Here’s the scenario: You have a subscription business and you know a customer is leaving. Should you offer a discount to entice them to stay?
Customer churn is a problem that every subscription business faces. However, the effectiveness of discounts depends on the type of SaaS product you’re offering.
Consumer SaaS Products
Why might a customer of a Consumer SaaS product churn? The most likely reason is that they weren’t using the service enough to justify the cost.
For example, when football season started I canceled my $10/mo Netflix subscription. Sundays were the only day’s I’d consider watching a movie. With football on there was no sense in paying Netflix.
Would a discount have kept me? I probably would have stayed on as a paying customer, had Netflix counter-offered me a $5/mo plan.
I don’t think it’s wise to give away a SaaS product for free. There is some ongoing cost associated with that customer—even if it is just for the servers. Figure out what you can handle and offer churning customers a discount to stay.
B2B SaaS Products
If you’re selling to businesses, it’s an entirely different story. Businesses buy products to solve problems. If you make a sale and a business churns, there are two possible culprits:
- Sales sold and set unreasonable expectations for the customer. In this case the product cannot solve a problem sales said it could.
- Customer Success was unable to provide education or guidance to meet the customer’s expectations. The customer was unable to use the software to solve a problem.
In this case a free or discounted subscription will not keep the customer. If cost was an issue, you would have never made the sale in the first place.
Businesses don’t churn because of cost, businesses churn because the product failed to meet expectations.
See my original Answer to Should you give free stuff to cancelled subscribers? on Quora.