Glossary
Churn
Churn refers to the rate at which customers stop doing business with a company. It is a critical metric for subscription-based businesses and industries where customer retention drives profitability.
What You Need to Know
Churn can be categorized into voluntary churn (customers who cancel their subscriptions or stop buying) and involuntary churn (customers lost due to failed payments or account issues). High churn rates indicate dissatisfaction or a failure to meet customer needs.
Businesses aim to reduce churn by improving product quality, customer service, and engagement. Identifying the reasons behind churn helps companies implement strategies to retain at-risk customers.
How It Works
Churn rate is calculated by dividing the number of customers lost during a period by the total number of customers at the start of that period. Analytics tools track customer behavior to detect warning signs, such as reduced engagement or complaints.
Businesses often deploy proactive measures, such as targeted retention offers, to prevent churn. Customer feedback surveys also provide insights into why users leave.
Advantages
Reducing churn increases customer lifetime value (CLV) and overall profitability. Retaining customers is generally more cost-effective than acquiring new ones. By addressing the causes of churn, businesses can improve their products and services, leading to greater long-term success.
Applications and Use Cases
Subscription services monitor churn to identify trends and take corrective action. E-commerce businesses also analyze repeat purchase behavior to maintain customer loyalty and reduce attrition.