Customer Churn

Customer churn is the rate at which customers stop doing business with an organization, i.e., by no longer buying from them or canceling a product or subscription.

Churn rate is usually measured across a specified time frame by dividing the number of customers lost during this time — i.e., during a given month — by the number of customers that the business had at the beginning of it.

For example, if a business had 350 customers at the beginning of March and ended the month rate 270, its churn rate for March would be 22.8% — this is the sum of the total number of customers lost (70) / total number of customers at the beginning of March (350) X by 100 for the percentage figure.

Businesses naturally aim to keep their churn rate as low as possible because high customer turnover can adversely affect profits and concern investors. It also costs the business more to acquire customers than it does to retain them. What constitutes an acceptable churn rate, however, varies between industries and markets.

Customer Churn Explained: