Churn Rate

Churn Rate

Customer churn rate is a vital metric that evaluates the rate at which customers discontinue their association with a business over a specific period, typically expressed as a percentage. To compute the churn rate, tally the number of customers who ceased their subscriptions or memberships within the defined timeframe and divide this figure by the total number of customers at the beginning of the same period.

This calculation provides insights into customer retention efforts, enabling businesses to assess their ability to retain customers and the overall health of their customer base. A high churn rate may indicate dissatisfaction or issues with the product or service, necessitating proactive measures to enhance customer satisfaction and loyalty.

Example

For example, let’s say a subscription-based streaming service had 1,000 customers at the beginning of the month. By the end of the month, 50 customers had canceled their subscriptions.

To calculate the churn rate: Churn Rate = (Customers Lost / Total Customers at Start) * 100

Churn Rate = (50 / 1000) * 100 Churn Rate = 5%

So, the churn rate for the streaming service for that month would be 5%. This means that 5% of their customer base discontinued their subscriptions during that period.