1. Introduction
Not all churn is created equal.
Losing one $10,000 customer isn’t the same as losing ten $1,000 users. While both result in the same monetary loss, they tell different stories. This is where understanding the difference between revenue churn and customer churn becomes essential for any SaaS operator, especially as your company scales across customer segments.
In this guide, we’ll explore:
- The difference between revenue churn and customer churn
- Why each matters depending on your stage, model, and GTM strategy
- Real-world examples from top SaaS companies
- How to measure, track, and reduce each type
2. What is Revenue Churn vs. Customer Churn?
Customer Churn
Customer churn is the percentage of customers who cancel or stop using your product during a given period.
Formula:
Customer Churn = (Customers Lost ÷ Customers at Start of Period) × 100
For example:
If you had 1,000 customers and lost 100, your customer churn is 10%.
Revenue Churn (aka Dollar Churn or Gross Revenue Churn)
Revenue churn refers to the percentage of recurring revenue lost from existing customers in a given period, excluding new customers.
Formula:
Revenue Churn = (MRR Lost from Churned + Downgraded Customers ÷ MRR at Start of Period) × 100
For example:
Start MRR = $100,000
Lost MRR = $12,000
Revenue Churn = 12%
Key Difference:
- Customer churn = Volume-based (number of users lost)
- Revenue churn = Value-based (dollars lost)
This distinction matters – especially when your customer base is unevenly distributed across different ACVs.
3. Why It Matters
a) Revenue Churn Reflects Dollar Leakage
Even with high new customer acquisition, if your revenue churn is high, your net growth can still be flat or negative. Investors care more about Net Revenue Retention (NRR) and Gross Revenue Retention (GRR) than just raw signup numbers.
b) Customer Churn = Early Warning Signal
If your churn spikes in customer count – especially in SMBs or freemium users – this often signals product onboarding issues, misalignment with user needs, or UX problems.
c) Strategic Focus by Model
- PLG/freemium SaaS: Customer churn matters more
- Enterprise SaaS: Revenue churn is the more critical indicator
- Usage-based SaaS: Both metrics are essential as usage drop ≠ customer exit
d) Value vs Volume Impact
Losing one $100K customer can hurt more than losing 10 $1K customers. Revenue churn tells you the magnitude of damage, not just the frequency.
4. How to Measure Each
Customer Churn Formula
Customer Churn = (Customers Lost ÷ Total Customers at Start of Period) × 100
Example:
- Start with 1,000 customers
- Lose 100
- Churn = 10%
Revenue Churn Formula
Revenue Churn = (MRR Lost from Downgrades & Churn ÷ MRR at Start of Period) × 100
Example:
- Start MRR = $100,000
- Lost MRR = $12,000
- Revenue Churn = 12%
Pro Tip: Revenue churn excludes expansion or upsell MRR. To include those, use Net Revenue Retention (NRR) instead.
5. Real-World Examples
Example 1: Zoom – SMB vs Enterprise Churn
In 2020, Zoom saw explosive growth due to COVID-19 and WFH adoption. Millions of SMB and free-tier users joined.
But by mid-2021:
- SMB customer churn rose sharply as demand normalized
- Enterprise revenue churn remained below 4%
Why? Zoom focused on expanding contracts in enterprises and avoided relying solely on volume.
Example 2: Twilio – Usage-Based Revenue Churn
Twilio’s usage-based pricing meant customers could shrink their spend without leaving. In 2023:
- Customer churn remained stable
- Revenue churn increased due to usage decline
This highlighted a key insight: stable logos don’t always mean stable revenue.
6. When to Focus on Which Metric
By Growth Stage
| Stage | Focus |
|---|---|
| 0–$1M ARR | Customer churn (early PMF signals) |
| $1M–$10M ARR | Both metrics — to ensure onboarding and monetization scale |
| $10M+ ARR | Revenue churn + NRR — core for retention and profitability |
By Business Type
| Business Model | Focus Metric |
|---|---|
| PLG / Freemium | Customer Churn |
| Enterprise SaaS | Revenue Churn |
| Usage-Based SaaS | Both — logos vs spend contraction |
7. Common Mistakes
1. Thinking All Churn Is Equal
Losing 50 $20 users is not as damaging as losing one $20,000 contract. Revenue churn captures value at risk.
2. Not Segmenting Churn
Track churn by:
- Plan/tier
- Acquisition channel
- Industry
- Cohort age (e.g., month of signup)
3. Mixing Up Metrics
- Revenue churn ≠ Net Revenue Retention
- NRR = (Starting MRR + Expansion – Churn) ÷ Starting MRR
4. Averaging Across Cohorts
Never combine churn rates across very different segments. SMB churn will look very different from enterprise.
8. How to Reduce Churn
Reducing Customer Churn
- Use guided onboarding (e.g., Appcues, Userpilot)
- Highlight activation milestones with tooltips
- Launch win-back email campaigns for dormant users
- Offer pause plans or usage-based billing
Reducing Revenue Churn
- Move to annual billing (lock-in revenue)
- Set up QBRs for $10K+ accounts
- Preempt downgrades using health scores (based on NPS, usage, etc.)
- Launch add-ons or premium features to upsell
Tools to Use
- ChurnZero / Vitally: CS automation, risk scoring
- ProfitWell Retain: Dunning, intelligent retry logic
- Mixpanel / Amplitude: Track pre-churn behavior
- Pendo / Appcues: Drive feature adoption
9. Advanced Tips
Revenue Churn Benchmarks (2024)
| Segment | Monthly Revenue Churn |
|---|---|
| SMB SaaS | 5–7% |
| Mid-Market | 1–3% |
| Enterprise | <1% |
(Source: OpenView 2024 Benchmarks)
Churn Types
- Voluntary Churn: Customer explicitly cancels
- Involuntary Churn: Payment failure (e.g., expired credit cards)
- Silent Churn: Usage drops significantly, but customer doesn’t cancel (visible in revenue churn)
Pair With:
- Net Revenue Retention (NRR): Best overall retention health metric
- Expansion MRR: If expansions > churn → you’re growing
Insider Tip:
“Don’t just reduce churn – understand it. Use exit surveys, NPS feedback, and account notes to drive churn analysis.” – Casey Winters
10. Related Terms
- Gross Revenue Retention (GRR): % of revenue retained before upsells
- Net Revenue Retention (NRR): Includes upsell/expansion
- Customer Lifetime Value (LTV): Impacted by both churn types
- Activation Rate: Lower activation leads to higher early churn
- Customer Health Score: Predictive of both churns
- Usage-Based Pricing: Increases risk of revenue churn
11. Tools & Sources
SaaS Tools:
- ChartMogul / Baremetrics: Cohort-based churn
- ProfitWell Retain: Churn recovery & insights
- Gainsight / Vitally: CS playbooks & workflows
- Mixpanel / Amplitude: Pre-churn activity tracking
- Pendo / Userpilot: Onboarding and adoption nudges
Benchmarks & Guides:
- OpenView SaaS Benchmarks 2024
- Reforge Retention Playbooks (Elena Verna)
- Bessemer’s SaaS Metrics Bible
- Lenny’s Newsletter (Churn deep dives)
- a16z Guide to NRR and Retention Metrics
12. Summary Table
| Metric | Focus | Best For | Red Flag When… |
|---|---|---|---|
| Customer Churn | % of users lost | Freemium, PLG | >10% monthly |
| Revenue Churn | % of revenue lost | Enterprise, Usage-based | >3–5% monthly |
13. Final Thought
Churn isn’t just a number – it’s a story about your product and your customers.
Ask:
- Are we losing our highest-paying users or just free-tier noise?
- Are customers shrinking in usage before leaving?
- Are we solving churn at the source – or just tracking it?
The best SaaS companies don’t just measure churn – they build to prevent it.
“Don’t track churn for reporting. Track it for learning.”