Churn Rate
The percentage of customers who stop purchasing over a given period.
The percentage of customers who stop purchasing over a given period.
Why It Matters
Churn rate directly determines whether a business can grow. High churn means constantly running on a treadmill—acquiring new customers just to replace lost ones. For subscription businesses, the math is brutal: at 10% monthly churn, you lose 72% of customers within a year. Reducing churn is often the highest-ROI activity.
Benchmarks
Good Performance
5-7% monthly for subscriptions
Practical Example
Scenario
A subscription brand has 10,000 active subscribers and loses 600 in a month.
Calculation
Monthly Churn Rate = 600 / 10,000 = 6%Result
6% monthly churn means ~52% of customers churn within a year. To grow 20%, they need to acquire ~7,200 new subscribers annually (5,200 to replace churn + 2,000 for growth).
Pro Tips
- 1Separate voluntary churn (customer chose to leave) from involuntary churn (payment failed). They require different solutions.
- 2Track cohort churn curves—most churn happens in months 1-3. If you survive month 3, retention improves dramatically.
- 3Implement predictive churn models using engagement data. Intervene before customers decide to leave.
- 4Analyze churn by acquisition source. Customers from aggressive promotions often churn faster than organic acquisitions.