Churn refers to the share of customers who leave a company within a given period. The term is used especially in subscription and service-based businesses, where customer loyalty and retention are critical to growth and revenue.
What does churn mean?
When we talk about churn, we typically refer to customer attrition. In other words, the opposite of customer acquisition. Churn can be measured in different ways - both by number of customers and by lost revenue.
- Customer churn: Number of customers who cancel or leave the company.
- Revenue churn: The value of the subscriptions or contracts that are cancelled.
How is churn calculated?
A simple formula for calculating churn over a period is:
Churn rate = (Number of customers lost during the period ÷ Number of customers at the start of the period) × 100
Example: If a company has 1,000 customers at the start of the month and 50 of them cancel their subscription during the month, the churn rate is:
(50 ÷ 1.000) × 100 = 5 %
Why is churn important?
High churn can be a sign of dissatisfied customers, competitive pressure or insufficient product value. Since it is often more expensive to acquire new customers than to retain existing ones, many companies actively work to reduce churn.
Methods to reduce churn
- Improved customer service and support.
- Ongoing customer feedback and analysis of churn reasons.
- Loyalty programmes and incentives to stay.
- Tailored offers and flexible subscription models.
Churn in practice
In SaaS companies and other subscription businesses, churn is a core KPI. Investors, management and sales teams monitor churn closely, as a high churn rate can erode growth even in companies acquiring lots of new customers.