B2B SaaS Churn Rate Benchmarks: A Complete Guide 2023

11minsread Feb20,2023

Inthewakeofglobalination,theSaaSbusinesssectorhasbeenundergoinganinuxofnewcompetitionanda constantriseincustomerchurn Switchingtocompetitors’products/servicesisalsorisingundertheimpactof digitization,especiallyusingpricecomparisons Inthisuncertaineconomicclimate,theirutmostpriorityistokeep customersfromchurning

Winningnewcustomersismorecostlyandretaininglong-termcustomerswithlong-termsubscriptionplanscanbe muchmorevaluable Fortunately,today’scompanieshaveb2bSaaSchurnratebenchmarkssuchasrobustcustomer retentionstrategiesandacquiringanewtooltohelpthemkeepoldusersandacquirenewones:Churnfree

Churnfreeusesautomatedalgorithm-drivenmethodstodrilldowndataofindividualcustomersbasedontheirbehavior paerns Hence,businessescancontroltheircustomerbasemorestronglyandcontrolchurn Churnfreehelpsyou evaluatemarketingeectiveness,improveyourboomline,anddoubledownonyourcustomerretentionstrategies

Let’sdiveintoeverythingyouneedaboutb2bSaaSchurnratebenchmarks AschurnexpertsatChurnfree weenable youtounderstandwhyyouruserscanceltheirsubscriptionsandassistyouinretainingthemwithpersonalized onboardingexperiences Collectapackoftips,b2bbenchmarks,andguidancetoimproveyourchurnrates

SaaSChurnRate:Denition&howtocalculateit

Knowingthedeep-downdenitionofchurnrateandhowitcanbecomesubtlyuncertaintoaectyourbusiness strategiesisimperative

First,let’sexplainwhatwemeanby“churnrate.”

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Blog Blogs > B2BSaaSChurnRateBenchmarks:ACompleteGuide2023 2BSaaSChurnRateBenchmarks: ACompleteGuide2023

Thechurnrateestimatesthenumberofuserswhocanceltheirsubscriptionswithinaspecicperiod.Itisabenecial practicetocalculaterevenuelostfromchurnedusers.

SaaSchurnratesarecriticalforabusiness’slong-termundertakingsandoverallperformance

CalculatingSaaSChurnRate

SaaSchurnratefocusesonthenumberofusersthatleaveyourservicesmonthlyorannually TomeasuretheSaaS churnrate,youcandividethetotalnumberofchurnedusersviathetotalnumberofusers:

Forexample,ifyourbusinesshas1000customersand80endedtheirsubscriptionslastmonth,yourcustomerchurn rateis8% TheSaaSchurnrateisalsounderstoodas“logochurn”

NetSaaSChurnRate

Togetmoreaccuratemeasurements,there’sthenetSaaSchurnrate,whichevaluatesthenumberofnewusersyour businessgainedoveraspecicperiod

Tomeasureit,youneedtodividethetotalnumberofleusersbythenumberofnewusersgainedoveraperiodviathe totalnumberofusers

Forexample,ifyourcompanyhas1000customers,80ofthemcanceledtheirsubscriptionlastmonth,whileyour businessgained2newusers,yournetSaaSchurnratewouldbe6%

Nevertheless,customerretentionisatremendousmetrictoevaluateyourcustomerbaseandproductexperience. Still,itdoesnotoerrealinsightsintotherevenueaectedbythechurnedusers it’susuallyconnectedwiththe revenuechurnrate TherealinsightisgainedbythetoolthatmeasuresyourNetSaaSchurnrateandhelpsyoudeney ourusers’behaviorpaerns

RevenueChurnRate

TherevenueSaaSchurnratecalculatestheratiooflostrevenueduetosomereasons,suchasdowngrades, cancellations,paymentfailures,andotherbolenecks Tomeasureit,youcandividethetotalchurnedrevenueovera specicperiodwiththetotalrevenueatthebeginning.

Forinstance,ifyourtotalrevenueis$2,000andyourchurnedrevenueis$300,yourrevenuechurnratewillbe15% The revenuechurnratehelpssetdierentpricingtiersforsubscriptionpricingplans,whichdonotfallunderthecategoryof SaaSchurnrate

Thenetrevenuechurnmeasurestherevenueobtainedfromexpansion,suchasupsells,add-ons,ortierupgrades To measureit,youcandividethetotalchurnedrevenueminustheexpansionrevenuebythetotalrevenueatthebeginning oftheperiod Theveryreasontocalculatetherevenuechurnrateistogainmorein-depthinsightsintotheactual revenuelostandgained.

Forinstance,ifyourbusinessgained$2000andyourchurnedrevenueis$300,butyoualsogainedanadditional$80 fromexpansion,andthenetrevenuechurnis7%

MonthlyRecurringRevenue/SubscriptionRevenue

SaaSbusinessesusuallyoperateonamonthlyincomebasis Therefore,anotherimportantmetrictocalculatewhenand whyyourcustomersdecidetoleaveyourservices istheMonthlyRecurringRevenue(MRR)Churn Tomeasureit,you candividethetotalchurnedMRRminustheexpandedMRRwiththetotalMRRatthebeginningofthemonth

Likewise,youcanknowyourAnnualRecurringRevenue(ARR)churnifyourbusinessrunsannually Similarly,youcan dividethetotalchurnedrevenueminustheexpandedrevenuewiththetotalARRatthebeginningoftheyear

Similarly,youcanestimateretentionandmeasureGrossretention,Netretention,orLogoretention.Customer retentionletsyoutrackhowsuccessfullyyoucanretainexistingusershappyandgainmorerevenue

B2BSaaSChurnRateBenchmarks&Challenges

Intheuncertaineconomicclimate,knowingthenaturalcausesbehindchurnshouldbetheultimatemotiveofevery business Thereareseveralb2bSaaSchurnratebenchmarksandchallengeseverybusinessface,andlet’sdiveintowhy theyoccurandwhatthesolutionsare

Churnhappenswhenbusinessesfailtoknowusers’behaviorpaerns.

Personalizationiscriticalforyouruserstotracktheirpreferences,aitudes,andwillingnesstopay Amazon,for example,canrelyonextensivestorageofpastpurchasedecisionstocalculatewhatitsuserispreparedtopayfor specicproducts.Usingadvancedanalytics,itexaminesthemotivesofpastpurchases notonlyauser’sbuying history,age,gender,andlocationbutalsomonetaryfactorssuchaspurchasevalueandmonthlyoryearlyshopping expenditure andthenthesemetricsareusedtomeasurethepossibilityofanewpurchasesusersarewillingtomake Thisway,youcandecideonanaccuratepriceplan,andyourusersdon’tfeelanover-pricingfactoranddonotcancel subscriptionplanstojoinyourcompetitors’serviceforlowerprices.

Whatdoyourusersactuallywant?

Personalizationisessentialbecausebusinessesprotfromit,andusersexpectit Thestudyrevealsthat74%ofusers ndmassmarketingisfrustrating,asmanybusinesseshaveobservedasteepdeclineinthesignicanceofnewsleers,

birthdaymailings,andmatchingcampaigns.

Theusers’expectationsgrowastheyaresuggestedtomorepersonalizedadvertisingthroughdigitalmediaandother advertisingchannels

Payingaentiontouserbehaviorpaernscanbehelpfulinmakingcustomerretentionstrategies.

Howtotrackuserbehaviorpaernssuccessfully?

Threefactorsmaermosttoavictoriousandscalableapproachtomeasuretheuserbehaviorpaern:data,triggers, culture,andmethods.

1.Geingthecorrectdata(notmoredata)

Arecentsurveyshows67%ofparticipantssaidtheirbiggestchallengewasusingtherighttoolstondtherightdata Obtainingthecorrectdataiskeytoknowingbest-in-classuserbehaviorpaerns,butitcanposeachallengefor utilities Onecommonproblemishowtodrilldownusers’datatostopperceiveddiscrepanciesandgapscausingSaaS churn,andsotheycanknowhowtogenerateinsightsandpersonalizeproductpromotioncampaignsforthebeer

Themarketisswampedwithwonderfultoolstohelpretainyourcustomers.Choosingthebesttoolforyourneedisan imperativetask.

Churnfreeisanamazingtoolthathasbeenhelpingseveralbusinessesretaintheircustomersandhelpthemmakethe bestbusinessdecisions

Oneofitsgreaterbenetsisitsintelligenceandautomatedmetricsthatdrilldowntherightdataandhelpyoutake actiononalldiscrepanciesthatmadethecustomersleaveyourproducts.

Ithasadvancedautomatedmetricstopredictuserbehaviormorecorrectlyandsuccessfully Metricssuchas customerlifetimevalue(CLV)orupsellingprobabilitieshelpyoumakebeerdecisions

Ithelpsextractrelevantexternaldatathatmightcontainauser’sbuyingpower,demographicgroup,andother characteristics

2.Determiningtherighttriggersforsuccessfulusercontact

Findingtherighttimetocontactauseriskey Thatmeansndingandtestingcertaineventsassociatedwithaspecic user aformoftrigger-basedmarketingrelativelyclosetotheb2bSaaSbusinesssector

Modelsoftriggersmaycontainvisitstowebstoresandwebpages,onlinesearchesonspecicproductsforprice comparisons,andclicksonFAQsaboutndingabeersolutions.

Businesseshavetopayacloseaentiontosuchtriggers Forinstance,metricstrackauserbrowsingonlineaboutFAQs andclickingonquestionsaboutaparticularproduct;itcansendtheuseranautomatedmessagepromotingitsservice andanewdiscountedpriceplantoenabletheusertoresumeusingitsservices

3.Usingthecorrectmethodsandtechtoscaleupsuccessfully

Manyb2bSaaSbusinessesgetcaughtinpilotmode,runningafeweectivecampaignsbutneedhelprunningthemout acrosstheiruserbase Toscaleup,theymusttakethreeactions:

Revisetheirdatainreal-timeandautomatetheiralgorithms

Ensureyoursysteminfrastructureisrmandsteady Createmoreinterfacesforyoursaleschannels.

Theboom-line:

Millionsbusinessonlineifnotbillions,theycantsurvivewithouttheinformationofalgorithms.Themetricsoerthe insightsthatleadyoutodeterminetheuserbehaviorpaerns Ensurethatyouhavestronginfrastructuretosupport userretentionstrategiesandB2bSaaSchurnratebenchmarks Churnfreehelpsyouunderstandtheboleneckscoming inyourwayofbuildingcustomerretentionstrategies

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B2B SaaS Churn Rate Benchmarks: A Complete Guide 2023

Published on Mar 16, 2023

Jeffrey M. Terrell

In the wake of global inflation, the SaaS business sector has been undergoing an influx of new competition and a constant rise in customer churn. Switching to competitors’ products/services is also rising under the impact of digitization, especially using price comparisons. In this uncertain economic climate, their utmost priority is to keep customers from churning. Winning new customers is more costly and retaining long-term customers with long-term subscription plans can be much more valuable. Fortunately, today’s companies have b2b SaaS churn rate benchmarks such as robust customer retention strategies and acquiring a new tool to help them keep old users and acquire new ones: Churnfree. Churnfree uses automated algorithm-driven methods to drill down data of individual customers based on their behavior patterns.