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2022-10-04 5:30 pm

Churn Rate Definition


Churn rate, also attrition rate, is one of the most important indicators when it comes to monitoring the behavior of your customers. The churn rate itself is quite a simple calculation, but it does not give us direct information about the business and requires further analysis.

Nevertheless, it is extremely important to constantly monitor how many customers resign or leave the competition, to improve retention in the future. Losing customers will soon be reflected in the decrease in revenue, and it may be hard and expensive to replace them. If you know the reason behind the resignation, you may act with an improvement plan quicker.

What is an average Churn Rate per industry? Here is a short summary from surveysparrow.com:

  • Insurance: 84%
  • Retail: 63%
  • Banking: 75%
  • SaaS: 35%
  • Hospitality: 55%
  • Media: 25%
  • Fintech: 37%

How to calculate Churn Rate?

First, you need to set up parameters for the analysis: time frame, product, type of customer, etc. The Churn Rate is the number of lost customers divided by the number of total customers at the start of a given period of time, multiplied by 100. Example: 20 customers canceled the subscription last month, where the total number of customers at the beginning of the month was 1000. (20/1000)x100=2%, so the Churn Rate is 2%.

Together with Churn Rate, you can collect other data related to retention, for example, redemption, engagement, or repeated purchase. You can find all calculators here.

How to analyze the Churn Rate? 

Why is it important to deeply analyze the Churn Rate? If the number is high, it’s an obvious signal that there is a problem somewhere that has to be fixed. It may be bad customer service, a product that does not meet customer expectations, too high a price, or anything else. It’s better not to ignore a rising Churn Rate as attracting new customers is far more expensive than keeping existing ones. Moreover, leaving customers may have a good reason to do so, and by sharing their negative experiences they may hit your brand image.

How to improve a Churn Rate?

There is no single solution to improve your customer retention. After having analyzed the potential issues, you may think about a proactive plan that will help you avoid such problems in the future. What works well? Build up a complex plan to take care of your customers at every stage of their customer journey: from onboarding to the extended usage of a product or service. Ask for feedback. Build customer loyalty by using various tools and techniques such as personalized coupons, loyalty programs, discounts, and other.

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