40+ Terms Defined

SaaS Churn & Retention Glossary

Every metric, acronym, and concept you need to understand churn — in plain English.

A C D E G I L M N O P Q R S T V W

41 terms

Covering churn metrics, retention strategies, and SaaS fundamentals

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A

Activation Rate

The percentage of new signups who complete a key milestone (or set of milestones) that correlates with long-term retention. This milestone is often called the "aha moment" — the point where the user first experiences real value from your product. A low activation rate is one of the strongest leading indicators of future churn.

Activation Rate = (Users who hit key milestone / Total signups) x 100
Why it matters: Improving activation is often the highest-leverage churn reduction move. Users who never activate are almost guaranteed to churn. See the activation milestones experiment.

Annual Churn Rate

The percentage of customers or revenue lost over a full year. It is not simply monthly churn rate times 12 — the correct formula compounds monthly churn. A 5% monthly churn rate actually translates to about 46% annual churn, not 60%. This compounding effect is why even small improvements in monthly churn have outsized annual impact.

Annual Churn Rate = 1 - (1 - Monthly Churn Rate)^12
Why it matters: Annual churn is the number that determines whether your business is growing or dying. Use the churn rate calculator to convert between monthly and annual rates instantly.

Annual Recurring Revenue (ARR)

The annualized value of your recurring subscription revenue. ARR is simply MRR multiplied by 12. It is the standard top-line metric for SaaS companies, especially those selling annual contracts. Investors use ARR milestones ($1M ARR, $10M ARR) as key growth benchmarks.

ARR = MRR x 12
Why it matters: ARR growth only tells half the story — you also need to know how much of it is leaking out via churn. Model the impact with the MRR Churn Impact Simulator.

Average Revenue Per Account (ARPA)

The average monthly recurring revenue generated per customer account. Sometimes called ARPU (Average Revenue Per User), though ARPA is more precise for B2B where one account may have many users. ARPA is a critical input for calculating customer lifetime value.

ARPA = Total MRR / Total number of active customers
Why it matters: Higher ARPA means each churned customer costs you more revenue. Companies with high ARPA can justify investing more in proactive retention and customer success.
C

Churn Rate

The percentage of customers who cancel their subscription during a given time period. Churn rate is the single most important metric for subscription businesses. It can be measured as customer churn (logo churn) or revenue churn (MRR churn), and the two often tell very different stories. A "good" churn rate depends heavily on your segment, pricing, and business model.

Monthly Churn Rate = (Customers lost during month / Customers at start of month) x 100
Why it matters: Everything on this site exists because churn rate is the silent killer of SaaS growth. Calculate yours with the churn rate calculator, then see how you stack up on the benchmarks page.

Cohort Analysis

A method of analyzing customer behavior by grouping them into cohorts — typically by signup month, acquisition channel, or plan type — and tracking retention over time. Cohort analysis reveals whether your retention is actually improving with product changes, or if blended metrics are hiding problems. It is one of the most powerful analytical tools for understanding churn.

Why it matters: Without cohort analysis, you are flying blind. A blended churn rate can look stable while newer cohorts churn at double the rate of older ones. Build cohort tracking into your churn dashboard.

Contraction MRR

The recurring revenue lost when existing customers downgrade to a cheaper plan or reduce their usage/seats, without fully cancelling. Contraction MRR is a form of revenue churn that is often overlooked because the customer technically stays. But it signals dissatisfaction and is frequently a precursor to full cancellation.

Contraction MRR = Sum of MRR decreases from existing customers (excludes full cancellations)
Why it matters: High contraction MRR is an early warning sign. Customers downgrading today often cancel tomorrow. Learn how to prevent it with the downgrade prevention experiment.

Customer Acquisition Cost (CAC)

The total cost of acquiring a new customer, including all sales and marketing expenses divided by the number of new customers acquired. CAC becomes critically relevant to churn because when customers churn before you recoup their acquisition cost, you lose money on every one of them.

CAC = Total sales and marketing spend / Number of new customers acquired
Why it matters: Reducing churn is often cheaper and more effective than reducing CAC. Every retained customer was already acquired — keeping them means the acquisition cost is spread over a longer lifetime.

Customer Health Score

A composite metric that combines multiple signals — product usage, support interactions, NPS responses, payment history, feature adoption — into a single score predicting how likely a customer is to churn or renew. Health scores turn reactive firefighting into proactive retention by flagging at-risk accounts before they reach the cancellation page.

Why it matters: The best retention teams don't wait for customers to cancel — they intervene early. Follow the health score monitoring experiment to build your own.

Customer Lifetime Value (CLV / LTV)

The total revenue you can expect from a single customer account over the entire duration of their relationship with your business. LTV is directly tied to churn: lower churn means longer customer lifetimes, which means higher LTV. It is arguably the most important number in SaaS economics.

LTV = ARPA / Monthly Churn Rate
Example: $100 ARPA / 5% churn = $2,000 LTV
Why it matters: Cutting churn in half literally doubles your LTV. That is why retention is the most efficient growth lever in SaaS. See the math in the MRR simulator.
D

DAU/MAU Ratio

The ratio of daily active users to monthly active users, expressed as a percentage. It measures product "stickiness" — how often users come back. A DAU/MAU of 50% means the average user is active about 15 days per month. Social apps like Facebook target 50%+, while B2B SaaS tools often see 20-30% and that is perfectly healthy depending on the use case.

DAU/MAU = (Daily Active Users / Monthly Active Users) x 100
Why it matters: Low stickiness is a leading indicator of churn. Products that users don't visit regularly are products that get cancelled. Focus on building sticky features.

Dunning

The process of communicating with customers about failed payments and attempting to recover that revenue. Smart dunning systems use optimized retry schedules, pre-dunning notifications before cards expire, in-app payment update prompts, and escalating email sequences. Dunning is the primary weapon against involuntary churn, which accounts for 20-40% of all SaaS churn.

Why it matters: This is free revenue sitting on the table. A proper dunning system can recover 50-70% of failed payments. Follow the smart dunning experiment to set yours up.
E

Expansion MRR

Additional recurring revenue gained from existing customers through upsells (upgrading plans), cross-sells (buying additional products), or usage increases (adding seats, exceeding tiers). Expansion MRR is what makes net negative churn possible — it can offset and even exceed the revenue lost from churned customers.

Expansion MRR = Sum of MRR increases from existing customers
Why it matters: The best SaaS companies grow their existing customers, not just acquire new ones. Explore product-led expansion strategies.
G

Gross Churn Rate

The total MRR lost from cancellations and downgrades divided by starting MRR, without factoring in any expansion revenue. Gross churn shows the raw "leakage" in your revenue bucket. Unlike net churn, it cannot be negative — it always shows the full extent of your retention problem, even when expansion revenue masks it.

Gross Churn Rate = (Churned MRR + Contraction MRR) / Starting MRR x 100
Why it matters: Relying only on net churn can hide a leaky bucket. Measure both gross and net churn to get the full picture. Use the churn rate calculator to run the numbers.

Gross Revenue Retention (GRR)

The percentage of recurring revenue retained from existing customers, excluding any expansion or upsell revenue. GRR is always 100% or below. It is the purest measure of your retention engine because expansion revenue cannot mask the underlying churn. Top-tier SaaS companies maintain GRR above 90%, and enterprise SaaS often exceeds 95%.

GRR = (Starting MRR - Churned MRR - Contraction MRR) / Starting MRR x 100
Why it matters: GRR below 80% is a red flag for investors and signals fundamental product-market fit issues. Take the churn risk quiz to assess your retention health.
I

Involuntary Churn

Churn that happens not because the customer wanted to leave, but because their payment failed and was never recovered. Common causes include expired credit cards, insufficient funds, bank fraud blocks, and outdated billing information. Involuntary churn typically accounts for 20-40% of total SaaS churn, making it the single biggest "quick win" for most companies.

Why it matters: These customers want to stay — you just need to fix the payment. Start with smart dunning and proactive card expiration outreach.
L

Logo Churn

The percentage of customer accounts (logos) that cancel, regardless of their revenue contribution. Logo churn treats every customer equally — losing a $50/month customer counts the same as losing a $50,000/month customer. This is important to track alongside revenue churn because a high logo churn rate signals product or market problems, even when revenue churn looks manageable.

Logo Churn Rate = (Customers lost / Customers at start of period) x 100
Why it matters: If your revenue churn looks fine but logo churn is high, you are probably only retaining whales while bleeding SMBs. See how you compare on the benchmarks page.

LTV:CAC Ratio

The ratio of customer lifetime value to customer acquisition cost. It measures the return on your acquisition investment. A ratio of 3:1 or higher is generally considered healthy — meaning you earn $3 for every $1 spent acquiring a customer. Below 1:1, you are losing money on every customer.

LTV:CAC = Customer Lifetime Value / Customer Acquisition Cost
Healthy: 3:1 or higher | Below 1:1 = losing money
Why it matters: The fastest way to improve your LTV:CAC ratio is to reduce churn, not cut acquisition costs. Every month a customer stays increases LTV while CAC stays fixed.
M

Monthly Churn Rate

The percentage of customers (or revenue) lost during a single month. This is the most commonly referenced churn metric in SaaS. For most B2B SaaS companies, 3-5% monthly churn is typical, while best-in-class achieve under 2%. Even small differences in monthly churn compound dramatically over a year.

Monthly Churn Rate = (Customers lost in month / Customers at start of month) x 100
Why it matters: Calculate yours right now with the churn rate calculator and compare against industry benchmarks.

Monthly Recurring Revenue (MRR)

The predictable, normalized monthly revenue generated from all active subscriptions. MRR is the heartbeat of any SaaS business. It includes new MRR (from new customers), expansion MRR (from upgrades), and is reduced by churned MRR (from cancellations) and contraction MRR (from downgrades). Annual contracts are divided by 12 and counted monthly.

MRR = Sum of monthly subscription fees from all active customers
Net New MRR = New MRR + Expansion MRR - Churned MRR - Contraction MRR
Why it matters: MRR growth is the story of your business. Use the MRR Churn Impact Simulator to see how different churn rates affect your trajectory over 12-24 months.

MRR Churn

The total MRR lost from cancellations and downgrades in a given period. MRR churn is often more meaningful than logo churn because it weights losses by revenue impact. Losing one $10,000/month enterprise customer is far more damaging than losing ten $50/month customers, even though logo churn says otherwise.

MRR Churn = Churned MRR (from cancellations) + Contraction MRR (from downgrades)
Why it matters: MRR churn is the dollar value of your retention problem. Model its impact on your growth with the MRR simulator.
N

Net Churn Rate

The net MRR lost after accounting for expansion revenue from existing customers. Unlike gross churn, net churn can be negative — meaning your existing customer base is actually growing without any new customers. This happens when expansion revenue exceeds churned and contracted revenue.

Net Churn Rate = (Churned MRR + Contraction MRR - Expansion MRR) / Starting MRR x 100
Why it matters: Negative net churn is the holy grail of SaaS. Run the numbers with the churn rate calculator.

Net Negative Churn

The state where expansion revenue from existing customers exceeds all revenue lost from churn and contraction. When you have net negative churn, your existing customer base generates more revenue each month even without acquiring a single new customer. This is the holy grail of SaaS economics and the ultimate sign of product-market fit.

Why it matters: Companies with net negative churn grow exponentially. It is the single best indicator that your retention and expansion engine is working. Achieve it through product-led expansion.

Net Promoter Score (NPS)

A customer loyalty metric based on a single question: "How likely are you to recommend this product to a friend or colleague?" Responses range from 0-10. Promoters (9-10) are loyal enthusiasts, Passives (7-8) are satisfied but unenthusiastic, and Detractors (0-6) are unhappy and at risk of churning. NPS ranges from -100 to +100.

NPS = % Promoters - % Detractors
Good: 30+ | Excellent: 50+ | World-class: 70+
Why it matters: NPS is a lagging indicator, not a leading one — use it alongside product usage data. Detractors are your highest churn risk segment and deserve immediate attention.

Net Revenue Retention (NRR)

The percentage of recurring revenue retained from existing customers, including expansion revenue from upsells and cross-sells. NRR can exceed 100%, meaning your existing customer base is growing without any new customers. It is the metric investors care about most because it shows the compounding power of your customer base. Top SaaS companies achieve 120%+ NRR.

NRR = (Starting MRR - Churned MRR - Contraction MRR + Expansion MRR) / Starting MRR x 100
Good: 100%+ | Great: 110%+ | Best-in-class: 120%+
Why it matters: NRR is the single number that tells investors whether your business has a compounding growth engine. Improve it by reducing churn and increasing expansion simultaneously. Start with the Churn Priority Finder.
O

Onboarding

The process of guiding new users from signup to their first meaningful experience of value. Onboarding is where most churn actually happens — the majority of users who will cancel do so within the first 30-90 days. Great onboarding shortens time to value, drives activation, and sets the foundation for long-term retention. It includes in-app flows, welcome emails, setup wizards, and guided tours.

Why it matters: Poor onboarding is the #1 cause of early churn. Follow the onboarding activation milestones experiment for a step-by-step playbook.
P

Product-Qualified Lead (PQL)

A user or account whose in-product behavior signals they are ready to buy or upgrade. Unlike Marketing-Qualified Leads (MQLs) which are based on content engagement, PQLs are based on actual product usage — completing onboarding, hitting usage limits, inviting team members, or using premium features. PQLs convert at 5-10x the rate of MQLs.

Why it matters: PQL models also help retention — the same behavioral signals that predict buying intent can predict churn risk when they decline. Explore product-led expansion.

Proactive Retention

The practice of identifying and intervening with at-risk customers before they decide to cancel. This is the opposite of reactive retention (save flows, win-back campaigns), which only kicks in after a customer has already made up their mind. Proactive retention uses health scores, usage patterns, and engagement signals to flag accounts that need attention weeks or months before they churn.

Why it matters: By the time a customer clicks "cancel," your odds of saving them are under 20%. Intervene early with health score monitoring and competitive evaluation detection.
Q

Quarterly Business Review (QBR)

A structured check-in meeting between your customer success team and key accounts, typically held every quarter. QBRs review product usage, ROI achieved, upcoming goals, and expansion opportunities. When done well, they are a powerful retention tool because they reinforce value and surface issues before they become churn risks.

Why it matters: QBRs reduce enterprise churn by keeping your product top-of-mind with decision-makers and champions. Accounts that skip QBRs churn at significantly higher rates.

Quick Ratio (SaaS)

A measure of growth efficiency that compares revenue coming in to revenue going out. It is calculated by dividing all incoming MRR (new + expansion) by all outgoing MRR (churned + contraction). A Quick Ratio of 4 means you add $4 of new revenue for every $1 lost. Mamoon Hamid of Kleiner Perkins popularized this metric as a quick health check for SaaS businesses.

Quick Ratio = (New MRR + Expansion MRR) / (Churned MRR + Contraction MRR)
Healthy: 4+ | Below 1 = shrinking
Why it matters: Quick Ratio instantly shows whether you have a growth problem or a churn problem. A low ratio with strong new customer acquisition means churn is the bottleneck.
R

Reactivation Rate

The percentage of previously churned customers who return and resubscribe. Reactivation is often cheaper than new customer acquisition because these users already know your product. A healthy reactivation rate varies by industry, but even getting 5-10% of churned customers back can meaningfully impact growth.

Reactivation Rate = (Churned customers who returned / Total churned customers) x 100
Why it matters: You already paid to acquire these customers once. Build a win-back campaign to systematically recover them.

Revenue Churn

The total MRR lost from churned and downgraded customers in a given period. Revenue churn weights losses by their dollar impact — losing a $10,000/month enterprise customer hurts far more than losing ten $50/month accounts, even though logo churn counts them equally. Revenue churn is the metric that actually shows up on your income statement.

Revenue Churn Rate = (MRR lost from cancellations + downgrades) / Starting MRR x 100
Why it matters: Track both logo and revenue churn — they tell different stories. Use the churn calculator to compute both.

Retention Curve

A graph showing the percentage of a customer cohort that remains active over time. The X-axis is time (weeks, months, or years) and the Y-axis is the percentage still retained. A healthy retention curve flattens out over time, indicating you have found a stable set of long-term users. A curve that never flattens means you have a product-market fit problem.

Why it matters: The shape of your retention curve tells you more than any single number. Build retention curves into your churn dashboard.

Retention Rate

The percentage of customers retained over a given period — the inverse of churn rate. A 5% monthly churn rate means a 95% monthly retention rate. While mathematically simple, retention rate can be easier to think about because it keeps the focus on keeping customers rather than losing them.

Retention Rate = 1 - Churn Rate
Example: 1 - 0.05 = 95% monthly retention
Why it matters: Use the Retention Leverage Audit to find the highest-impact levers for improving your retention rate.
S

Save Flow

An in-app experience presented when a customer initiates cancellation, designed to understand their reason for leaving and offer a relevant alternative — a discount, a plan pause, a feature walkthrough, or a concierge support session. A well-designed save flow can rescue 10-15% of customers who click "cancel." It also doubles as a churn reason collection mechanism.

Why it matters: A save flow is the single highest-ROI retention investment for most SaaS companies. Build one in a week with the cancellation save flow MVP experiment.

Stickiness

A qualitative measure of how habit-forming your product is — how often users come back without being prompted. Stickiness is often quantified using the DAU/MAU ratio. Sticky products have high natural engagement, deep workflow integration, and features that users rely on daily. Stickiness is the strongest organic defense against churn.

Why it matters: Build stickiness into your product with sticky feature experiments.

Switching Costs

The real and perceived costs (time, effort, money, data migration, workflow disruption) that make it painful for a customer to leave your product for a competitor. High switching costs reduce churn not because customers are happy, but because leaving is too expensive. The best approach is to create genuine value that makes leaving unappealing, not artificial lock-in that breeds resentment.

Why it matters: Deep integrations are the most valuable (and most ethical) form of switching cost. See the competitive displacement prevention experiment for strategies.
T

Time to Value (TTV)

The elapsed time between a user signing up and experiencing the first meaningful value from your product — their "aha moment." Shorter TTV directly correlates with higher activation rates and lower early churn. The goal is to remove every unnecessary step, pre-fill every possible field, and get users to that first moment of value as fast as humanly possible.

Why it matters: Every hour of TTV costs you users. The activation milestones experiment walks you through shortening TTV systematically.

Trial Conversion Rate

The percentage of free trial users who convert to a paid subscription. Industry benchmarks vary widely: opt-in free trials (no credit card required) typically convert at 2-5%, while opt-out trials (credit card upfront) convert at 40-60%. Low trial conversion is essentially "pre-churn" — you are losing users before they ever become customers.

Trial Conversion Rate = (Trial users who became paid / Total trial users) x 100
Why it matters: Improving trial conversion is a retention play, not just a conversion play. See the trial conversion experiment.
V

Voluntary Churn

Churn that occurs when a customer actively decides to cancel their subscription. This is the opposite of involuntary churn (payment failures). Common drivers include poor product-market fit, unmet expectations, competitor switching, budget cuts, or simply no longer needing the product. Voluntary churn is harder to fix than involuntary churn because it requires understanding and addressing root causes.

Why it matters: Start by separating voluntary from involuntary churn in your metrics. Then use a save flow to capture reasons and rescue at-risk customers, and take the Churn Risk Quiz to identify your biggest vulnerabilities.
W

Win-Back Campaign

A structured outreach program designed to re-acquire customers who have already churned. Win-back campaigns typically use email sequences, personalized offers, and product update announcements to entice former customers back. The best time to launch a win-back campaign is 30-90 days after cancellation, when the customer still remembers your product but may have realized the grass is not greener.

Why it matters: Reactivating a churned customer costs a fraction of acquiring a new one. Follow the step-by-step win-back campaign experiment to build yours.

Know the terms. Now fix the problem.

Understanding churn metrics is step one. Step two is running the right experiments to actually reduce it.

Take the Churn Risk Quiz Browse Experiments