Churn rate is the percentage of customers or subscribers who stop doing business with a company during a given time period. It can include customers who end their subscription, don’t renew their contract, or close their account.
There are several ways of calculating the churn rate. One possibility is to divide the number of customers lost by the number of customers gained during a given period and multiply by 100%. Another popular method is to divide the number of customers lost during a given period by the total number of customers at the beginning of that period.
Chun rate helps to evaluate the satisfaction of customers and see if your efforts have paid off. A constantly increasing churn rate can refer to a fundamental problem in the business. It might mean that the cost is too high, customer support is lacking, or the overall customer experience needs work. If the rate suddenly rises, it might mean that customers don’t like a recent change (for example, a price rise or a new interface or a feature).
Churn rate is often compared with growth rate. The latter is the percentage of new customers. When the churn rate is higher than the growth rate, the company’s customer base is shrinking. When it’s the other way around, then the company is growing. So if the churn rate suddenly rises, then it’s important to see if the recent change also impacted the growth rate. For example, the change of interface might be frustrating for old customers but it could attract more new customers.
- Attrition rate