The percentage of customers or subscribers who stop using a product or service during a defined period.
A key retention metric that helps reveal whether customers continue to receive value.
Short and sweet:
The percentage of customers or subscribers who stop using a product or service during a defined period.
A key retention metric that helps reveal whether customers continue to receive value.
See also: Customer Retention, Lifetime Value, Retention Rate
Churn rate measures the percentage of customers who stop doing business with a company over a given period, most commonly discussed in subscription-based businesses where customers can cancel at any time rather than simply fading away gradually. It functions as the direct inverse of retention rate, and even a small churn rate can compound into a significant loss of revenue over time if it isn’t addressed, since a steady stream of lost customers has to be replaced just to keep revenue flat. Understanding why customers actually leave, through exit surveys or usage data, tends to matter more for lowering churn than simply tracking the rate itself.
A streaming service that loses 5 percent of its subscribers every month is dealing with a churn rate that, left unaddressed, could quietly erode its entire customer base within a couple of years.
Gym memberships are notorious for a high dropout rate like this, especially every February once the wave of New Year’s resolution sign-ups starts canceling.
A SaaS company tracking this figure closely might notice it spikes right after a price increase, prompting the team to reconsider how the change was communicated to existing customers.
