• SaaSCan™

SaaSCan Research Insights September 2020


By Lauren Thibodeau


COVID-19 Impact on Canadian SaaS Retention and Churn


Overview


In the immediate aftermath of COVID-19, it was clear that SaaS retention and churn metrics would be significantly impacted due to rapidly changing economic conditions. What wasn't clear was exactly how they would be impacted, for which types of SaaS companies, and for how long.


To answer these questions and uncover insights to inform the broader Canadian SaaS community, SaaSCan connected with a number of Canadian headquartered SaaS companies. In this SaaSCan Research Insights brief, we reveal how COVID-19 messed with Canadian SaaS retention and churn metrics, what they did about it, and how it worked out.


Methodology

  • SaaSCan surveyed Canadian headquartered SaaS companies on pre and post COVID-19 retention and churn first in early April 2020 (n=48), then in mid-August 2020 (n=34).

  • Survey respondents were sourced with the help of the SaaSCan Advisory Board, as well as SaaS investors, incubators and accelerators across the country, and organizations like the Council of Canadian Innovators and the C100.

  • Surveys were conducted online, and were anonymous and confidential.


5 Key Findings


1. Company Specific Factors: Post COVID-19, Canadian SaaS retention and churn were positively impacted by 3 company specific factors:

  • Industry Vertical – with health care, high tech, online retail faring best

  • Annual Contract Value – with larger ACVs having lower churn

  • Billing Model – with monthly billing models yielding higher net $ retention vs annual or usage-based billing

2. Company Specific Actions: Post COVID-19 retention and churn were also positively impacted by company specific actions. Canadian SaaS companies took myriad actions to adapt and pivot quickly. Product roadmap changes were called out as having the single biggest positive impact on retention and churn post-COVID. In order of decreasing frequency, actions were taken across:

  • Customer Success – Ex: Contact customers with near term renewals, target customers with high (or low) adoption, accelerate CSM hiring

  • Product Roadmap – Ex: Pivot roadmap to prioritize sticky, high value features, pivot roadmap to add new COVID-19 use cases

  • Financial Options – Ex: Offer menu of payment options for hard hit customers, offer limited time payment pause, offer COVID-19 starter pricing

  • Professional Services – Ex: Offer complimentary services to help customers accelerate or recover value

3. Metric Measurement: In terms of SaaS Metric measurement, there is clearly an opportunity and imperative for more Canadian SaaS companies to track key SaaS metrics. Respondents indicated that today, only:

  • 75% measured Logo Churn*

  • 44% measured Net $ Retention*

  • 42% measure Gross Retention*

* For robust definitions with examples and benchmarks, visit Klipfolio's MetricHQ.


4. COVID-19 Relief Funding: While only 59% of SaaS companies surveyed were able to benefit from COVID relief funding programs, of those who did, the Canada Emergency Wage Subsidy (CEWS), and the Industrial Research Assistance Program’s Innovation Assistance Program (IRAP IAP) were the most commonly leveraged programs. Respondents cited them as having the biggest $ impact.


5. Future Government Support: Looking forward, high growth, high potential SaaS companies say government can have the biggest impact by expanding access to capital, followed by access to talent.


4 Key Recommendations


1. Product Roadmap: If you haven’t already done so, step back and take a good, hard look at your product roadmap. Reconnect with your customers, listen, then ask yourself 2 fundamental questions:

  • Are we delivering functionality that provides incredible value to our customers?

  • Are we delivering the unique functionality that our customers need in a post-COVID world?

Of all the actions Canadian SaaS companies took immediately post-COVID to support their customers and ensure their own businesses could survive and thrive, Product Roadmap Pivots were called out by respondents as having the single biggest positive impact post-COVID.


2. SaaS Metric Measurement: If you aren’t yet measuring these 3 fundamental SaaS churn & retention metrics, start today! Then learn how you stack up to best in class performers, and make a plan to elevate your own results.

  • Logo Churn*

  • Net $ Retention*

  • Gross Retention*

* For robust definitions with examples and benchmarks, visit Klipfolio's MetricHQ.


3. Billing Model: If your main billing model is annual fixed fee and your customers are still cautious post-COVID, consider offering a monthly billing option, at least in the short term. This is especially important if you sell into small and medium sized businesses (SMBs).


100% of companies who saw Net $ Retention increase post-COVID used primarily a fixed monthly billing model. This preference for monthly billing post-COVID was further corroborated by a Canadian B2B SaaS company with 10’s of 1000’s of customers, who saw a significant shift in favour of monthly versus annual billing post-COVID, with no pricing or other changes, and despite offering a discount for annual billing.


4. Customer Success: If you haven’t already, now is the time to assess the maturity of your Customer Success practices and see where you can improve.


SaaSCan results showed that SaaS companies with strong Customer Success practices were well positioned to act quickly in the immediate wake of COVID-19 in 4 areas that had an immediate, top line revenue impact. They:

  • Targeted outreach to a stack ranked list of customers based on pre-defined criteria such as renewal date and health

  • Targeted customers with high adoption, and in a number of cases increased expansion revenue significantly post COVID, despite the challenging economic climate

  • Targeted customers with low adoption, and helped them recover value so they churned less often

  • Accelerated hiring of Customer Success resources to ensure strong onboarding and adoption of new and existing customers

To discuss how SaaSCan can help, reach out to lthibodeau@saascan.ca today.


Download the Full Results

SaaSCan August 2020 Survey Findings 0913
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Download • 3.30MB


About the Author


Lauren Thibodeau is the Founder and Chief Research Officer of SaaSCan. She also runs consulting firm WTC Solutions, enabling B2B SaaS companies to grow recurring revenue and crush churn by maturing their customer experience, customer success, and product adoption practices. Lauren lives in Ottawa, Canada with her husband and three children.

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© 2020 SaaSCan™ / LThibodeau (at) SaaSCan.ca