Table of contents
Churn Rate
TL;DR
Churn Rate measures the percentage of customers who stop using your product over a given time period. It’s one of the most important CX health indicators in SaaS—high churn signals product gaps, onboarding issues, or value misalignment. Reducing churn isn't just about saving accounts—it's about improving the experience so customers want to stay. Tracking churn rate helps revenue, product, and CX teams align around one goal: keeping customers long enough to succeed.
What Is Churn Rate?
Churn Rate is the percentage of customers who leave your product or cancel their subscription within a specific timeframe. In SaaS, it’s a direct measure of how well your company retains its customer base—and often, how much value those customers actually get from your product.
While many CX metrics reflect satisfaction or engagement, churn rate tracks final outcomes. It’s binary: stay or leave.
There are two common types of churn to track:
Customer churn: the percentage of users or logos lost
Revenue churn: the percentage of recurring revenue lost (more relevant for variable pricing models)
Churn isn’t just a metric—it’s a lagging indicator of broken processes: poor onboarding, misaligned expectations, reactive support, or a product that no longer fits the customer’s needs. High churn erodes recurring revenue, drains acquisition ROI, and stalls growth.
Tracking churn rate allows CX, product, and RevOps teams to isolate patterns, intervene earlier, and build a more resilient customer base.
Why Churn Rate Matters in SaaS CX
Retention isn’t just a revenue lever—it’s the foundation of sustainable growth. While CSAT, CES, and NPS reveal customer sentiment, churn exposes the outcome. Here’s why it matters:
Signals Experience Gaps: Churn is often the final result of unresolved friction, misaligned value, or poor onboarding—making it a lagging but undeniable indicator of CX breakdowns.
Revenue-Critical Metric: Every customer lost is recurring revenue lost. Even small changes in churn rate can dramatically affect LTV, CAC payback, and growth velocity.
Aligns Teams Around Retention: Churn puts shared accountability on CX, Product, Success, and Sales to deliver value continuously—not just at acquisition.
Focuses Action on Root Causes: Measuring churn by segment, cohort, or journey stage highlights where your experience is failing—and where to intervene first.
How to Measure Churn Rate
Churn Rate measures the percentage of customers who stop doing business with you over a given time period. It's one of the most critical indicators of retention health in SaaS.
To calculate churn, start by identifying two values for the period you're analyzing:
- Customers at the beginning of the period
- Customers lost during that period
Then apply the standard formula:
Churn Rate =
(Customers Lost ÷ Customers at Start of Period) × 100
Example:
If you started the month with 500 customers and lost 25:
(25 ÷ 500) × 100 = 5% monthly churn
You can calculate churn rate monthly, quarterly, or annually—depending on your contract cycles and reporting cadence.
Strategic Ways to Measure Churn in SaaS
- By customer segment: Are small businesses churning faster than enterprise accounts?
- By lifecycle stage: Are newly onboarded customers dropping off early, or is churn happening closer to renewal?
- By product usage: Link churn with engagement metrics to identify early warning signs.
- By cohort: Compare churn across signup dates to evaluate the impact of product or CX changes.
Tracking churn this way helps you go beyond surface-level loss and start understanding why customers leave—and how to stop it.
Final Thought
Churn Rate doesn’t just measure exits—it reveals experience gaps. Reducing churn isn’t about retention for retention’s sake—it’s about delivering value consistently, solving customer problems, and building trust over time. In SaaS, high retention drives compound growth. And managing churn is where that growth begins.
FAQs
What’s a good churn rate for SaaS?
B2B SaaS companies typically aim for <5% monthly churn—or lower. Annual churn under 10% is considered strong.
What causes high churn?
Common causes include poor onboarding, limited product adoption, reactive support, and misalignment between sales promises and product delivery.
How is churn different from retention?
Churn measures loss; retention measures the percentage of customers who stay. They’re complementary metrics.
Can churn be negative?
Yes, in terms of Net Revenue Churn. If your expansion revenue exceeds lost revenue, your net churn can be negative—meaning revenue grew even with some customer loss.
Should I measure churn by logo or revenue?
Ideally both. Logo churn shows customer count loss; revenue churn reveals the financial impact.
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