– Customers/Subscribers: The percentage of customers or subscribers who cancel their subscriptions or stop purchasing from a business.
– Employees: The percentage of employees who leave a company during a given time frame.
Key points about churn rate:
It is typically expressed as a percentage.
It is the opposite of the growth rate, which measures the influx of new customers or employees.
It is an important metric for businesses as it directly impacts revenue and profitability.
A high churn rate can indicate problems with customer satisfaction, product quality, or pricing.
Calculating churn rate:
Churn rate is usually calculated by dividing the number of customers lost during a specific period by the total number of customers at the beginning of that period. For example:
Churn Rate = (Lost Customers / Total Customers at Start) * 100%
Importance of churn rate:
By monitoring and analyzing churn rate, businesses can:
- Identify areas for improvement in their products, services, or customer support.
Develop strategies to reduce churn and retain customers. - Forecast future revenue and profitability.
Make informed business decisions.
