Welcome to The 2020 Great Big List of SaaS Stats and Benchmarks!
SaaS business churn varies incredibly depending on their customer base. SMBs have a high churn rate and low contract cost. Large organizations have much higher retention. These deals involve larger contracts and in turn, more revenue.
The top growth activity for SaaS businesses is the acquisition of new customers at 89%, with renewals by customers in second place at 59% and upselling and add-on sales in third place at 46%.
When the numerator of your quick ratio is growing that means your revenue is growing. It’s very important important to keep increasing revenue to counter any MRR (Monthly Recurring Revenue) that is lost to churn.
The churn rate depends on the SaaS business scale and maturity. SaaS statistics show that companies making more than $10 million in revenue have an average churn rate of 8.5%; while those that make less than $10 million are likely to have a churn rate of a whopping 20%.
SaaS sales statistics show that the way the product is sold greatly impacts the churn rates. Field sales have noted the lowest churn rates of 11.8% which is below the median rate. Inside sales and Internet sales have seen churn rates of 14% each, while channel sales is the distribution method with the highest rate of 17%.
Two-thirds (or 32%) of the companies have reported churn rates of 5%, while the other 32% have experienced churn rates of 5-10%. 17% of the respondents had experienced churn rates of 10-15%, and almost one-fifth had churn rates beyond 15%.
The monthly retention rate for customers logging in to a mobile app is 41.5%. If your customers are logging in to a mobile app, there is a 4 times higher chance for retention compared to the ones that use a web interface.
The median cost to acquire $1 of annual recurring revenue (ARR) for a new customer is $1.32. Using upselling strategies with existing customers, the cost drops significantly to $0.71.
48% of respondents reported an average contract length of one year. 13% reported typical contracts were month-to-month, whilst 11% said their average contract length was three years or more.
Seat-based pricing is the most popular model but usage-based pricing comes as a close second with 38% of companies implementing it. Additionally, companies that use usage-based pricing would say that their price and value align.
According to the software industry statistics, SaaS companies are generally distancing themselves from the trend of offering discounts. Only 31% of companies offer a small discount while 38% provide an occasional discount of 10-25%.
Research from the Temkin Group found that companies that earn $1 billion annually can expect to gain, on average, an additional $775 million over 3 years of investing in customer experience (with SaaS companies standing to earn the most, at $1 billion).
Source: Higher Logic