How to calculate Churn rate?
If retention rate is the percentage of customers who are retained over a time period, churn rate is the inverse of it.
Churn Rate is the percentage of customers who leave or cease using a service over a specific time period.
Example:
Suppose an online streaming service starts the month with 1,000 subscribers. By the end of the month, 50 subscribers have cancelled their subscriptions.
The monthly churn rate is calculated as follows:
Churn Rate = (Number of Customers Churned / Number of Customers at Start) × 100%
= (50 / 1,000) × 100 = 5%.
Significance of Churn Rate:
Churn Rate is often used as an indicator of customer dissatisfaction, competition, or the effectiveness of customer retention initiatives.
A lower churn rate is usually seen as a positive sign of customer satisfaction and business health, while a higher churn rate may indicate problems that need addressing.