Tracking customer churn rate is one of the most important metrics for your SaaS business. And for obvious reasons, because lost customers equal a direct loss of revenue.
However, customer attrition can actually cost you even more than just their individual worth. Studies have shown that that the customer acquisition cost (CAC) of earning a brand new customer versus keeping an old customer can be up to 25 times more expensive! This makes sense when you think about all the resources that go toward email campaigns, social outreach, keyword bidding, events, and all the other channels that target a new audience. Plus the cost of sales if you have a sales team.
At its core, the basic churn equation is pretty simple. Just take the number of churned customers for a period of time, divide it by your total number of customers, and you’ll get your churn percentage rate for that period. Though this number is good to know as a baseline, tracking customer attrition gets a lot more complicated as your business grows. You’ll need to get into more complex modeling to include factors such as seasonal business changes or tracking different customer segments.
The good news is that you don’t have to be a data analyst in order to understand the underlying causes that contribute to customer churn and what you can change in your business to reduce this number. Some of the most common reasons customers churn include:
- The product didn’t meet the customer’s needs
- The product wasn’t a good fit to begin with, usually as a result of inaccurate audience targeting
- There was a lack of customer touchpoints and they either forgot about your business or didn’t feel excited about it anymore
- Competitors had something better to offer, whether it’s the price, quality, or another factor
- Poor customer service turned a customer off the product entirely