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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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:
Usage Upgrades or downgrades are tracked when they actually happen. For example, if a user moved from PlanA ($59) to PlanB ($119) today, an upgrade of $60 will be tracked. The same logic will apply to downgrades.
In cases where the user would switch back and forth, every upgrade and downgrade would be tracked and would influence the upgrade or downgrade amount in Databox. Therefore, Databox suggests using the Calculated Metrics to track the Net New Upgrade or Downgrade values.
Below is an example of the MRR Upgrades metric and the same logic will apply for other Upgrades and Downgrades metrics.
Net New MRR Upgrades = MRR Upgrades – MRR Downgrades
Limitation To calculate upgrades, downgrades, and reactivations we use the /events endpoint. In accordance with the Stripe API documentation, Databox can collect only 30 days of historical data through this API endpoint. For example, if an upgrade occurred 31 days ago, it would not be pushed to and visible in Databox today.
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.
Transactions metric represents the total number of successful payments processed through Stripe, including charges, refunds, and payouts, measured over a specific time period.
ARR (excl. Canceled Subscriptions) by Plan Name is a metric that calculates the total Annual Recurring Revenue generated by each subscription plan excluding canceled subscriptions, providing insights into which plans are driving the most revenue for a business.
Churned ARR measures the loss in recurring revenue from existing customers over a year. It helps companies understand their customer retention rate and revenue growth potential.
Churned Customers measures the rate at which customers stop using a company's product or service within a certain period of time. It is an important metric for subscription-based businesses to track customer retention and identify areas for improvement.
Sent Invoices metric refers to the total amount of invoices sent to customers during a specific period. It is a useful measure of a company's invoicing and billing performance, and can help identify any issues or opportunities for improvement in the invoicing process.
Overdue Invoices Amount metric in Stripe tracks the total amount of unpaid invoices that are past their due date, providing an overview of the outstanding balance that customers owe.
ARR by Plan Name is a metric that calculates the total Annual Recurring Revenue generated by each subscription plan in a given period, providing insights into which plans are driving the most revenue for a business.
Trial Conversion Rate measures success in converting trials to active subscriptions over a rolling 30-day period, excluding today.