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> More importantly you can tell investors you have even more accounts than you do and your churn rate is very low. I know you're being a little facetious but i
by scott_w 2y ago
> More importantly you can tell investors you have even more accounts than you do and your churn rate is very low.
I know you're being a little facetious but it is actually a benefit. Many companies have implemented subscription pausing to reduce churn. The reason is pretty straightforward good business: it's easier to reactivate customers who lay dormant for 1 or 2 months than it is to let them churn and have to re-sell the product to them from scratch.
- jgalt212 2y agoFair enough, but as far as your investors are concerned you're changing the definition of churn. I'm sure if they ask, they'll be provided with "pause" metrics, but such data will never see the light of day in any marketing materials.
- AdamN 2y agoA thoughtful investor will be more interested in paid active users and cohort analysis of retention (in terms of actual usage) rather than subscription numbers/revenue in absolute terms. Engagement can always be monetized better in the future.
- dumbfounder 2y agoAnd they don’t usually ask for number of subscribers, but number of paid subscribers. Startups have played enough games with this that investors should be able to hone in on the right numbers.
- scott_w 2y agoCorrect, your churn would be artificially lowered, so you'd probably want to define a point where a "paused" subscription is effectively inactive and count that against churn. It would still show in other metrics, however, as you'd have monthly active users (or accounts), which would take a hit. You'd also see a drop in MRR when an account is paused. Bear in mind I'm assuming a business that wants clear, accurate metrics so the executive team know what actions to take; not simply a business looking to scam investors out of money ;-)
- vel0city 2y agoI've had places offer to just not bill for a few months while still allowing full access or offer some steep discounts in the workflow for cancelling in attempt to reduce churn.
- bitmasher9 2y agoIf you ever dealt with the business side of SaaS you know how important churn is. Growth = New Customers Acquisition - Churn. New customers are expensive for many businesses to get, they have marketing, sales, and promotion related expenses. It makes sense to spend money to reduce churn too, because it’s a cheaper way to boost your growth rate. If you offer deals to reduce churn, you need to focus on if those deals are just delaying inevitable churn or if they are actually winning back customers. Delaying churn is just a game of spending money to make your books look better for a quarter.
- scott_w 2y agoYes but it’s also a chance to convince the customer that you’re worth keeping around. Depending on your product, you might also have customers that dip in and out. Keeping them from churning, while sacrificing a little cash today, helps keep that customer from shopping around for alternatives, too.
- vel0city 2y agoAlso, in my experiences most of those services which offered free time or heavily discounted alternatives to cancelling tend to be things which have a pretty low cost per subscriber (e.g., news sites, simple applications, not much per-user storage).
- mercwear 2y agoI agree with your statement but your general calculation of growth is off imho, it should be: Growth = (New Customers Acquisition + Install Base Growth) - Churn This also assumes that churn = Customers that leave completely and those that downgrade plans IB growth can fuel business growth, especially during times of low new customer acquisition and or high to moderate churn
- deleted 2y ago[deleted]