Three most effective ways to measure churn and increase retention rate.

What are the three ways to Measure Churn?

Acquiring your customers is just a first step in the fruitful partnership process and retaining them is the next big thing and for that matter, it becomes extremely crucial to reduce the churn for any SaaS Business. Of course, churn is inevitable, but the better we analyze and measure churn, the better we will be at reducing the churn. So, how many ways can we actually measure churn? Well, as a matter of fact, there are three ways to it. You can have a look at the 7 types of SaaS Customer Churn you may not be aware of!

  1. User Churn
  2. Logo Churn
  3. MRR churn

User Churn

User Churn is straightforward, it is the measure of – How many users are there, how many users are not. Lost users or licenses within product instances in the month. Now, this method allows you to evaluate your subscription model to see whichever accounts are decreasing in usage that may be more likely to churn entirely in the future, and hence deserve immediate attention from your customer success team.

Logo Churn

Logo Churn or Account Churn is simply the number of accounts or the customers that churned over a given time period (week, month, quarter, etc). This method will allow you to see churn as a percentage of total accounts at a high level and can be compared over time to see larger trends.

MRR(Monthy Retention Rate) Churn

This is the most important way of measuring churn is the MRR churn, the lost MRR from customers who churned in the month. Tracking churn this way allows you to see the revenue impacted because of your churn rate to adjust forecasting, hiring, and long-term growth goals because of your churn rate. Here is a blog to understand the – 6 Exclusive Hacks Of CustomerSuccessBox To Accelerate Customer Retention For Your SaaS

Pro tip

So a lot of times you might see that, while in the same cohort, you’ve got some natural logo churn. But you’ve got better MRR retention, and this is not uncommon. In fact, if you ask me, this is the core secret to getting to negative churn, or getting to more than 100% MRR retention. 

For example, if you start the year with let’s say 100 accounts, paying you $10,000 In MRR, you are not going to keep from the same cohort, you’re never going to keep all the 100 accounts, there will always be natural churn, and because of businesses shutting downs and a whole bunch of natural reasons which are completely out of your control but to cover up for this, let’s say that you initially had a 100 account and now you’ve come down to 95 accounts, so to cover up for that loss of five accounts I will highly recommend you to work towards covering that up by upselling into the 95 existing accounts, and that is where you will see improved MRR. For example- you started with $100,000 in MRR but you might end up with 95 accounts out of 100 accounts, although with $110,00 to $120,000 in MRR within the same batch of 95, and that is the negative Churn secret. Check out the – F.A.I.R Framework to conduct Churn analysis

Bonus tip: If you’re looking for a Customer Success platform that can help you reach Negative churn, your search ends here-Customer Retention.

Payal is working in the Marketing Department at CustomerSuccessBox. She is majoring in Biotechnology and is casually curious about the SaaS economy and designing prosthetics. And in life, she readily preaches the idea of Carpe diem.