Customer Churn

What’s the definition of Customer Churn?

Customer Churn, also known as customer attrition, is the rate at which customers stop doing business with a company over a specific period of time. It is typically measured as a percentage of the total customer base and is an important metric for businesses to track as it impacts their revenue and growth.

Example of Customer Churn

An example of Customer Churn might be a subscription-based software company that measures its churn rate on a monthly basis. If the company had 1,000 customers at the beginning of the month and 50 of them cancelled their subscriptions during the month, the churn rate for the month would be 5%.

How to measure Customer Churn

Measuring Customer Churn involves tracking the number of customers who leave a business over a specific period of time. This can be done by tracking cancellations, non-renewals, and other indicators of customer attrition. The churn rate is then calculated as a percentage of the total customer base. Measuring churn can be done on a monthly, quarterly, or annual basis depending on the business and its goals.

Customer Churn Formula

Why is Customer Churn important?

Customer Churn is important for businesses to track because it has a direct impact on their revenue and growth. High churn rates can indicate issues with customer satisfaction, product quality, or competition, which can ultimately lead to decreased revenue and market share. By tracking churn rates and identifying the root causes of churn, businesses can take action to improve the customer experience, retain customers, and drive growth. Additionally, tracking churn rates can help businesses identify trends and potential issues early, allowing them to take proactive measures to prevent churn.