Role of Customer Success and Improvement of Churn Rate

2. Types and Calculation Methods of Exchange Rates

There are several types of exchange rates. Each one has a different criteria for determining the numerical value, so it is necessary to use them appropriately.

Customer Channel Rate

Customer churn rate is the cancellation rate based on the number of customers. Generally, when we talk about churn rate, it often refers to this one.

Calculation Method
Customer Churn Rate =
Number of Canceled Customers (ID) in Current Month ÷ Number of Contracted Customers (ID) at the End of Previous Month × 100

Customer churn rate represents the percentage of customers who have cancelled their service within a certain period of time, out of the total number of licenses and users. Therefore, the number of customers in this equation refers to the number of licenses and users.

For example, the calculation method when the number of licenses at the end of the previous month was 100 and the number of licenses cancelled in the current month was 2 is "2% = 2 ÷ 100 × 100". Since the customer churn rate is based on the number of customers, it will always be a positive value.

Cancellation will be considered not only when cancelling, but also when downgrading from a paid membership to a free membership. In SaaS, there may be changes in the number of IDs, so even if a customer who previously had 100 IDs reduces to 60 IDs, it will be treated as 40 IDs being cancelled.

Account Chain Rate

The account churn rate represents the percentage of companies or subscribers who have cancelled their services within a certain period of time. The calculation formula is the same as the customer churn rate, but the number of customers here refers to the number of companies or subscribers, so it is slightly different from the customer churn rate.

Calculation Method
Account Churn Rate =
Number of Canceled Customers in Current Month ÷ Number of Contracted Customers at End of Previous Month × 100

For example, if the number of companies at the end of the previous month was 100 and the number of companies that cancelled their accounts this month was 2, the account churn rate for this month would be "2% = 2 ÷ 100 × 100". Since the number of licenses and companies are different, the actual value reflected may vary.

The account churn rate is always a positive value, as it is based on the number of customers, just like the customer churn rate.

Revenue Chain Rate

The revenue churn rate is the cancellation rate based on revenue. It is also known as "MRR churn rate". For example, if there is a monthly plan of 10,000 yen and a plan of 5,000 yen, the cancellation of the former is considered equivalent to the cancellation of two of the latter. If there are multiple pricing plans, it is necessary to pay attention not only to the customer churn rate but also to the revenue churn rate.

Calculation Method
Revenue Chain Rate =
Lost Revenue due to Cancellations or Plan Changes in Current Month ÷ Monthly Revenue in Previous Month × 100

In other words, calculating the percentage of revenue decrease due to cancellations or plan changes from the previous month. A similar metric, known as "Net Revenue Chain Rate", also takes into account revenue increase from upselling and cross-selling.

Net Revenue Chain Rate =
(Lost Revenue for the Month - Revenue Gained from Upsells and Other Sources) ÷ Monthly Revenue from Previous Month × 100

3. Measures to Improve the Exchange Rate

Of course, the lower the churn rate, the better. However, the appropriate churn rate value will vary depending on various factors. These factors include price, growth rate, target, and scale. Nevertheless, it is generally considered that staying within 3% per month is a good benchmark. If the churn rate exceeds 3%, it may be necessary to make improvements. Therefore, it is important to conduct a churn analysis to determine the cause.

Cause analysis of churn (Identifying usage phases and behaviors that lead to churn)

In the case of B to B, there are reasons for withdrawal such as "I tried it, but it doesn't fit our company's situation." There are various reasons for customers to cancel, such as "switching to something easier to use, more convenient, or cheaper" or "it became a negative asset without expected results, and it is difficult to secure a budget to maintain it." Some of them may be difficult to handle, but by responding appropriately, it is possible to avoid cancellations in advance. Therefore, it is common to conduct a survey when canceling to find out the reason for cancellation.

"There are also reasons for cancellation such as "I tried using it but it was not helpful". This is a common issue when the person in charge of the new contract and the user in the field are different. To solve this issue, it is important to first understand the client company that will become the customer."

・What kind of business challenges do you have?
・How can your company's products and services be utilized to address these challenges?
・What benefits can be gained from this?

After understanding these things, we will accurately convey the content of our products and services to our customers and make sure they are fully aligned. By conducting prior alignment, it should become clear whether we can meet the customer's objectives and avoid any mismatches.

Establishing a Customer Success System

Many companies now focus on customer success.
Tools such as SFA and CRM can generate a lot of profit if used effectively. However, it also comes with a burden and cost of learning multiple functions and mastering efficient usage. In such situations, how the provider of products or services can support is crucial in affecting the churn rate. It is important to understand the customer, just like analyzing the cause of churn. It is necessary to correctly recognize the customer's goal and provide customer success-oriented support. By constantly monitoring the situation and providing proactive support for challenges, it should not only reduce churn rate, but also improve customer satisfaction and branding.