The Downgrades metric measures the number of customers who have shifted from a higher-priced subscription plan to a lower-priced one within a specified timeframe.
With Databox you can track all your metrics from various data sources in one place.
A downgrade is when a customer moves from a higher subscription level to a lower one, resulting in a loss of revenue for the business. This metric is crucial for subscription-based businesses as it could indicate a problem with the service, such as high prices or lack of perceived value at higher plan tiers.
You can calculate your downgrade ratio by dividing the number of customers who have switched to lower-tier subscription plans by the total number of customers. Here’s the exact formula:
Downgrades = Number of customers who downgraded / Total number of customers
Let’s say you have a software company with 1000 subscribers. During a specific period, 15 customers downgraded their subscription plans.
Upgrades = 15 / 1000
This leaves us with a 1.5% downgrade ratio for the specific time period.
What Is an Acceptable Downgrade Ratio
The acceptable downgrade ratio can vary depending on the pricing structure, the business model, the company’s specific goals, and a variety of similar factors. But as a general rule of thumb, a downgrade ratio of below 2% is something many businesses find acceptable.
Just remember that an acceptable downgrade ratio is not a fixed number, but a dynamic metric that changes to your specific circumstances. Regular monitoring and analysis of downgrade ratios, along with customer feedback, will help you determine what is acceptable for your own organization and help you make more informed decisions going forward.
Reducing the number of downgrades and making sure your customers are satisfied with the service is a critical aspect of maintaining and growing your business’s revenue. Let’s take a look at some specific tactics that industry leaders employ in their companies when trying to reduce downgrades:
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Used to show comparisons between values.
Databox is a business analytics software that allows you to track and visualize your most important metrics from any data source in one centralized platform.
To track Downgrades using Databox, follow these steps:
The Stripe SaaS MRR Growth dashboard tracks MRR, net new customers, churn rate, and revenue trends. It provides insights into MRR breakdowns (new, upgrade, churn MRR), helping SaaS businesses optimize subscription growth and retention.
This report is designed for SaaS leaders, providing in-depth analysis of MRR, customer churn, and revenue growth metrics. This dynamic overview integrates key performance indicators such as ARPU, LTV, customer retention, and MRR breakdowns.
One of the main reasons for downgrades is cost – customers may feel they aren’t getting enough value for their money. Or in some other cases, they may not fully use or understand the features of higher-tier plans.
Other factors that can lead to downgrades include business changes like budget cuts or downsizing, issues with customer service, and dissatisfaction with product performance.
To keep your users from downgrading their plans, you need to consistently demonstrate the value of your higher-tier services.
Try to regularly check in with your customers to catch potential problems before they turn into reasons for a downgrade.
Educate your users about how they can benefit from your advanced features and ask them if they want 1-on-1 assistance to learn the ropes around it.
There is a variety of different ways you can reduce the number of upgrades, but talking to your customers and getting their direct feedback on what they think (and acting on it) is at the core of each strategy.
Failed Charges metric is a measure of the number and value of payments attempted but not successfully processed due to issues such as insufficient funds, invalid card information, or other errors.
Pending Balance is the amount of funds that are currently being held by Stripe and have not yet been transferred to your account due to processing delays or potential disputes/chargebacks.
Transactions by Type metric provides a breakdown of transactions by payment type, such as credit card or bank transfer, allowing businesses to analyze payment preferences of their customers.
MRR (excl. Canceled Subscriptions) stands for Monthly Recurring Revenue excluding Canceled Subscriptions, a metric that shows the predictable monthly revenue generated by a subscription-based business model excluding canceled subscriptions. It includes all recurring charges and allows businesses to monitor customer retention and growth.
New MRR is a metric used in Stripe to measure the total amount of recurring revenue generated by new customers who have signed up for a subscription or recurring product in a particular period.
The Churned MRR (Delinquent) by Plan Name metric indicates the amount of lost revenue due to customers on subscription plans who have not paid on time or have canceled their subscription. The metric is displayed by the name of the plan.
MRR Upgrades measures the total increase in Monthly Recurring Revenue (MRR) from existing customers who upgraded to a higher-priced subscription plan.
Trial Conversion Rate measures success in converting trials to active subscriptions over a rolling 30-day period, excluding today.