What is Churn Rate?
Learn what churn rate means, why it is important, and how you can calculate it based on the number of customers that you have.
Updated on September 17th, 2023
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Churn rate is a measurement of what percentage of newly acquired customers have stopped using your service since you acquired them. Most people choose a specific time period when they are calculating their churn rate.
How to Calculate Your Churn Rate:
Churn rate can be calculated using the following formula:
(Customers who have left) ÷ (Customers acquired) x 100 = Churn Rate (%)
The churn rate is found by totaling the number of customers who have canceled their service with you and dividing it by the total number of customers that you acquired over the same period. You can multiply the result by 100 to find the churn rate as a percentage of your total acquired customer base.
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FAQs:
What is a good churn rate?
Any business that has a churn rate between 5% and 7% annually can consider that as being a good churn rate.
How is churn rate defined?
Churn rate measures the rate at which the customers you have acquired for your subscription service may be leaving or canceling. Churn Rate is usually used as a metric in SaaS businesses (Software-as-a-Service).
How do you calculate customer churn rate?
Churn rate can be calculated using the following formula:
(Customers who have left) ÷ (Customers acquired) x 100 = Churn Rate (%)
How do I lower my churn rate?
- Analyze and determine why churn occurs.
- Use co-browsing to offer personalized customer service.
- Improve user onboarding process.
- Use a proactive approach.
- Make it hard for your customers to ignore you.
- Create a community around your product.
- Remind your customers how much value you provide them.
- Increase customer engagement.
- Offer dedicated account managers.
- Surprise and delight your customers.
- Provide additional services.
Why does customer churn rate matter?
Businesses keep track of churn rates so that they can identify increases in customer cancellations over time. This is important for subscription-based businesses, especially because there can be a high customer acquisition cost to get people to sign up and pay a monthly fee.
What is the SaaS churn rate?
SaaS stands for Software-as-a-Service. The churn rate is calculated the same way for SaaS business, it is just sometimes called the "SaaS churn rate" because it is used so commonly for that business model.
Why does my churn rate keep going up?
A steady increase in your customer churn could indicate a problem. Perhaps you have a defective product or poor customer service. It could simply be that your service is not as effective as the competition. Identifying these shortcomings early could help you to retain the majority of your customers.
Is churn the same as attrition?
The churn rate and attrition rate are two different things. Attrition is a measurement of the rate at which employees are leaving your company.