What is customer churn rate?

Customer churn rate is the percentage of your customers or subscribers who cancel or don't renew their subscriptions during a given time period.

Churn is closely related to the concept of average customer lifetime. For example, an annual churn rate of 25 percent implies an average customer life of four years. An annual churn rate of 20 percent implies an average customer life of five years. The churn rate can be minimized by creating barriers which discourage customers to change suppliers (contractual binding periods, use of proprietary technology, value-added services, unique business models, etc.), or through retention activities such as loyalty programs. It is possible to overstate the churn rate, as when a consumer drops the service but then restarts it within the same year. Thus, a clear distinction needs to be made between "gross churn", the total number of absolute disconnections, and "net churn", the overall loss of subscribers or members. The difference between the two measures is the number of new subscribers or members that have joined during the same period.

Churn Rate Formula

To calculate customer churn rate, designate a time period and tally up the total number of customers you've acquired and the number of customers who churned during that time period. Then, divide the number of customers who churned by the total number of customers acquired, and multiply that decimal by 100% to calculate your churn rate

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