Churn rate is typically used in reference to the percentage of customers that stop using your service or stop engaging with business within a given time frame. Churn rate is also often referred to as attrition rate. Churn rate can measure all kinds of churn though; employee, customer, gross revenue, net revenue etc.
Let’s look at an example of customer churn rate:
- If a company has 100,000 customers at the start of a year and 80,000 at the end of the year,
- you would divide 20,000 (the amount of customer that “churned”) by 100,000 (the amount of customers the company had initially)
- to determine the customer churn rate to be 20% year over year.
There are different types of churn:
- Voluntary churn: A customer has voluntarily chosen to churn.
- Involuntary churn: A customer hasn’t voluntarily chosen to churn, but maybe a card was declined or a payment wasn’t processed correctly.