Eldon Broady

Do You Know Your Churn Rate?

There are plenty of statistics and metrics out there to measure the success of your company, but one of the most important is your customer churn rate. Figuring out your churn rate can help you understand if your company is on the right track. In this article, we'll talk about what we mean by churn rate and how it helps you understand how to prevent customer churn.

What is Customer Churn Rate?

In basic terms, churn rate is the percentage of your customers that leave your service over a given period of time. Churn rate gives you a micro-view of this specific number, but on a macro level it can show you a lot more. This number can indicate a number of factors, including:

• Lifetime value of customers
• Company performance
• Company health
• Customer retention
• If changes you made affected customer satisfaction
• Helping you get a better picture of your customer type

In short, this one metric can give you a lot of insight on how your business is doing. So how exactly do you measure your churn rate?

How do You Measure It?

The simplest measurement for churn rate is the following formula:

number of churned customers / total number of customers

You simply pick a period of time, take the number of customers who dropped your service over that time and divide it by your total number of customers in that time period.

According to a study done by Profit Well, an average churn rate is anywhere between 2-8%, and the lower the better. However, younger companies can have a much higher average churn rate and older legacy companies tend to have a lower average. This is because they've had the time to build trust and respond to customer wants and needs. Newer companies will have to work to build trust and get their churn rate at a stable, acceptable level. Keep in mind, negative churn can also happen when you get new customers and their added revenue is more than the lost revenue from churn customers.

If you see that your churn rate is high, this is when you might want to start looking at what could be going wrong. Implementing customer retention strategies can also help prevent customer churn.

Author Resource:

Eldon Broady writes about customer retention and customer success tools. You can find his thoughts at customer success platform blog. Visit this website to know more about customer success concepts.