What is Customer Churn Rate? – Formula and Ways to Reduce Customer Churn Rate [With Examples]

What is customer churn rate?

Churn rate of customers is the percentage at which the customers stop subscribing or using your company’s products.

The churn rate measures a company's loss of subscribers or customers for a given period of time. It is also referred to as the rate of attrition.

How to calculate customer churn rate?

To calculate the churn rate of customers, divide the ‘number of customers lost’ in a particular time period (week, month, or quarter) by the ‘total number of customers at the beginning’ of the reporting period. 

Now, multiply the number by 100 to get the percentage churn rate.

Formula for calculating customer churn rate

Customer Churn Rate formula
Customer Churn Rate Formula

Real-life example of customer churn rate

Let’s say you own a micro SaaS business and had 500 subscribers to your software plan at the start of the previous month. You lost 50 subscribers during the previous month. 

Then, your churn rate will be: 50/500 x 100 = 10%

What’s considered a good customer churn rate? (benchmark)

A good churn rate is considered to be between 2% - 8%. The holy grail of churn rate would be 0% indicating that your business isn’t losing any customers but that is far from reality. 

A good customer churn rate depends on various factors such as, industry, business model, etc.

Churn Rate by Industry
Churn Rate by Industry - Source

Each industry has a different average churn rate that companies can compare themselves with to understand their competitiveness. By the end of March 2022, Netflix active monthly churn rate was 3.3%.

B2B has a churn rate of almost 5% whereas B2C has a churn rate of 6.7%. A high churn rate could adversely impact profits and hinder growth.

Ways to reduce your customer churn rate

  • Know why your customers leave: If your customer churn rate is high, there might be a probability of a big issue waiting for you. 68% of customers leave because they think a company doesn’t care about them. By getting your customers on the call you can find out what went wrong.
  • Show that you care: In order to show your customers that you care about them, you need to constantly engage with them. The most efficient customer engagement channel for B2B companies is email marketing.
  • Solve customer’s problem: Solving customer’s problem is the most obvious way to reduce churn rate. Make sure that you have good customer service in place as 58% will never use a company again after 1 negative experience.

Also Read: Related Metrics

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