Churn in SaaS companies: A critical challenge for long-term growth

For years, churn has been one of the biggest challenges in the SaaS industry, and it remains an issue that demands attention at the highest management level. When we measure and analyse the reasons behind churn in SaaS companies, it becomes clear that the very foundation of any subscription-based model relies on loyalty, recurring revenue, and lasting customer relationships. Yet this is still where many organisations fall behind, struggling to retain the customers they have worked so hard to win.

Focus on new customers vs. customer loyalty 

Reports show that winning new business is significantly more expensive than retaining existing customers. Despite this, many SaaS organisations still place most of their attention on customer acquisition, while long-term, strategic work on loyalty and customer experience often takes a back seat. When that happens, companies risk losing sight of the bigger picture of customer relationships, which not only intensifies the churn challenge but also creates inefficiencies that can impact results far into the future.

To understand the true impact of churn, it’s essential to look beyond short-term numbers and identify the underlying factors that drive customer loss.

The true impact of churn and its financial consequences 

Churn has long been a central challenge for the SaaS sector, with clear consequences for both profitability and future growth opportunities. While most in the industry are aware of churn’s impact, identifying the underlying causes and acting effectively on them is far more difficult. Often, the churn rate only reveals the surface of a deeper issue, where multiple factors interact and affect the company’s results over the long term.

When a customer leaves, it’s not just a single revenue loss; the entire potential lifetime value disappears, particularly in B2B, where each customer plays a crucial role in long-term business development. Every lost customer also means resources must be reallocated to fill the gap, generating hidden costs across sales, marketing, and onboarding new clients. These costs directly affect cash flow and reduce the potential for organic growth. For established SaaS companies, it is well known that the cumulative effect of churn can undermine both strategic initiatives and long-term market position.

Why do customers leave? 

Customer churn is rarely a random occurrence. It is usually the result of several factors throughout the customer journey. Often, it stems from experiences where the customer does not perceive sufficient value, or where communication around the product’s potential has fallen short.

• Weak onboarding: Without a clear and effective start, customers may never experience the “aha moment” and are likely to leave quickly.
• Unclear communication of value and product development: If customers are not regularly reminded of the product’s benefits, their interest can fade.
• Reactive support: When customer issues are not handled proactively, frustration builds, increasing the risk of churn.

Analysing why churn occurs from the customer’s perspective is essential to identify the root causes, whether they relate to the product, customer support, pricing, or competitive factors.

The customer journey – the heart of loyalty and retention 

A key theme in effective churn management is understanding the customer journey. Churn almost always results from gaps or missed opportunities during critical moments of a customer’s interaction with the company. When onboarding, product usage, training, and follow-up are not seamless, the customer relationship is at risk.

• Onboarding process: If the initial experience is too complicated or lacks clear guidance, the relationship can weaken early on.
• The first 90 days: This is a crucial period where support and attention can make a real difference.
• Proactive communication: Customers expect their needs and questions to be addressed before they develop into problems.

A deep understanding of the customer journey makes it possible to identify current and future risk points and to use data for continuous improvements at every stage. 

Customer insights and culture form the foundation of competitive loyalty 

To truly reduce customer churn and build long-term loyalty, organisations need more than processes and tools. It is about listening to customers, understanding their needs, and consistently collecting genuine, actionable feedback. The most successful SaaS companies work systematically with customer dialogues and involve the entire organisation in interpreting and acting on these insights.

• Create structures and routines for regular feedback from relevant customer segments.
  
• Ensure the customer’s voice reaches decision-makers and product teams.
  
• Develop a culture where the whole organisation is customer-focused and views the customer journey as a shared responsibility.

Real improvements only occur when customer insights are integrated into daily decision-making, and the company culture reflects a genuine focus on the customer. This is how churn can be reduced sustainably, while strengthening competitive advantage.  

Read more about how tech companies overcome feedback and data challenges in this article.

The importance of measuring and understanding churn

Most SaaS companies have a basic grasp of their churn rate. However, to truly understand and manage the issue, a deeper approach is required, one that takes a holistic view of the health and loyalty of the entire customer base.

• Net Revenue Retention (NRR) provides insight into the company’s ability to grow without acquiring new customers.
• Customer Health Score incorporates usage, satisfaction, and engagement over time.
• Segmented churn analysis identifies whether specific customer groups are particularly affected.

Analysis at this level enables data-driven actions, better prioritisation of resources, and a clearer understanding of what genuinely creates value in customer relationships.

Churn as a strategic challenge in SaaS companies 

The question shouldn’t just be, “How do we reduce churn?” but rather, “What mechanisms drive churn, and what does this tell us about our business model, customer experience, and organisation?” Customer churn is a cross-functional issue that affects the entire company, from product development to support and leadership.

Delving into churn means being willing to ask the difficult questions:

• Is the customer receiving enough value, quickly enough?
  
• Does the customer understand the value the product provides over time?
  
• Are we focusing sufficiently on the customer’s real challenges and needs?
  
• How can we build long-term, loyal relationships rather than just transactional ones?

By addressing these questions across the organisation, you can develop a more customer-centric approach. It is only when loyalty and experience receive equal attention to new customer acquisition that the true potential of the SaaS model is unlocked.

Why the customer journey and loyalty are becoming increasingly important 

As competition intensifies and the SaaS market matures, the importance of building loyal, long-term customer relationships is increasing. New technologies offer opportunities for deeper insights, proactive measures, and increasingly personalised experiences. Yet the fundamental challenge remains: companies must understand their customers’ real needs and act on this knowledge. Churn remains one of the most critical business challenges for SaaS companies. Organisations that are able to effectively interpret, analyse, and act on churn data are best placed to achieve sustainable growth, reduce risk, and strengthen their competitive position over time.

By viewing churn as an opportunity to understand and improve customer relationships, rather than an isolated problem to “solve”, SaaS companies lay the foundation for a strong, loyal customer base and sustainable business development.

Read more about Netigate CX in our brochure: Netigate CX: Leading solution in customer experience management