SaaS churn rate is so far a subject to many controversial theories in the SaaS digital marketing industry. The main reason behind this confusion is that a certain amount of this rate can be acceptable or right for a company, while the same amount can be a reason for headache for another company. Even a thorough study of the average churn rates of different companies will lead you to the same contradictory reviews and confusing statistics. Since it is still not very clear which amount of churn rate can be called a ‘good rate’, it is better to keep it as a non-issue. You cannot ever hit zero churn rate, which is okay. Let us find out how we can answer the question to the best of our understanding.
What is SaaS Churn?
Let us first understand the term ‘Saas Churn’. It is the amount of termination of your subscribers in a given period. It is represented in percentage and SaaS churn is an unavoidable circumstance for any business, as there will always be some customers who turn down your subscriptions due to simple dissatisfaction, cash flow crisis, or a failed payment experience, etc. This is an essential measurement of your company’s performance when calculating growth and revenue forecasting. For marking growth through the Saas digital marketing of your company, the growth rate (new subscribers) needs to be more than the churn rate (i.e., the canceled subscribers).
What is Acceptable SaaS Churn Rate?
According to the evident experts in the industry, the acceptable churn rate should range between 5–7% annually, whether you measure the changes in your revenue or the customers. Some other studies have shown that around 70% of the SaaS Marketing Agencies had less than 10% churn rate annually, and 75% among them had an annual churn rate at either 5% or even less than that.
Monthly and Annual Churn Rates
We have just mentioned that a 5–7% annual churn rate is acceptable for most companies and businesses, which translates into the monthly churn rates of 0.42–0.58%. We can put it more simply by saying that the companies with a ‘good’ or ‘acceptable’ churn rate lose only one customer (or dollar) out of each 200 customers (or dollars) every month.
Why Churns Happen and How to Eliminate Them?
There are two fundamental reasons that can lead to SaaS churns.
The death of your customer (or if they go out of their business).
They do not get satisfied or get their desired outcome.
We do not have much control over the first reason. However, you will still find some extremely loyal customers who will always remain your customers even after they go out of business.
The churn is just a symptom of some underlying, more significant issue. If you can cure the main problem, the churn will automatically go away. Also, in some other cases, it is better to treat the symptom and not the disease.
It is evident that the ‘good’ SaaS churn rate is a very subjective matter that ranges from different industries and companies. SaaS churn is not desirable for any business; however, it is inevitable. These components of SaaS digital marketing are quite complicated and confusing for a non-professional to handle. So, it would be good to rely on a professional digital marketing company that knows the tones and the tricks of this industry very well. Think Orion is a company that offers its customers an all-round marketing solution to help them boost their customer base and revenues.