Are You Calculating Your Customer Churn Rate?

Do you know how many of your customers are cancelling and/or aren’t renewing their subscriptions during a specific time period? This is referred to as customer churn. It is the business cycle of losing and procuring customers. Every company experiences customer churn. The lower your churn rate, the better. 

Your customer churn is vital to assessing the effectiveness of your marketing endeavors and the overall satisfaction of your customers. If your customer doesn’t stay around long enough for you to recover your average customer acquisition cost, you are going to have issues regardless of your monthly revenue. 

Try our 5 easy steps to calculate your churn rate:

1. Decide your specific time period. 
2. Decide the number of customers that were acquired during your time period. 
3. Decide the number of customers lost or churned during your time period. 
4. Now, divide the number of lost customers by the number of acquired customers. 
5. Lastly, multiply that number by 100%.

For example, I wanted to look at our churn rate for 2020 (January 1, 2020 – December 31, 2020). Let’s say we acquired 3,600 new customers and we lost/churned 1,200 customers. 

• Customer Churn Rate = (Lost customers / Acquired customers) x 100%
• Customer Churn Rate = (1,200 / 3,600) x 100%
• Customer Churn Rate = (.33) x 100%
• Customer Churn Rate = 33%

There are many theories on acceptable monthly and annual customer churn rates, but you have to look at what is best for your company. The biggest difference between them is that monthly churn compounds over time whereas annual churn is measured over the entire time. 

There are some things you can do to prevent churn before it happens. 

• Learning why your customers churn is the first thing in understanding the elements that caused a customer to leave. Using surveys to gain insight into their reasons will help fix the problems. 
• Understanding the red flags will signal you that maybe they are about to leave. Have they received your product lately? Do they return excessively? When was the last time they logged in or made contact? Knowing this will help reach out to them with resources and support before they decide to leave. 
• Make sure to provide support to your customers. Furnish customers with easily accessible resources and education so they can understand how to get the most out of your product. 
• Check in with your customers and proactively communicate with them. Engaging with your customers helps them to connect with you as a trusted partner. 

Retaining your customers is a vital part of growing your customer base. Keep an eye on your churn rate so you can assess your performance along the way. 

Have more churn rate ideas? Feel free to share and continue the conversation in our comments.