Churn Rate
Churn Rate
The churn rate, also known as Attrition rate, is the percentage of customers or subscribers who discontinue their relationship with a company over a given period. It is a critical metric for businesses, especially those in subscription-based models, as it indicates customer retention and satisfaction.
Churn Rate Formula:
Churn Rate = (Number of Customers Lost during a Period) / (Total Number of Customers at the Start of the Period) * 100
Examples:
- Example 1: A subscription service starts the month with 1,000 customers. If 50 customers cancel their subscriptions by the end of the month, the churn rate would be (50 / 1000) * 100 = 5%.
- Example 2: A SaaS company has 2,000 customers at the beginning of the quarter. If 200 customers leave during that quarter, the churn rate would be (200 / 2000) * 100 = 10%.
Cases:
- High Churn Rate: A company experiencing a churn rate of over 15% may need to investigate customer satisfaction issues, product quality, or competition.
- Low Churn Rate: A churn rate below 5% often indicates strong customer loyalty and satisfaction, suggesting effective engagement strategies.