B2B vs. B2C SaaS Churn Rate: A Comprehensive Guide

April 4, 2023

SaaS churn can pose a significant threat to the success of both B2B and B2C companies.

When customers cancel their subscriptions, allow their renewal to expire, or downgrade their subscription plans, your business loses money.

The good news?

Churn can be avoided in any SaaS business.

That said, the B2B SaaS churn rate isn’t the same as that of B2C SaaS.

Besides, the strategies you use to minimize churn rate for B2B SaaS are different from that of B2C companies.

In this article, I’ll help you understand the difference between B2B SaaS and B2C churn rates.

Let’s get started.

What is Churn Rate?

Customer retention is crucial for the growth and continuity of your business.

Sure, some customers will eventually cancel their subscriptions or leave your business. However, it’s important to constantly keep your churn rate low.

So what is churn rate?

Churn rate represents the percentage of customers who stop using your solution within a given period.

A higher churn rate indicates that customers aren’t satisfied with your solution. The opposite is also true.

SaaS businesses use this metric to evaluate customer satisfaction and loyalty.

This is to help keep subscribers from canceling their subscriptions because that can lead to revenue loss—as there will be fewer transactions and the business will need to spend more money on marketing and advertising.

According a Younium guide on subscription management, brands can decease their customer churn rate with help of effective subscription management software.

With that said, let’s take a look at both B2B and B2C SaaS churn rates to help you get the differences.

B2B SaaS Churn Rate

B2B SaaS companies sell solutions directly to other businesses or decision-makers within other companies.

The low churn rate in B2B SaaS happens due to a myriad of factors including:

  • High prices. B2B SaaS products are usually complex and their prices are normally higher. This leads to a lengthy decision-making process by customers and lower churn rates.
  • Specialized accounting. B2B SaaS firms have specialized accounting departments that ensure timely payments of bills.

Even those without a specialized department use subscription management software like Younium to automate their subscription billing processes.

  • Annual subscriptions. B2B customers purchase software solutions or subscriptions for long-term use thus they purchase annual subscriptions which makes them less likely to churn.

That being said, B2B SaaS companies face churn-rated challenges that B2C don’t. They include:

  • Business failure. Businesses are prone to failure. And when this happens, their subscriptions are canceled. This is a threat to the B2B world considering that over 20% of startups fail within the first year.
  • Employee turnover. Employee turnover is inevitable because employees retire, get promoted or find jobs elsewhere. When this happens, the software solutions or services they were using are stopped.

B2C SaaS Churn Rates

B2C SaaS companies sell products or services directly to customers for personal use.

According to the Recurly research mentioned above, B2C SaaS churn rate averages at 6.77%.

The higher churn rate happens due to a myriad of factors including:

  • Lower prices. Lower prices make customers make impulsive purchases but in the long run, this may result in massive unsubscriptions by customers.
  • Simplicity of making a purchase. Due to the simplicity of B2C SaaS products, people are more likely to subscribe to a solution without approval from the boss. This can also lead to impulsive purchases and unsubscriptions.
  • B2C companies sell in higher volumes. This leads to higher churn rates as customers are more likely to buy in bulk.

B2C SaaS companies also face unique churn challenges unlike B2B SaaS including:

  • High competition. The B2C SaaS consumer market is bigger than for B2B SaaS which leads to high competition for customers.
  • B2C SaaS products are focused on entertainment and learning. This includes Spotify, Netflix, and others. Customers don’t persistently need these products thus they subscribe and unsubscribe.
  • Involuntary churn. B2C customers are prone to face challenges such as expired debit card or credit card which results in involuntary churn.

How to Reduce B2B and B2C SaaS Churn Rates

To prevent customers from churning, you need to find out the reason why customers are unsubscribing or leaving your brand. You manage your subscriptions effectively with the help of a best software.

Attrock prepare a detail guide on best subscription management software to help beginners choose a suitable subscription management solution.

Here are best actionable tips to reduce churn rates for your B2B and B2C SaaS business:

  • Have an organized and efficient customer onboarding
  • Offer long-term pricing, particularly annual subscriptions.
  • Demonstrate the most valuable features of your product or solution.
  • Make customer engagement an ongoing process by constantly improving user experience and solving customer complaints.
  • Invest in a robust subscription management software solution.
  • Create a better customer offboarding process to avoid friction with customers who are leaving.

Conclusion

Whether you run a B2B or B2C company, you should never ignore churn rate. When customers churn, your business loses opportunities to make money and grow.

It’s also costly for your business because you will need to set aside some budget to gain new customers.

Since you understand the difference between B2B vs. B2C SaaS churn rates, work on lowering your churn rate.

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Author Bio - Reena Aggarwal

Reena is Director of Operations and Sales at Attrock, a result-driven digital marketing company. With 10+ years of sales and operations experience in the field of e-commerce and digital marketing, she is quite an industry expert. She is a people person and considers the human resources as the most valuable asset of a company. In her free time, you would find her spending quality time with her brilliant, almost teenage daughter and watching her grow in this digital, fast-paced era.

 

Social connects: LinkedIn, Twitter

 

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Carlos Diaz
I believe in making the impossible possible because there’s no fun in giving up. Travel, design, fashion and current trends in the field of industrial construction are topics that I enjoy writing about.

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