Churn Rate
What are Churn Rates?
Churn rate, also known as attrition rate, measures the rate at which customers stop doing business with a company over a specific period. It's a key metric for businesses, especially those with subscription models, as it indicates how many customers are leaving and can impact revenue and profitability.
What it is: Churn rate represents the percentage of customers who discontinue their relationship with a company during a given period (e.g., monthly, quarterly, annually).
Why it matters: High churn rates can signal customer dissatisfaction, poor product-market fit, or ineffective customer service, potentially leading to lost revenue and growth stagnation.
How to calculate it: You can calculate churn rate by dividing the number of customers lost during a period by the number of customers at the beginning of that period, then multiplying by 100 to express it as a percentage.
Example: If a company starts a month with 100 customers and loses 10, the churn rate is (10/100) * 100 = 10%.
Industry benchmarks: Churn rates vary significantly across industries.
Strategies to reduce churn: Businesses can implement strategies like loyalty programs, personalized communication, proactive customer support, and addressing the root causes of customer dissatisfaction to reduce churn
What are types of Churn Rates?
- Customer Churn: Measures the number of customers lost
- Revenue Churn: Measures the amount of revenue lost due to customer churn
