What is the Churn Rate?
The Churn Rate is the percentage over a time period showing the loss of subscribers to a service.
How Churn Rate Works
Success and Failure
To be successful, you want to have a low Churn Rate as this represents the loss of subscribers and revenue for the company.
To calculate the Churn Rate, take the number of subscribers you start with (say 100) and subtract the number of lost subscribers (say 10). The percentage lost would be the Churn Rate (10%).
Not Just For Subscribers
The Churn Rate for non-subscriber based companies can be more difficult to calculate but still possible. For example, if you're average customers buys once every year, and a customer has not bought anything in a year, they may be considered to be part of the Churn Rate.
Churn Rate Best Practices
It's not the most glamorous part of the business, but an accurate Churn Rate can tell you what's working and what's not.
Two Important Types
Two important types of Churn Rates are Customer Churn Rate and Revenue Churn Rate. Comparing the two so you know the value of each lost subscriber is key to bouncing back to success.
The goal isn't to demolish a Churn Rate, it will ALWAYS be there as there will always be someone that cuts ties with your company. The goal is to be aware of the Churn Rate and respond accordingly in order to minimize it.