Unusually High Churn Rate: Benchmarks and How to Fix?

First, Don't Panic. Not All Is Lost.

Churn is normal. Not all churn is bad churn. And not all is lost.

Netflix has a churn rate of 2%, while Apple TV+ has a churn rate of 8%.

It also varies industry-to-industry. Some industries like tobacco companies have very low churn because their product is addictive. On the other end of the spectrum, you might see AI companies with monthly churn as high as 20%!

Sometimes, churn is good. And it can be your core value prop. Like Hinge.

Unusually High Churn Rates Benchmarks

These metrics were originally sourced by Lenny's churn post. We've converted them to annual rates.

• For B2C SaaS: Anything over 46% annual churn is HIGH (~5%/month). Between 31% and 46% annual churn is GOOD, and less than 22% is GREAT. These include subscription products sold to consumers; e.g. Duolingo, Spotify, Grammarly.
• For B2B SMB + Mid-Market: Anything over 46% is HIGH (~5%/month). Between 26% and 46% is GOOD, and less than 17% is GREAT. These include products sold to companies with less than 1,000 employees and charge less than $1K per month for the average customer. Examples: Gusto, Intercom, Airtable, Asana
• For B2B Enterprise: Anything over 22% is HIGH (~2%/month). Between 11% and 22% is GOOD, and less than 6% is GREAT. These products are sold to companies with more than 1,000 employees, generally charging more than $5K per month for the average customer; e.g. Salesforce, Snowflake, Workday, ADP

Diagnose What's Causing Unusually High Churn

• Is it in month 1 or month 3?
• Are you losing more logos or more revenue?
• Is churn higher due to involuntary churn or is it due to voluntary churn?
• Is the churn rate trending up or down?
• How long do customers usually retain for? Do different cohorts perform differently or are they consistent?
• Are you looking at gross churn or net churn? AKA are you accounting for new expansions or new subscriptions?

Answering all these questions will give you a better idea where to focus.

For example, say you lose most users on their first month renewal. The solution to test here would be to create separate exit surveys for these two groups. And offer heavier offers (discounts, trial extensions, onboarding calls) to retain them.

If involuntary churn makes up 90% of your revenue, you might want to deploy dunning campaigns, precision retries, and failed payment walls.

If you're losing big customers instead of many small customers, your retention strategies are going to look incredibly different.

So, to summarize, step 1 is to look deeper into your churn metrics.

Churnkey has a free churn metrics product that integrates with your billing tool and answers all these questions for you automatically. Check it out and then ask our sales team for benchmarks right after if you'd like.

We also have helpful guides on how to read decline codes, retention cohorts, retention curves, involuntary vs voluntary churn, gross vs net churn and more.

Fixing Unusually High Churn For Businesses

Churn is a solved problem which means there are lots of solutions out there. You can use something in-house or set up Churnkey. Typically, your retention strategies depend on what's causing churn in the first place.

1. Exit Surveys

Why do people churn? How have those reasons trended in the past? When they switch to a competitor, which one do they switch to? Interview high AOV accounts. Learn more about setting up exit surveys.

2. Attract ICPs

Is your marketing attracting the right audience? You can do simple onboarding profiling to find out if you're attracting your ICPs or not.

3. Dunning Campaigns

Just tell people their payment failed. Set up incredible dunning campaigns in all its glory. Personalized with custom variables. Segmented based on plan type. Sent out in user's time zones. From multiple senders or local numbers.

4. Precision Retries

Customer intervention is not always necessary. Payment retries are very powerful on their own. Plus, they require almost zero engineering lift.

5. Failed Payment Wall

Dynamically block feature access while asking your customers to update their payment details directly inline.

6. Offer Customer Support

Offer dedicated support for churn. Have an account manager or customer support executive reach out based on the reasons you see in your churn dashboard. You might want to train your CS team to look for the decline code associated with a payment.

7. Easy Card Updates

No passwords, no logging in: let your customer enter a new card with just one click. If you're offering a special discount, ensure that that discount auto-applies.

8. Collect Partial Invoices

Offering installment options can ease the burden on customers facing temporary payment issues, such as insufficient funds or maxed-out cards.

9. Customer Risk Modelling

Be more strategic with your team's time: know when to engage your best customers, predict at-risk revenue, and track trends in feedback. Get ahead of your high churn with advanced churn propensity modelling.

10. Trial Extensions / Offers

Offer trial extensions, discounts, and other benefits to customers as they churn. Especially helpful if you have heavy M1 churn.

and lots more!

Fixing Unusually High Churn with Churnkey

Churnkey is a complete churn reduction platform. Our churn suite of products include:

1. Churn metrics
2. Omni channel dunning campaigns
3. Precision retries
4. Failed payment recovery wall
5. Customer health scoring
6. Cancel flows
7. Reactivations
8. Insights AI

and more!

We natively integrate with most billing providers and support companies at all stages of their growth. To get started, sign up for Churnkey or book a demo.

Thanks for reading and good luck managing churn! You've got this. 💪