Yesterday’s article gave birth to a question from a B2B SaaS. It initially started with “What’s considered decent/good/great for monthly avg. churn for a B2B SaaS company?” and the answer for that is hard to be given. I can say “best is 0%” and you’ll sigh.

Depending on company and industry, it varies.

The Conversation

Follow-up from the said SaaS business: Saw your post and I agree. VoCs don’t really work if you’re not looking for their emotions associated with features.

We’re building a B2B supply chain integrity tool (sell to all segments of multiple markets – SMB, Enteprise, law enforcement, etc in luxury and consumer goods space). Our churn for 2018 was roughly 0.8% avg monthly, despite increasing costs [by] 10x. I feel there’s some stickiness and value there. But [it’s] hard to benchmark as we don’t have similar, direct competitors, which is what led to my generic question on churn. Thoughts?

My answer:

There definitely is some stickiness and value if only 0.8% churned after increasing costs by 10x. It means, as you’ve confirmed it later in your message, that they don’t really have an easy alternative and there is a lot of value they’re getting. So much that the previous price of yours was a bargain to them.

Probably you thought of this but they (these businesses) must be making a lot of money by using your product. If I’m making $10,000 more by using your product, I won’t really care if you’re charging me $1 or $10.

Listen, if you don’t have any benchmark because of no direct competition, that’s a luxury for you. Hopefully you won’t know otherwise.

8% matters in context. If we’re talking 25 customers and only 2 of them leave, well too bad, shit happens. Sometimes companies just go out of business and that’s churn as well — nothing that can be controlled by you.

If we’re talking 25000 customers and 2000 leave, that’s another story. I assume you’re on the lower end given that it’s B2B.

Netflix and Their User Churn

They’ve increased their prices by around 12% the other day. Apparently, 8% of their subscribers churned (i.e. unsubscribed). Let’s do the math here:

The price from the lowest tier is going up $1, from 7.99 to 8.99. That is about a 12.51% increase.

If the price goes up by 12.51% and you lose 8% of your customers, you are making 112.51% as much per account off of 92% as many accounts.

1.1251 * 0.92 = 1.035092 — that means this: Netflix is now making 3.5092% more money. Their revenue in 2017 was 11.7 billion USD. A 3% increase means…

$410.5M.

———

Naturally that 8% number was taken out of someone’s ass and doesn’t mean anything. Apparently there are 148.46 million Netflix subscribers — the study claims that eventually 11.8 million people will unsubscribe.

The Bottom Line

It varies by industry, user base and company size. There’s no cookie cutter answer. Anyone who claims that is just trying to look like a user churn PhD.

About Ch Daniel

I run chagency, an experiences design agency that specialises on helping tech CEOs reduce user churn. We believe experiences are not only the reason why users choose not to leave but also what generates word of mouth. We’re building a credo around this belief.

If I’ve brought you any kind of value, follow me and get in touch here: LinkedIn | Twitter | Email

I’ve also created an infinitely-valuable app for sneaker/fashion enthusiasts called Legit Check that impacted hundreds of thousands over millions of times – check it out at chdaniel.com/app

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Illustration Credit: Character Lab