Instead of reacting randomly, we zoomed out and looked at churn through a PDLC lens<\/strong>. That meant treating churn not just as a support or success issue, but as a product problem. We pulled together product managers, data analysts, and customer success leads, embedding churn analysis and feedback loops<\/strong> directly into our development cycles.<\/p>\n\n\n\n The result? We dropped churn to 4.26%.<\/p>\n\n\n\n But then\u2014cue dramatic music\u2014COVID-19 hit.<\/strong> Our roadmap shifted, user behavior changed, and despite our progress, SaaS churn crept back up to 6.12% by June 30, 2021<\/strong>. Our north star was still 3%, and we knew we couldn\u2019t chase that number with surface-level fixes.<\/p>\n\n\n\n So we doubled down. We aligned every stage of the PDLC\u2014discovery, prioritization, shipping, and feedback\u2014with one mission: reducing churn sustainably.<\/p>\n\n\n\n We\u2019ll walk you through exactly how we did it, what worked (and what didn\u2019t), and how you can integrate churn-reducing strategies right into your PDLC to build a stickier, healthier SaaS product.<\/p>\n\n\n\n\n\n\n\n As the OKR driver for reducing SaaS churn, I faced an unknown opponent because I was unaware of why our customers were leaving us. In general, people are afraid of the unknown and tend to avoid it. As I didn’t know what was going on, whenever someone mentioned the customer churn topic, I usually smoothly redirected them to another one (or swept this churn topic under the carpet, whatever you like more). People can be really good at avoiding what they don\u2019t want to talk about and yep, I wasn\u2019t an exception.<\/p>\n\n\n\n However, as concerns and questions kept coming from the top, I was eventually pushed into a corner and had to do something about it. This time, I needed to take it very seriously.<\/p>\n\n\n\n If your retention is poor then nothing else matters<\/p>\nBrian Balfour<\/cite><\/blockquote>\n\n\n\n And together with the team, we were able to bring the SaaS churn rate down! After several months of experimenting, including changing the way we think, making changes to the product, implementing the customer health score rather unsuccessfully, and improving communication with customers, we were able to cut the customer churn to the target benchmark. In fact, we surpassed it significantly.<\/p>\n\n\n\n This is the story of how we at Usersnap ate our own dog food and reduced the churn below 2% \u2013 1.98% to be exact!<\/p>\n\n\n\n If you don\u2019t have time to read the full article, click on the section that you are interested in the most below.<\/p>\n\n\n Nowadays, with the growth of subscription business models<\/a>, and your competitors watching you constantly, SaaS churn is probably one of the most important metrics that should be tracked by every SaaS company.<\/p>\n\n\n\n Let\u2019s start with the basics.<\/p>\n\n\n\n SaaS companies rely on client retention to generate revenue, hence churn is an important growth indicator for them. Fun fact, it costs five to twenty times more to bring in new customers than to keep the ones you already have, therefore it\u2019s critical to keep an eye on SaaS churn.<\/p>\n\n\n\n Understanding why customers are leaving your service is possible via an examination of customer churn. Your brand\u2019s reputation, customer loyalty<\/a>, and overall lifetime value may all be improved by using these tactics.<\/p>\n\n\n\n That\u2019s one of the reasons why preventing customer churn rate from exceeding the optimal value should be the primary goal for product managers who want to ensure sustainable growth. A product manager can only enhance the Lifetime Value (LTV) of the customers if churn is in a reasonable range.<\/p>\n\n\n\n If the churn rate is high, the growth can reduce even if your average recurring revenue (ARR) is increasing. This means that your SaaS company is acquiring new customers but failing to retain the existing ones. This can highlight a major flaw in the product as it can potentially mean that while customers are driven by the promises your SaaS product makes, they are not satisfied with the execution.<\/p>\n\n\n\n This is why it is crucial for product managers to focus on predicting customer churn with precision so it can be managed effectively.<\/p>\n\n\n\n You can’t improve what you can’t measure, so be as meticulous as possible with your churn calculations.<\/p>\nRyan Law, VP of Content at Animalz<\/cite><\/blockquote>\n\n\n\n In order to compute the SaaS churn rate, the calculation is simple: subscription cancellations in a certain time period, divided by the total number of clients at the onset of that period.<\/p>\n\n\n\n Essentially, the churn rate of your customers is the proportion of users that discontinue using your product during a certain time period.<\/p>\n\n\n\n Despite this, our research into a multitude of individual SaaS firms has shown a great deal of intricacy hidden under the surface of this apparently straightforward calculation. Some companies have resorted to breaking down the customer churn into segments, cohorts, etc. while others are tracking trial users in their turnover, not appropriately counting seasonal clients.<\/p>\n\n\n\n Your customer turnover rate is a reflection of your company\u2019s overall performance, and you need to know how to improve it. In order to do this, you must not make your churn rate calculation too convoluted. If you go down this rabbit hole, you will end up making the process too complex which will distract you from the original objective \u2013 predicting customer churn with reasonable precision.<\/p>\n\n\n\n It is quite obvious that you are not the only SaaS organization that is attempting to reduce its customer churn. Generally, a SaaS customer doesn\u2019t stop requiring the product but goes to your competition. That\u2019s why a high churn rate usually indicates that your customers are leaving your SaaS product for an alternative. Here\u2019s how you can use the SaaS churn rate to compete with other firms.<\/p>\n\n\n\n If your present users depart, so does your monthly regular income. A firm\u2019s monthly recurring revenue (MRR) serves as a gauge of its long-term survival in SaaS. To avoid revenue losses, it is essential for product managers to prevent customer churn.<\/p>\n\n\n\n One solution to managing churn is to implement billing management software. Take the Chargebee SaaS billing<\/a> management system, for example \u2014 their service includes smart dunning management, which automatically sends customizable notifications to customers who have missed payments, reducing involuntary churn and increasing customer retention.<\/p>\n\n\n\n SaaS growth<\/a> may be fueled by net negative MRR churn, which is a common occurrence in the SaaS industry. Users that stay with your service for the long term make more money for you than those who cancel or downgrade, so you have a net positive churn rate. Net negative MRR churn is simpler to obtain if you have a low churn rate.<\/p>\n\n\n\n If you invest money to get new clients but they leave before you could even recoup your expenses, your business is going to be in trouble. Increased churn also balloons up your customer acquisition cost. You\u2019ll be able to regain your CAC from your users faster if you lower your customer churn rate as much as possible.<\/p>\n\n\n\n Customers\u2019 lifetime value (LTV) is a measure of a SaaS firm\u2019s success and long-term viability. Due to the drop in money that might have been generated, the LTV of a customer diminishes when your SaaS churn is high.<\/p>\n\n\n\n Now that you have an idea of what SaaS churn is and where you stand among the competitors, it\u2019s time to dive deeper into the customer churn strategy that we have successfully implemented. By the end of this chapter, you will have a clear idea of what is needed to say bye-bye to the high churn rate and drop it under 2%. Are you with me? Buckle up!<\/p>\n\n\n\n The Usersnap churn strategy consists of three steps (AAP): ASK, ACT, PREVENT.<\/p>\n\n\n <\/p>\n\n\n\n\n
What is churn and why it\u2019s a vital metric for product managers<\/h2>\n\n\n\n
How is SaaS churn calculated<\/h2>\n\n\n\n
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How do you compete with other SaaS<\/h2>\n\n\n\n
Monthly Recurring Revenue (MRR)<\/h3>\n\n\n\n
Net Negative MRR Churn<\/h3>\n\n\n\n
Customer Acquisition Cost (CAC)<\/h3>\n\n\n\n
Lifetime Value (LTV)<\/h3>\n\n\n\n
Usersnap\u2019s Strategy for Preventing Customer Churn<\/h2>\n\n\n\n
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