Customer churn in SaaS

Why and what is churn

Customer churn is when customers stop using your company’s product or service. That causes your metrics to drop.

At the same time, customer churn is what separates your self-funded SaaS startup from reaching 1M ARR - or a seed company from series A🌱

Today I want to talk about customer churn: as I was watching Netflix on my couch I wondered, why have I been a Netflix customer for almost 10 years?
How did I not churn?

The answer was simple: the service works well for what it provides, it’s priced correctly for what I am getting, and it has never let me down.

Curious as a cat, I wanted to figure out what other companies who face churn are doing in the SaaS space…

What I learned about churn

Actively churning means, to you business-owner:

  • You have to spend 5X more money acquiring a new customer to make up for your churn

  • Sacrificed time + money you spent to acquire that customer you just lost

  • Brand reputation goes down as the customers that left you are no longer “loyal”.

  • MRR/ARR goes down, that goes without saying….

✨ What can you do to reduce churn? Talk to customers and be flexible.

  • Improve customer service, most importantly, turnaround on requests. If customers are frustrated with you, that leads to churn.

  • Send updates and ask for feedback, regularly as you can prevent churn by simply being honest and human about the way you conduct your business.

  • Flexible pricing and Pausing subscription: When you offer good value for money that equates to customers not wanting to click that “cancel subscription” button.

My buddies at Abyssale.com ** have a great pause subscription funnel, that’s a great way to reduce churn as people can pause and then come back later - here’s what it looks like:

Finally, it’s a learning journey

You have to understand why people churn, the best way to do that is to analyze why they’re churning so don’t be shy offering exit interview vouchers and giftcards to those big churning accounts.

* According to research not done by me 👀
** Disclaimer: I am a good friend of the company hence why I know about it