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 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.
Churn Rate Definition:
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).
Churn Rate FAQs:
Why does customer churn rate matter?
Businesses keep track of churn rate 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. 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?
Churn rate and attrition rate are two different things. You can learn more about attrition by checking out our article, "What is Attrition?"