which you are going to calculate customer churn
  • Total number of customers acquired during that period
  • Total number of customers churned during that period.
Once you have those values, you can plug them into this formula to calculate your churn rate: 
Customer Churn Rate = (Total number of churned customers) / (Total number of acquired customers) x 100

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