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Definition: It is the percentage of customers that stop using a product or subscription within a certain period.


Other than determining the number of conversions, marketers also take note of the churn rate to help them dig deeper into their strategies.

It is an important metric since it helps them understand why customers are leaving the business and take the necessary actions to make an improvement.

This metric can also be applied in companies to determine the rate at which employees quit their jobs within a specific time period.

How do you calculate churn rate?

Churn rate is calculated by the number of lost customers divided by the total number of customers at the beginning, then multiplied by 100.

% = (Lost customers / total customers) x 100

For example, there were 150 people subscribed to a monthly plan and 15 people who didn’t renew their subscription at the end of the month.

(15 / 150) x 100 = 10%

What is considered a good churn rate?

According to baremetrics, a good churn rate is between 4 to 7%, meanwhile Profitwell thinks it’s around 2 to 4% for older companies and 4 to 24% for younger.

Possible reasons why customers churn

No matter what reason it may be, knowing what’s causing customers churn might just be the missing piece to increase your company’s sales.

Switched to an alternative

Customers might have found an alternative that has all the features that they need.

Your product might have fewer functions compared to your competitors like maybe their app has a widget, while yours doesn’t and it’s probably what they’ve been looking for all along.

Not-so user-friendly interface

If your product might be too advanced for some of your users, this can only make them feel frustrated and drives them away.

Product is no longer valuable

Before, Snapchat ranked higher than its competitors until they added a similar feature such as adding stories, and snaps were no longer valuable for some.

Unreasonable pricing plans

One thing that customers hate is expensive pricing plans that don’t even justify the features of the product.

Trust issues

For example, Zoom used to be an excellent software and was widely used by people around the world until it had very alarming security issues.

Although there are still so many reasons out there knowing what your customers have to say about your product or service, whether it’s positive or negative feedback, is very important.

Understanding these reasons can help you reduce churn, optimize user experience, and increase the company’s reputation.

How to reduce churn rate?

Reducing churn rate can be a tough and long process to deal with since it can depend on how fast and efficient the company can fix issues.

Customer support

Providing adequate and very responsive customer support is a huge plus for consumers since it helps them fix their problems right away.

Most eCommerce websites now offer live customer support to assist customers especially when it’s about something urgent.

This is very effective in taking all their frustrations in just a few minutes that increases customer satisfaction.

Process transactions faster

Another thing that customers dislike is whenever transactions take too long to complete and sometimes it may even result in failed payment processing.

Think about spending at least 5 minutes telling the cashier in your favorite fast food only to find out their ice cream machine is broken and they’re currently not accepting card payments.

Build brand loyalty

It’s easier to retain customers when they establish a unique relationship with the brand despite how many times it has failed to meet their expectations.

Creating a rewards program can help build brand loyalty and retain customers.

Build a community

Here’s the thing, people like to be part of a community especially when it’s focused on a particular niche.

Most companies create groups on Facebook to build a community for their customers and easily interact with them.

This is also a very useful strategy to reach targeted prospects easier since it is a special community that you built for them.

Improve products or services

All the efforts of your company to retain a customer wouldn’t be worth it if you’re not doing improvements to give them a better experience with your products or services.

Some companies tend to focus more in their marketing efforts to get higher conversion rates, and this will only encourage customers to switch to a different company.

Educate customers regularly

Customers, especially newcomers, like getting expert advice or tips that they can use on your products on a regular basis.

Try providing tutorials on your website to motivate and retain customers starting from the day they bought your products until the end of time.

This gives them ideas on what they can do to make things easier on their part and get them excited to learn new things from you.

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