It also known as the rate of attrition or customer churn, is the rate at which customers stop doing business with an entity.
It is commonly expressed as a percentage of subscribers or users who cancel their subscriptions or services within a specific period. Additionally, it includes the rate at which employees leave their positions over a given time frame. For sustainable business growth, organizations need to ensure that their rate of acquiring new customers exceeds their churn rate.
To calculate the customer churn rate, select a timeframe and gather the total number of acquired customers along with those who churned during that period. Then, divide the number of customers who churned by the total number of acquired customers and multiply the resulting decimal by 100% to obtain the churn rate.
Formula: Customer Churn Rate = (Lost Customers ÷ Acquired Customers) x 100%
FAQ
Churn Rate is calculated by dividing the number of customers lost during a specific period by the total number of customers at the beginning of that period. The result is then multiplied by 100 to express it as a percentage.
Churn Rate provides valuable insights into customer satisfaction, product/service quality, and overall business health. High churn rates can indicate issues such as poor customer experience, pricing problems, or competitive pressures, while low churn rates signify strong customer loyalty and satisfaction.
Businesses can reduce churn rate by improving customer experience, providing exceptional customer service, offering incentives or loyalty programs, addressing customer feedback promptly, regularly communicating with customers, and continuously innovating to meet changing customer needs.
The definition of a "good" churn rate varies depending on the industry, business model, and stage of growth. Generally, lower churn rates are preferable, but what constitutes an acceptable rate depends on factors such as customer acquisition costs, lifetime value of a customer, and competitive landscape.
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