Churn refers to the rate at which customers or subscribers stop using a company’s product or service over a specific period of time.
Churn is often used as an indicator of customer dissatisfaction, changes in market conditions, or the effectiveness of customer retention strategies.
How do you calculate churn rate?
Churn rate is typically calculated by dividing the number of customers lost during a given time period (usually a month or a year) by the number of customers at the beginning of that period. The result is expressed as a percentage.
For example, if a company starts with 1,000 customers and loses 50 customers by the end of the month, the churn rate would be:
Churn rate = (50 / 1,000) * 100 = 5%
A high churn rate can have a significant negative impact on a company’s revenue and growth, as it becomes more challenging and costly to acquire new customers than to retain existing ones. Therefore, businesses often focus on reducing churn by improving customer satisfaction, addressing customer concerns, and implementing effective customer retention strategies.
Churn is also known as customer attrition or customer turnover.