Every lost customer is a lesson. Learn how to turn churn into growth.

Churn Rate Benchmarks: What's a Good Churn Rate in SaaS?

A practical guide with industry benchmarks, real-world examples, and proven strategies to reduce churn and drive retention.

The churn rate is more than another recurring revenue metric on your dashboard. For SaaS leaders, product managers, and executives, understanding churn rate is essential for scaling operations, maximizing customer retention, and improving business outcomes. If your churn rate increases, you lose more than just customers and money. It shows that you must enhance your value delivery, user experience, or operational efficiency. Keep churn low, and you show investors, teams, and the market your company can scale and consistently deliver value.

Salesforce shows how to reduce customer churn. They use a “land and expand” strategy, strong onboarding, and ongoing engagement. This approach helps maximize net revenue retention (NRR).

In this SaaS churn rate guide, I walk you through:

• Churn rate benchmarks for different industries.
• Frameworks to identify the causes of your customer churn and how you can boost retention
• Real-world tactics that known companies use for reducing churn rate
• Action steps you can take today to improve your churn rate

By the end, you'll understand how to track churn, identify risks early, and develop a customer retention strategy that drives growth.

Churn rate explained: why it matters, how it hurts, and the strategies that turn it into growth.

What Is Churn Rate? Why It's Vital for SaaS Companies and Subscription Businesses

Churn rate measures the percentage of customers — or recurring revenue — lost during a specific timeframe (monthly or annually). Unlike vanity metrics, churn rate offers a hard look at your business's health and customer satisfaction. SaaS companies, e-commerce platforms, and subscription services use churn rate as a leading performance indicator.

Essential Types of Churn Rate to Track

Measure multiple types of churn to get a holistic view of customer retention:

• Customer Churn (Logo Churn): Represents the percentage of lost customers.
• Example: Zoom tracks customer and revenue churn to monitor product performance and onboarding effectiveness.
• Revenue Churn: Represents the percentage of recurring revenue lost (cancellations and downgrades included).
• Netflix leverages this churn metric to gauge the impact of pricing and product changes on subscriber loyalty.
• Gross Revenue Retention (GRR): Shows recurring revenue from existing customers, excluding upsells/cross-sells.
• HubSpot relies on high GRR to demonstrate business model stability and healthy customer relationships.
• Net Revenue Retention (NRR): Combines GRR with expansion revenue, revealing how well you grow spend among current customers.
• Slack consistently posts NRR above 120%, showcasing successful customer expansion and retention.

Calculating Churn Rate: Clear Formulas

Consistency in calculation matters. Decide if you "count" a customer as lost when they cancel, at contract end, or service cessation. Then apply the following:

• Monthly Customer Churn Rate:

Churn Rate = (Ci Lost This Month ÷ Customers at Start of Month) × 100

• Annual Churn Rate:

Churn Rate = (Customers Lost This Year ÷ Customers at Start of Year) × 100

• Monthly Revenue Churn:

Revenue Churn = (MRR Lost from Existing Customers ÷ MRR at Start of Month) × 100

Retention Rate: The Flip Side of Churn

If your churn rate is 5%, you retain 95% of customers. Some teams, like Shopify, use both churn rate and retention rate metrics to motivate product development and set goals.

Why Churn Rate Matters: The Link Between Churn, Customer Retention, and Growth

A high churn rate is not just about losing money. It shows problems in your business model, customer experience, and growth potential. Tracking and improving churn rate directly impacts profitability, lifetime value, and investor confidence.

The REAL Business Costs of Customer Churn

• Lost Marketing and Sales Investment:
• Each departing customer means lost acquisition spend. Blue Apron had fast growth, but its churn was high. That made it hard to show long-term value in front of investors.
• Losiet Upselling & Referral Potential:
• Zendesk prioritizes customer health to drive repeat business and referrals, improving customer retention and long-term profitability.
• Operational Distraction:
• When you have a high churn rate, your team is scrambling. They are constantly in firefighting mode, stressed out, draining resources that are better used for innovation.
• Lower Company Valuation:
• Peloton suffered reputational damage and stock drops after underestimating the importance of churn rate in its growth phase.

Every churn is a data point — reviewing and implementing customer feedback can turn failures into future strengths.

Churn as a Leading KPI

High churn in Segmentment can trigger broader declines — spot these trends early. WSegmentment saw SMB churn spike; they rebuilt onboarding and support to maintain healthy retention rates across the portfolio.

Churn Rate Benchmarks by Industry

I always say: you must know where you have to go to go there. Here are the benchmarks you should look up in your business to set actionable targets for your churn rate performance.

🔑 Churn Rate Benchmarks by Industry

• 🏢 B2B Agencies/Services: ✅ Good: 10–15%, ❌ Bad: 20%+
  💡 Trust, “being different,” and service quality drive retention.
• 🛒 E-commerce / Subscription: ✅ Good: 20–30%, ❌ Bad: 35%+
  ⚡ Deliver value fast, crash the learning curve.
• 💳 Fintech / Financial: ✅ Good: 15–24%, ❌ Bad: 28%+
  🛡 Security, trust, and brand matter most for customer loyalty.
• 👩‍💻 SaaS (SMB / Mid-Market): ✅ Good: 18–22%, ❌ Bad: 25%+
  🎯 Personalized offers and staying competitive are key.
• 🏙 SaaS (Enterprise B2B), ✅ Good: 6–8%, ❌ Bad: 10%+
  🔒 High contract “stickiness,” but a few big losses can hurt.

Industries With High Churn Rate: Challenges & Lessons

Churn tends to be highest in categories with low switching costs, like streaming or food delivery apps. Hulu, the TV streaming platform, for example, experienced spikes in churn. Their strategy was to launch promotional campaigns and personalized retention offers.

B2B SaaS: Why Even Small Churn Increases Matter

Enterprise companies like Workday, usually have a lower annual churn rate because of their complex implementations and long-term contracts. Losing one important account can undo months of growth. That is why they invest in customer success and renewal management.

Diagnosing Churn Rate: Identifying Root Causes to Improve Customer Retention

Churn usually signals operational missteps. Solve upstream issues to convert losses into long-term gains.

1. Sales Process Issues: Poor Customer Fit

When sales quotas rise, so can churn — if teams chase the wrong profiles. Marketo improved retention by strengthening sales qualification and focusing on ideal customer profiles.

What to Monitor:

• Spikes in early churn after new campaigns
• Churn clusters tied to specific sales reps or tactics
• Customer complaints about onboarding or gaps between sales promises and delivery

2. Ineffective Onboarding Experiences

Atlassian used to dominate the market of IT project management tools, yet they had a rapid drop-off and churn. The customers found it challenging to know where to start; some were giving up. They rebuilt the onboarding experiences, adding a simple onboarding checklist to ensure users achieved their first “success moment” as quickly as possible.

Warning Signs:

• Surge in early support requests
• Delays in reaching “first value”
• Month-1 inactivity

3. Weak Product-Market Fit

Mailchimp failed to serve the mature SMBs. SMBs need more automation. Responding with robust APIs and integrations, they reclaimed lost segments and improved retention metrics.

Red Flags:

• Growing churn in specific accounts
• Feedback about missing features
• Uptick in competitive losses

4. Pricing and Plan Structure Mismatches

Spotify noticed that they were losing clients because of their rigid plans. So they introduced student and family subscriptions. This change boosted both retention and average revenue per account.

Indicators:

• Refund requests at renewals
• Downgrade or plan change requests
• Extention requestions

Five Customer Strategies to Reduce Churn Rate

When it comes to reducing the churn rate, you need to think multi-dimensionally. Here are top five retention strategies that I know as a fact to deliver sustainable improvements in B2B, fintech, SaaS, and e-commerce environments.

1. Effective Onboarding Processes

Early engagement drives lasting retention. That’s Slack’s onboarding strategy. Slack uses roadmaps to enable users to realize value fast — boosting customer retention rates and NRR.

Action Steps:

• Break onboarding into milestones with evident progress.
• Send prompts and guidance tailored to user behavior.
• Measure and improve “time to first value”

2. Communite Value Constantly

ServiceNow sends regular business reviews for its clients’ accounts. This simple yet powerful action reinforces the value and highlights tangible ROI, thereby reducing customer churn.

Action Steps:

• Educate your team to focus on customer outcomes
• Feature customer success stories in education campaigns
• Deliver personalized usage and ROI reports

3. Proactive Account Health Monitoring

Salesforce assigns health scores to its customers, so when an account is tagged as high-risk, it intervenes to minimize the SaaS churn rate.

Action steps:

• Install tools to monitor user logins and feature adoption.
• Automatically track client performance in the system and identify risk signals
• Deploy targeted “save” playbooks for risky accounts

4. Prevent Involuntary (Payment) Churn

Netflix uses multiple payment reminders and retries, slashing involuntary churn. Proactively address payment issues to keep more subscribers.

Action Steps:

• Set up automated dunning communications
• Expand payment method options globally

5. Increase Product “Stickiness”

Adobe resolved the churn rate wth product intelligence. They added creative tools to their SaaS platform to make it a vital component of daily workflows.

Ways to Boost Stickiness:

• Support multi-user and team-based use cases
• Build deep integrations with other leading SaaS tools
• Make it easy to execute the most used features.

Churn Rate Metrics

You have to monitor and analyze churn rates to drives better decisions at every level. Here is what the Must-Track Churn Rate Metrics:

• Gross Revenue Retention (GRR) — The percentage of recurring revenue retained; foundational for SaaS benchmarking.
• Net Revenue Retention (NRR) — Measures account expansion and contraction; a healthy NRR indicates loyal, growing customers.
• Cohort Analysis — Segment by signup date, channel, or region; use to pinpoint where churn starts.
• Time-to-Churn — Average account lifespan, great for identifying early warning signs.

Building an Actionable Churn Rate Dashboard

• Weekly: Check at-risk customers and open support issues.
• Monthly: Drill down churn by cohort, product, and acquisition source.
• Quarterly: Share churn improvement results with stakeholders and the board.

Churn Rate and Business Value: Financial Implications for SaaS & Beyond

A lower customer churn rate directly lifts profits, capital efficiency, and company valuation.

• Just 5% drop in SaaS churn rate by even 5% can unlock 25–95% profit.
• Loyal customers reduce support burden and drive organic growth.
• Maintaining a GRR above 90% significantly boosts SaaS valuations at IPO or acquisition.

Companies like Shopify invest heavily in customer success, enabling world-class retention, driving recurring revenue growth, and fostering brand resilience.

Key Takeaways: Your Action Plan for Churn Rate Reduction

Churn rate improvements translate into business health and growth. Here’s how executives should put churn insights to work:

• Set churn and retention targets informed by up-to-date industry benchmarks
• Align product, sales, and support teams around customer outcomes
• Tie incentive plans to retention
• Create a system to take feedback from churned customers for product growth and continuous process improvement.

Your Step-by-Step Churn Rate Reduction Action Plan

1. Measure your Churn Rate: Automate your system to track the churn rate accurately with as much data as possible.
2. Identify Hotspots: Segment churn by cohort, channel, and customer fit to expose root causes.
3. Test test test: Pilot onboarding, account management, or pricing changes. Measure the impact each month.
4. Make it a company-wide priority: Foster a company-wide focus on retention — report wins, share lessons, and evolve tactics.

Churn rate is the ultimate barometer of sustainable growth in SaaS and subscription-based businesses. Treat every customer who leaves as a valuable lesson. See every improvement as an opportunity to retain customers longer, increase value, and lead the industry.