Why do small customers churn more?

📈 The latest research reveals churn is a BIG problem for SMALL customers⤵

Most people are aware that small customers churn more than big customers. However, many do not realize just how severe and pervasive the difference is across companies and industries.

📊 The results from our latest research on company size and churn are nothing short of astonishing. 

Here are a few of the headline findings:

1️⃣ Small companies (1-100 employees) churn at more than 3 TIMES THE RATE compared to mid-market (100-500 employees) and enterprise (500+ employees) companies. 

2️⃣ Small companies are the dominant source of churn in SaaS/B2B, accounting for a disproportionately large share of customer churn, which significantly impacts long-term growth.

3️⃣ There is no significant difference in churn rates between mid-market and enterprise companies, indicating that this churn risk is associated only with the smallest customers.

The implications of these findings are sobering:

⦿ SaaS companies plagued by churn are increasingly abandoning their smallest customers to stabilize retention by moving up-market. But the competition for these high-value customers in many verticals has become fierce, making this a treacherous strategy.

⦿ Other companies are pursuing a "PLG" approach in hopes of increasing customer success rates while simultaneously solving for the brutal unit economics of low-value / high-churn small customers. However, many companies are discovering they are unprepared for the radical product transformations and other costly trade-offs required to make it work.

⦿ At a higher level, these findings threaten the credibility of the SaaS "land and expand" growth model and the valuations and investments that depend on it. 

⦿ Ultimately, these findings raise legitimate questions regarding the value of "Customer Success" in many companies where it has failed to solve the puzzle of consistently growing small customers at scale.

😊 THE GOOD NEWS:

Our research reveals that high churn for small customers is not inevitable. Some companies have achieved radical improvements in small customer retention by as much as 4x to 8x! 

The secret is implementing a Results-Led-Growth approach. This method doesn't wait for major product overhauls and can be done at any scale. Let me know if you'd like to learn about how these companies are making it work.