Any subscription company that uses logo churn can turn out to be the best one. Why? Well, here’s the answer.
Logo churn is the percentage of customers who stop using a service within a specified time frame. It can be calculated in terms of numbers rather than a percentage.
Any SaaS company’s primary objective is to attract new clients. However, maintaining existing clients’ subscriptions is critical. So, these companies can calculate the number of consumers who quit or don’t renew their memberships during a specific time.
It is a helpful way to predict how quickly a SaaS or subscription business is losing clients. Your logo churn rate will provide specific information about how successfully you are serving your client’s needs.
Hence, you must take measures to guarantee clients are pleased with your product and subscription to maximize income. Regardless of how quickly you are engaging with your clients, a high churn rate may prevent you from seeing long-term sustainable growth.
No worries. There’s a secret to reducing logo churn. You can make the user experience joyful and simple. This is especially important if your software requires extensive training. You may also need this strategy when it is difficult to operate software in a short time.
Assuring effective customer use of your product will encourage them to renew their memberships. You can understand the formula of logo churn to incorporate into your business.
Logo churn can be expressed in the following manner:
The number of customers your business lost during a specific period is divided by the number of customers at the start of your business.
Here’s an example of how to put values in the formula.
If your company had 50 customers at the beginning of the month and 10 customers left by the end, you would divide 10 by 50. The answer would be ⅕. Now multiply the number by 100. So, logo churn would be 20%
To measure logo churn, understand the example written here.
SaaS Company X wants to calculate logo churn of one year.
X’s number of logos lost during the year is 6. At the same time, the number of logos at the beginning of the year being measured was 200
6/200 = 0.03
SaaS Company X had a logo churn of 3%.
It is essential to select the time frame that is most relevant to your company. This is often one year for B2B SaaS or subscription firms. That’s because the contract length they sell the most is one year.
These firms are unlikely to find much value in analyzing logo turnover on a monthly basis. This is because their consumers often make a cancellation decision once every 12 months.
Some B2B SaaS or subscription companies sell a month-to-month subscription. Customers in this situation decide whether to cancel” each month. Therefore, a one-month logo churn would be considered.
Clients consider their options when it comes to renewing their subscriptions in many SaaS businesses and reach a bizarre state of turmoil. They neither renew nor cancel when the renewal date approaches. This scenario increases with the renewal contract value.
Tip: You must not change the parameters of your criteria to obtain meaningful operational insight from any metric.
Logo churn is mostly used by SaaS companies who want to know how many customers are engaging with their website. For instance, there’s a company named “The Folks”. It’s a SaaS or subscription firm that wants to know how many customers they lost in the past year.
In such a situation, “The Folks” would use logo churn. Suppose the company had 1000 clients on the website in Jan 2023. However, there are only 800 clients using their services by the end of Dec 2023.
So, the company will use the logo churn formula. They’ll notice that they lost 20% of their total clients in 2023. The rate may be increased by 2024.
Hence, the logo churn method is useful for all businesses focusing on growing in a few years. Based on the results, companies can review their sales and marketing strategies. They can improve their products and offer features that satisfy their clients.