A high churn rate is the ultimate sign of failure in SaaS. It indicates that too many consumers thought your goods or service wasn’t worth the price. One of startups’ most significant, enduring issues is churn, and the only way to address it is with frank honesty. This article will explain the causes of customer attrition and show you how to lower it and enhance customer satisfaction.
There will always be some churn; getting the churn rate to zero is not the goal. However, the usefulness of the churn rate depends on how you interpret it. Are we discussing revenue churn here? Month-to-month agreements? Contract retention on an annual basis? Low-value client attrition?
The impact of churn on your business can be calculated in various ways, the truth being said. The best course of action depends on your growth stage, your CLV and CAC rates, and, above all, whether or not churn statistics are affecting your profitability and sales.
Why Is SaaS Churn Important?
SaaS churn might cause your company to fail. It affects a company’s viability, profitability, and revenue levels. Churn is a concern because it gets worse. If the SaaS churn rate isn’t controlled or lowered over time, client pipelines will eventually dry up, and you won’t have any more clients. Churn is influenced by many distinct business factors, ranging from product fit and pricing to customer acquisition costs (CAC).
How Much of a SaaS Churn Rate Is Good?
On average, a churn rate of three to eight percent is considered acceptable. However, this might change depending on your market, product, business, and season.
The Harsh Reality: SaaS Churn Cannot Be Completely Avoided
Let’s say a customer leaves you due to their business closing. It may be natural for you to raise your hands and declare that there is nothing you can do. After all, you’re just selling them a product, and you have no power to prevent them from failing.
While some churn cannot be avoided entirely, you should try to minimize it. Ignoring churn and not taking action might be hazardous.
The marketing manager of B2B/SaaS startup productivity tools at Controlio said there isn’t a magic bullet to reduce customer attrition; the company has successfully used tactics like more extended contracts and more excellent product fit.
It is ineffective to write off churn as inevitable, as CEO of Gainsight Nick Mehta notes, as you will write off an increasing amount of your churn rather than searching for answers. It would be best if you considered asking yourself:
- How many clients leave for reasons that may have been avoided with greater client satisfaction?
- How many clients leave us for reasons that have nothing to do with us at all?
Analyze the effects of so-called inevitable turnover on your company. And guess what happens if frequent considerable attrition ruins your retention? You can call it inevitable, but you must modify your business plan to survive using remote workforce monitoring software such as Controlio.
Why Do SaaS Users Discontinue?
SaaS product users abandon them for various reasons. Unsatisfactory product fit or a convoluted onboarding procedure may lead potential clients to consider your rivals. Higher churn rates, according to Motivosity’s Vice President of Marketing Logan Mallory, are largely related to how customers are handled after making a purchase.
But is preventing customer churn really that easy?
Pricing creep, poor target market fit, capital constraints, and superior competitor products can cause higher churn rates. Even founders knowledgeable about churn and its causes frequently don’t know why it occurs.
