Churn is when customers stop using a company’s products or services. High churn rates can be a sign that something needs to change to keep customers happy and loyal.
Why watch for churn?
- To understand what customers need and what might be missing
- To spot patterns, like if a certain service or product isn’t hitting the mark
- To see how many new customers are sticking around and becoming regulars
- To manage costs, as it often costs more to find new customers than to keep existing ones
- To see how well the company is keeping its customers and where it might need to improve to keep them coming back.
When to look at churn?
Some businesses check churn rates monthly, while others review them quarterly or annually, depending on what works best for their customer base and business cycle.
How it’s measured:
- Pick a period to measure, like one month or one year
- Count the number of customers who left during that time
- Divide by the total number of customers at the start of the period
- Multiply by 100 to get a percentage – that’s the churn rate!
- A good or “acceptable” churn rate is from 2% to 8%.
A lower churn rate generally means customers are satisfied and likely to keep coming back