Yes, you might have “negative churn” or “expansion revenue” where you lose some customers but the ones that stay pay you more over the course of the year.
That’s awesome! Expansion revenue is the best.
Unfortunately, in my experience, SaaS providers with high churn rates often don’t know how to effectively up-sell, cross-sell, or even down-sell so their churn rate is rarely offset by expansion revenue.
And the cost of acquiring more customers – especially when accurately figuring in all sales, marketing, on-boarding, and support costs – will frequently do more to offset what expansion revenue they have than the other way around.
As well, their pricing models are usually such that they don’t effectively move customers to higher pricing tiers and, in fact, often have non-value differentiators (like storage) separating pricing tiers so that customers game the system to avoid paying more (a major churn threat, by the way).
That said, assuming you’ve got up-sells and cross-sells that work and you have a pricing model that encourages customers to use more so they pay more to drive expansion revenue, how much better would it be if you could expand revenue over a larger customer-base by keeping more customers?
Right… so even when arguing for expansion revenue, I’m also arguing for lower churn.
sixteenventures.comGrowth rate accelerates in the expansion stage ($2.5M – $10M ARR)
Customer Segmentation analysis will help point out which are your most profitable segments
Investment in marketing automation tools is expected to reach $25 billion by the year 2023
For SaaS companies valued at over $1billion, the median amount of financing raised is $206million
More than 1/2 of SAAS companies increased their spending on customer retention last year
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Less than 20% of new revenue came from existing customers in the form of up-sell and expansion sales
The median cost for a SaaS company to acquire a dollar of new customer revenue is $1.18
The median annual unit churn for SAAS companies was 10% in 2016
After $10M in ARR, the median growth rate slows to just under 50%
In 2018, the global tech spending is forecast to amount to 3,212 billion U.S. dollars.