What is Customer Churn Rate?
Customer churn rate is defined as the % of a company's total customers that stop doing business with the company over a specified period. No matter what you sell, customer churn is one of the most impactful metrics for companies because it's the ultimate measure of customer happiness.
How to calculate Customer Churn Rate?
To identify your company's churn rate, choose a period you want to measure the following values: Number of customers at the start of the period(X) Number of customers lost during that period(Y) Customer churn rate (Z):
(Y/X) *100 = Z
For example, if a business had 100 existing customers at the start of the month and lost 20 customers by the end of the month, it would divide 20 into 100 and get .05, or 5 percent. This means the company had a monthly churn rate of 5 percent.
Why is Customer Churn Rate important?
Lost customers equal missed revenue. If a company fails enough customers, it can have a severe impact on revenue. It is also significant because it costs more to acquire new customers than to retain existing customers. Companies that lose customers to churn aren't just losing the revenue from those customers, but they're also stuck with the high cost of finding new customers. It's critical to understand customer churn rate, customer happiness and focus on their loyal customers to maximize their customer retention rate.