Churn rate is a metric that shows the rate at which customers stop engaging with a business, usually calculated as a percentage.
Customer retention is key to any successful business, helping boost profits and build loyalty. Many businesses use churn rate as a key performance indicator (KPI) to determine the success of their retention initiatives.
Businesses can look at a number of areas of their business to calculate churn rate. For example, they might consider the percentage of customers who unsubscribe from their newsletter, the number of customers purchasing products month over month, or the number of customers who abandoned their shopping carts to purchase from their competitors.
In each of these cases, the business would calculate churn rate by dividing the number of customers at the beginning of any given time period or initiative by the number of customers at the end of that period.
While some customer churn is normal, a consistently high churn rate can indicate problems with a business’s sales, marketing, or customer engagement efforts.