Formula for Churn Rate
The following formula may be used for calculating the churn rate:
Churn Rate = (Number of customers lost during a specific period )
/ (Total number of customers at the beginning of that period) * 100
Churn Rate = (Number of Customers at the Beginning of the Period -
Number of Customers at the End of the Period) /
Number of Customers at the Beginning of the Period
For example, let’s consider a subscription-based company that had 1000 customers at the beginning of the month and 800 customers at the end of the month. Using the formula:
Churn Rate = (1000 - 800) / 1000 = 200 / 1000 = 0.2 or 20%
Churn Rate is the percentage of customers lost during that period, which in this case is 20%.
Churn Rate and Growth Rate are two crucial metrics that directly impact a business’s success. Churn rate represents the loss of customers, while growth rate indicates the rate at which the customer base is expanding.
For example, if a company has a 10% growth rate and a 5% churn rate, it means that for every 100 customers, the company is gaining 10 customers and losing 5. Thus, the net growth would be 5% (10% – 5%).
What is Churn in Product Management? Calculation, and Its Impact on Business
Churn in Product Management is a critical metric for businesses, particularly for subscription-based services, as it directly impacts revenue and growth. in the context of business, It refers to the rate at which customers or subscribers stop doing business with a company or cease their subscription to a service over a specific period. Understanding churn is essential for businesses to retain customers and maintain sustainable growth.
Churn refers to the percentage of customers or subscribers who discontinue their relationship with a company within a specific time frame, typically a month or a year.
Table of Content
- What is Churn?
- There are typically two types of churn
- Formula for Churn Rate
- Impact of Churn on the Product Metrics
- What Product Managers Need to Know About Churn
- Difference between Churn Rate and Growth Rate
- Why Do Customers Churn?
- What does churning mean in Business?
- Pros and Cons of Churn Rate
- Example of Churn
- Steps to Reduce Churn
- What do we mean by High Churn Rate?
- What is Netflix’s Churn Rate?
- FAQs On Churn
- Conclusion