How to measure churn in non-SaaS environment?

Robbie

What is the best method for measuring churn in a marketplace model? Our customers can sign up to access our platform without paying a subscription fee. Our revenue then comes from a particular end user execution. A SaaS model may come as the company matures but need to work with what's in place at the time being. Would you simply tie it to non-usage? e.g. 60 days of no logins would be flagged as a churned customer?

Anita Toth

Hi @Rob S.

I hope this info is helpful to making sense of the best way to calculate things in your company.

Churn is calculated when a paying customer no longer pays. If your customers are signing up without paying anything and they leave, they are not a churned customer. They're a user who hasn't converted into a paying customer.

A metric like 'no logins within X period' might be helpful to determine activity and then create a sequence to help them re-activate.

You might also want to talk to some of these customers to find out why they don't stick around. Even interviewing 10 of them could help identify other possible routes to monetization besides the route you currently have.

Daryl Colborne

Rob,
It's not perfect but I leverage a specific line item in the contract to help me determine retention/churn for Enterprise accounts that make a perpetual purchase: Maintenance & Support for X Months.

Is there a Support line item as part of the purchase? If so, I'm sure there is a duration associated with that line item and the customer has to renew their Support with you. If the renewal opportunity does not result in a "Closed Won" scenario, that customer has churned. At least, this is the way I have defined it in a non-SaaS world

Not only will the "customer" be unable to receive Technical Support, but they will be unable to download the most recent code versions. While they can continue to use the product, the code version they currently sit on will eventually go end of life.

Ed Powers

Another suggestion, @Rob S, is RFM (Recency, Frequency, Monetary) analysis which is often used to measure retention in non-subscription businesses. It can be done from transaction data over a period of interest:

Andy Manning

Hi Rob!

I would argue it's not probably worth measuring churn in that way for that user model, what would be interesting for me would be number of end user executions against time per user type and other marketplace interactions, and yeah length of time since last login I would look at (and then segment depending on the results). What I'd be really looking for is clear indicators for the type of user and interactions that lead to them doing the end user interaction that gives you revenue, and whether you can increase this based on other factors like what type of users, what other interactions do they do etc. so you can try and increase the users and journeys that create revenue and forget about the rest!

Kevin Mitchell Leonor

What is your average lifecycle for your customers? If you determined that a customer is optimal if they enter your marketplace every 30 days, that could be a benchmark that triggers risk if they have not resulted in a sale. If you have determined that people that repurchase within 6 months, are likely to be long term customers, then use 6 months as a health indicator. If you have seen that people that do not enter the marketplace after 6 months from their last login tend to never return, then that should be your benchmark for non-SaaS churn.