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The Crucial Role of Retention in Subscription Models
For software-as-a-service (SaaS) startups, mobile apps, and subscription box companies, customer retention is the ultimate driver of compound growth. It is far more cost-effective to retain an existing subscriber than to acquire a new one.
Customer churn rate measures the percentage of your customer base who cancel their subscription or stop buying during a given period. High customer churn erodes marketing efforts, creating a "leaky bucket" where you must constantly acquire new users just to remain flat.
To calculate customer churn rate, divide the number of customers lost during a period by the total number of customers you had at the start of that period. A healthy monthly churn rate for SaaS companies is typically under 1.5%.