Types of churn and how to measure them

How can you utilize SaaS churn calculation to its fullest potential?

A crucial indicator for all subscription-based organizations is the churn rate. No matter how significant your recurring revenue is, a high churn rate will prevent you from recouping your client acquisition costs.

Read this article to find out more about the many kinds of churn you should track and how to use them to increase customer retention.

Too often, SaaS businesses fail to accurately calculate their churn rate - or even consider it at all. We tell you how to calculate churn correctly, how critical the metric is for your business, and how to reduce it.

Churn measures the number of customers or subscribers who stop using your product or service over a given period, usually expressed as the percentage of your total customer base.

Revenue churn

You can then calculate your revenue churn rate by dividing the number of customers who downgrade by the total number of customers.

Revenue churn is a metric that measures the percentage of revenue that is lost due to customer churn over a given period of time. It is calculated by dividing the total amount of revenue lost due to churn by the total amount of revenue generated during the period.

For example, if a SaaS company generated $100,000 in revenue during a month, and lost $10,000 in revenue due to customers churning during the same period, the revenue churn rate for that month would be 10%. This is calculated by dividing $10,000 (the total amount of revenue lost due to churn) by $100,000 (the total amount of revenue generated during the month), resulting in a revenue churn rate of 10%.

Revenue churn is an important metric for SaaS companies, as it provides a more detailed and nuanced view of customer retention than gross or net churn rate. By regularly tracking revenue churn, companies can get a better understanding of the impact of churn on their revenue and take action to prevent it. This can help to retain more customers and increase revenue, which is essential for the long-term success of the company.

Gross churn

Gross churn is a metric that measures the percentage of customers who cancel their subscription to a service over a given period of time. It is calculated by dividing the number of customers who churned during the period by the total number of customers at the beginning of the period.

For example, if a SaaS company had 100 customers at the beginning of the month, and 10 of those customers cancelled their subscription during the month, the gross churn rate for that month would be 10%. This is calculated by dividing 10 (the number of customers who churned) by 100 (the total number of customers at the beginning of the month), resulting in a gross churn rate of 10%.

Gross churn is an important metric for SaaS companies, as it provides a quick and easy way to measure the effectiveness of customer retention efforts. By regularly tracking gross churn, companies can identify trends and patterns, and take action to address any issues that are leading to customers churning. This can help to prevent churn and retain more customers, which is essential for the long-term success of the company.

Net churn

Net churn rate is a metric that measures the percentage of customers who cancel their subscription to a service over a given period of time, after taking into account any new customers who joined during the same period. It is calculated by dividing the number of customers who churned during the period by the average number of customers during the period.

For example, if a SaaS company had 100 customers at the beginning of the month, and 10 of those customers cancelled their subscription during the month, but the company also gained 15 new customers during the month, the net churn rate for that month would be 6.7%. This is calculated by dividing 10 (the number of customers who churned) by 115 (the average number of customers during the month, which is calculated by adding the number of customers at the beginning of the month and the number of new customers gained during the month and dividing by 2), resulting in a net churn rate of 6.7%.

Net churn rate is an important metric for SaaS companies, as it provides a more accurate picture of customer retention than gross churn rate. By regularly tracking net churn rate, companies can get a better understanding of their customer base and identify any issues that are leading to customers churning. This can help to prevent churn and retain more customers, which is essential for the long-term success of the company.

Are you tired of losing valuable customers? Clickout can help you to create personalized offboarding flows and make it easy to retain your customers at scale.

With our platform, you can create tailored offboarding flows for each of your customer audiences, based on their individual needs and preferences. This allows you to provide a personalized experience that is designed to retain your customers and prevent them from canceling their subscription.

Our platform also makes it easy to track customer churn and identify trends and patterns. This allows you to quickly identify any issues that are leading to customers churning and take action to prevent it.

In addition, our platform offers a range of features to help you retain your customers, including customizable email templates, in-app messaging, and automated follow-up reminders.

Don't let your customers slip away – try Clickout and start retaining more of your valuable customers.

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