Account Contraction refers to the loss of revenue in existing customer accounts. This could be due to either of the following account change:
- Decrease in number of seats
- Higher discount on services in a particular month
- Subscription cancellation (in case of multiple subscriptions under the same account)
Account Contraction directly impacts the Monthly Recurring Revenue (MRR). In the subscription economy, the Net Growth rate is tied to expansion and contraction along with new MRR. The customer retention is as important as customer acquisition in SaaS world.
How to control Account Contraction?
- Understand the business objectives for which customer has bought the product/service
- Effective On-boarding
- Deliver constant value
- Engage the customer
- Help the customer in achieving the Desired Outcome