Churn rate refers to the rate at which your customers or subscribers cancel their subscriptions during a specific period, and churned users are the users who have stopped using your product/service or are not active anymore.
How to calculate the churn rate?
For example, if you have 100 customers at the start of the first quarter and only 60 are left at the end. Here’s how you would calculate the churn rate:
The difference between the number of customers at the start and the end of the churn period, i.e.
100 - 60 = 40 divided by total number of customers at the start of the churn period, i.e. 40 / 100 = 0.4
Customer churn rate: 0.4 x 100 = 40%
It is crucial to keep an eye on the losing customers, and this is where the churn rate comes into the picture. A higher churn rate indicates that your customers do not like your product or service. A company will grow only when its growth rate (rate of gaining new, active customers) is higher than its churn rate.
What causes churn?
There could be numerous reasons behind customer churn, such as:
- Poor product or service quality
- Poor onboarding experience
- Lack of proactive customer support or the timely resolution of queries
- High pricing
- Competitors offering better products
- Weak relationship building
You can identify the reasons why your customers are not satisfied with your product/service and work on the flaws to lower a higher churn rate.