There are a myriad number of unique acronyms and terms in the business and customer service world, so we're defining one of them in under 300 words: customer churn rate.
What Is Churn Rate?
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 rate is a critically important metric for companies whose customers pay on a recurring basis -- like SaaS or other subscription-based companies. Regardless of your monthly revenue, if your typical customer does not stick around long enough for you to at least recoup your average customer acquisition cost (CAC), you’re in trouble. Learn how to reduce customer churn in this blog post.
How to Calculate Churn Rate
To calculate customer churn rate, designate a time period, and tally up the total number of customers you 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.
So, for instance, if you have five customers cancel and you originally signed 200 customers during that time period, your churn rate would be 2.5%.
5 ÷ 200 = .025 x 100% = 2.5%