How to Calculate Churn Rate in 5 Easy Steps [Definition + ...

The churn rate formula is: (Lost Customers ÷ Total Customers at the Start of Time Period) x 100. For example, if your business had 250 customers ... HowtoCalculateChurnRatein5EasySteps[Definition+Formula] Tryusingourinteractivechurnandretentionratecalculator. DownloadforFree SophiaBernazzani Updated: June15,2021 Published: June07,2021 Doyouknowhowmanycustomersyouloseeveryyear?Howabouteverymonth? Customerchurn,orcustomerturnover,referstothenumberofcustomersyou’relosinginapredeterminedtimeperiod.Churnrateisascarymetric.It’salsoanincrediblyimportantone. Ifyoudon’tknowhowmanycustomersareleavingthebusiness,thenyouwon’tknowhowit’simpactingyourrevenue—andyouwon’tbeabletocreateimprovementplanstoreduceturnoverrate. Theproblemisthatit’sdifficulttocalculateandremedycustomerchurn.Nottoworry.Inthispost,we’llcovereverythingyouneedtoknowaboutchurnrate,including: WhatisChurnRate? ChurnRateFormula HowtoCalculateChurnRate WhattoDoAfterCalculatingChurnRate ChurnRateExamples WhatisaGoodChurnRate? Let’sgetstarted. Whatiscustomerchurnrate? Customerchurnrateisthepercentageofyourcustomersorsubscriberswhocancelordon'trenewtheirsubscriptionsduringagiventimeperiod,suchasamonthorayear. Churnrateisacriticallyimportantmetricforcompanieswhosecustomerspayonarecurringbasis—likeSaaSorothersubscription-basedcompanies.Regardlessofyourmonthlyrevenue,ifyourtypicalcustomerdoesn'tstickaroundlongenoughforyoutorecoupyouraveragecustomeracquisitioncost(CAC),you'reintrouble. YoufindouthowmanypeoplechurnedusingaCRM.Thesoftwareyousellmayalsohaveabuilt-insubscribercountthatshowsyouhowmanyusersyouhadatthebeginningofatimeperiodandhowmanyusersyouhadattheend. ChurnRateFormula Thechurnrateformulais:(LostCustomers÷TotalCustomersattheStartofTimePeriod)x100.Forexample,ifyourbusinesshad250customersatthebeginningofthemonthandlost10customersbytheend,youwoulddivide10by250.Theansweris0.04.Youthenmultiply0.04by100,resultingina4%monthlychurnrate. Ifthatmathisasintimidatingtoyouasitisforme,youcanuseatoolthatautomaticallycalculateschurnrate.Let'sexploreoneofthosetoolsinthesectionbelow. FeaturedTool:ChurnRateCalculator Downloaditnowforfreeandfollowalongtodetermineyourownbusiness'churnandretentionrates. HubSpot'sCustomerServiceMetricsCalculatorcalculatesbothrevenuechurnandcustomerretentionrate,inadditiontoeightotherimperativecustomersuccessmetrics.Ifyouwanttodetermineyourchurnratemanually,readonforanexplanationandexampleofcalculatingthismetric. HowtoCalculateChurnRate Tocalculatechurnrate,chooseatimeperiod,suchasmonthlyorannual.You’llneedtoknowthenumberofcustomersyouhadatthebeginningofthetimeperiodandthenumberyoulost.Dividethefollowing:LostCustomers÷TotalCustomersattheStartofTimePeriod.Then,multiplythenumberby100. Remember,thestepstocalculatechurnrateare: Determineatimeperiod:monthly,annual,orquarterly. Determinethenumberofcustomersyouhadatthebeginningofthetimeperiod. Determinethenumberofcustomersthatchurnedbytheendofthetimeperiod. Dividethenumberoflostcustomersbythenumberofcustomersyouhadpriortothechurn. Multiplythatnumberby100. Asanexample,let'ssayyoursoftwarecompanyhad500customersatthebeginningoflastquarter. However,youalsolost50customersduetoexpiredcontractsandafewpoorcustomerserviceinteractions. Thiswouldmeanyourquarter'scustomerchurnratewouldbethe50churnedcustomersdividedbythe500formercustomers,and50dividedby500is0.10. Multipliedby100,thisgivesyouacustomerchurnrateof10%. Here'showitlookswhenyoudothemathout: CustomerChurnRate=(LostCustomers÷TotalCustomersattheStartofTimePeriod)x100 CustomerChurnRate=(50÷500)x100 CustomerChurnRate=(0.10)x100 CustomerChurnRate=10% Nowthatyou'vefoundoutwhatyourchurnrateis,you'reprobablywonderingwhatyoushoulddonext—especiallyifyourchurnrateishigh.Takealookatthenextsectionforsomebestpracticesthatcanhelpyoudecreasechurnatyourbusiness. StepstoTakeAfterCalculatingChurnRate Isyourchurnratehigh?Thereareseveralstrategiesyoucouldimplementtodecreaseit.Ifyoudon’tactivelyworktolowerchurnrate,yourcompanycouldsufferinthelong-term. 1.Analyzechurntoimproveyourcustomerserviceteam. Despiteyourbestefforts,customerchurnwillhappenandwhenitdoes,useitasanopportunitytodigintowhatledthecustomertoleave,andwhatyoucandotopreventasimilarcustomerfromchurningforthesamereason. Onecrucialstepistotrackyourchurnandretentionrates.YoucandothiswithHubSpot'sCustomerServiceMetricsCalculator—afreetooltocalculateanddocumentyourretentionrateovertime. Youcanuseinstancesofchurntodigintoindividualcustomersupportrepormanagerperformance,analyzeyourproductorserviceagainstcompetitors,oridentifychallengesinthecustomerexperiencethatyouwanttoremedywiththehelpofyourproductanddevelopmentteams. 2.Revampyouronboardingplanfornewcustomers. Youcanworktopreventcustomerchurnfromthemomentsomeonebecomesacustomerbycreatingarobustnewonboardingprocess.Useanewcustomerwelcomeemailandofferdedicated1:1andonlinecustomeronboarding.Youcanalsocreateeducationalcontentonyourblog,socialmedia,andvideochannelstoinstructcustomersandshowthemhowtogetoptimalvaluefromyourproductorservice. Downloadourfreecustomeronboardingtemplatesandgetacustomerintakeform,awelcomepacket,andmore. 3.Investinmoretrainingforsupportandsalesreps. Salesrepsshouldbesellingthetruevalueofyourproductorservicesocustomersdon'tfeelswindled.Additionally,customersupportemployeesshouldbewell-equippedtomanageanyissuethatcomestheirwaytosecurecustomersatisfaction.Investinginprocessesandresourcesforthesetwodepartmentscanhaveadrasticimpactonchurnrate. Downloadourfreesupporttrainingtemplatetobuildathoroughtrainingandonboardingplanforyournewsupporthires. 4.Askforfeedbackatkeymoments—andrespondpromptly. Makesureyou'reconsistentlyaskingforcustomerfeedbackatkeymomentsacrossthecustomerexperience.Ifyou'vealreadyidentifiedthatcustomersarelikelytochurniftheydon'tlogintoyourtoolevery15days,askthemforfeedbackaroundday10andtrytore-engagethem. Iftheyhitamilestoneusingyourproductorservice,askthemforfeedbackafterthatmoment.Figureoutthekeymomentsthatmakeorbreakahappycustomerandaskforfeedbackatthosetouchpointstostrengthentherelationship. Sometimes,customerfeedbackcomesintheformofnegativecustomerreviews—inwhichcaseyou’llwanttorespondpromptlyandappropriately. Downloadourfreereviewresponsetemplatestorespondtonegativereviewsappropriatelyandincreaseyourchancesofretaininganddelightingthatcustomer. 5.Communicateproactivelywithcustomers. Buildrapportwithyourcustomersbycommunicatingwiththemproactivelysotheyviewyouasatrustedpartner.Periodicallyreachoutwithcontentyouthinkthey'llfindinterestingorhelpful,connectandengagewiththemonsocialmedia,andreachoutifissuesoroutagescropupontheproductsidesotheyknowtheycandependonyou. 6.Offerexclusiveperkstoexistingcustomers. Topreventfurtherchurn,youcanofferperkstoyourcurrentcustomers.Whileyoucouldpotentiallyinstitutearewardprogram,that’sabetterfitforretailbusinesses.Youcaninsteadoptforpersonalizedtouch-pointseveryonceinawhile,suchasanin-personcoffeechatorpersonalvisittotheiroffice. Ifyourbusinessissmall,youcanalsohavetheCEOpersonallycheckinwithexistingcustomerstofindouthowthey’redoing.Thisisalsoagreatopportunitytogetfeedback.Abusycustomermaynottakeasurvey,butiftheCEOasksthemiftheyhaveanycomments,thecustomermaybemorelikelytorespond. 7.Leveragefeedbackfromfreetrialcustomers. Churndoesn’thappenuntilyouloserevenueafteracustomerleavesyourbusiness.Butifsomeonedoesn’tpurchaseyourproductafterafreetrial,thatcanbecountedaschurn—metaphoricallyspeaking. Carryoutasurveyofthosewhodidn’tpurchaseyourproductafterafreetrial.Acustomerwho’salreadyleftthebusinesslikelywon’tanswermanyquestionsaboutyourproductorwhyitdidn’tworkforthem.Someonewhotookafreetrialandultimatelydidn’tendupmakingapurchasewillexpectasurveylink.They’vealsohadlittleinteractionwithyourbusiness,sothey’remorelikelytobefrank. Usethisfeedbacktoimproveyourproductandlearnwhatmakescustomers“churn”beforetheyevenbecomeapayingsubscriber. Pairthesetipswithcustomerretentionstrategiestolowerchurnrate. Now,youmightbewondering:whatdoeschurnratelooklikeinreallife,forrealcompanies?Let’stakealookatsomewell-knownexamples. ChurnRateExamples ManySaaScompanies,specificallyintheB2Cspace,publishtheirchurnratestoshowhowwelltheyretaincustomers.Usetheseexamplestoguideyourunderstandingofyourownchurnrate—whatitshouldlooklikeforyourbusinessandwheresomefamouscompanieslieonthespectrum. Netflix:2.5%MonthlyChurnRate Netflixhasoneofthelowestchurnratesinthevideostreamingindustry.Itsmonthlychurnrateisstrikinglylowat2.5%,meaningthatmorethan97%ofcustomerschoosetostaywithNetflix.Causesmayincludeitsexpansivecatalogofshowsanditswell-establishedbrandvoice. Disney+:4.3%MonthlyChurnRate Disneyhasalwaysavoidedbeingpartofotherstreamingservices,anditlauncheditsownservicetodistributeitsshowsonline.UsersflockeduponthereleaseofDisney+in2019,andnotmanyhaveleft.It’sthereforenosurprisethatDisney+’smonthlychurnrateisatalow4.3%. Spotify:4.8%MonthlyChurnRate Spotifyisapopularmusicstreamingservicethat’sknownforitspersonalizedrecommendationsandexpansivemusiclibrary.Ithasareportedchurnrateof4.8%. Hulu:5.2%MonthlyChurnRate HuluisoneofNetflix’sprincipalcompetitors.Well-knownforitsexclusiveTVshows,ithasa20%marketshareinthevideostreamingindustryanda5.2%churnrate. Peloton:8%YearlyChurnRate Pelotonhasa8%yearlychurnrate.Theexerciseequipmentandfitnesssubscriptioncompanymayenjoya92%retentionrateforbeingthefirstin-homecyclingfitnesssubscription.Itsstatusasthefirstofitskindhascementeditssubscriberbase. Adobe:10%YearlyChurnRate AccordingtoRobGiglio,formerVicePresidentofAdobe’sDigitalMedia,Adobehaslessthana10%yearlychurnrateandovera90%customerretentionrate. AppleTV+:15.6%MonthlyChurnRate AppleTV+’smonthlychurnrateisat15.6%.Someoutletshavereportedthatit’sashighas20%.Atechjournalistcalleditthe“mostunloved”ofApple’splatforms.Anotherhasarguedthatitscatalogis“tiny”andthatthecontentislargelynon-original,whichmaybethereasonwhyitschurnrateishighercomparedtoitscompetitors. Withalloftheseexamples,itmaybedifficulttopinpointwhatagoodchurnratelookslike. Whatisagoodchurnrate? Agoodor“acceptable”churnrateisfrom2%to8%,especiallyforB2CSaaSbusinessesthatofferself-servesolutions.Thelower,thebetter,oritcansignificantlyimpactyourMonthlyRecurringRevenue(MRR).ForB2BSaaSbusinesseswithhighaveragecontractvalues(greaterthan$1,000permonth),churnrateshouldbebelow2%. Below,wecovermorequestionsyoumayhaveaboutchurnrate. Whatisannualchurnrate? Annualchurnratereferstothepercentageofcustomerslostoverthecourseofayear.Tocalculateannualchurnrate,youwouldlookatthenumberofcustomersyouhadatthebeginningoftheyear,thenlookatthenumberyouhadattheendoftheyear. Subtractthosetwonumbers.After,dividethatbytheamountofcustomersyouhadatthestartoftheyear,andmultiplyby100. Whatismonthlychurnrate? Monthlychurnratereferstothepercentageofcustomerslostoverthecourseofamonth.Tocalculatemonthlychurnrate,dividethenumberofcustomersyoulostoverthemonthbythenumberofcustomersyouhadatthebeginningofthemonth.Multiplytheresultby100. HowcanItrackchurn? Trackingchurnovertimecanbedoneinanumberofways.Youcankeepaspreadsheetwithyourfindingsandvisualizeitusingthespreadsheet’sbuilt-indatavisualizationtool.YoucanalsouseadedicatedreportingdashboardsoftwaresuchasHubSpot’stoautomaticallycalculateandtrackchurn. Whatisthedifferencebetweenattritionandchurn? Customerattritionisthesameascustomerchurn.It’salsoreferredtoascustomerturnoverandcustomerdefection. CalculateChurnRatetoReduceCustomerTurnover Calculatingchurnratemayseemlikeanunpleasanttask,butit’scriticaltotrackittounderstandwhatmaybegoingwrongonacustomerservicelevel.Calculatecustomerchurnrateoverayearoramonth,improveyourcustomerservicesystems,investinyourcustomerservicereps,andwatchyourchurnratedecreaseexponentially. Editor'snote:ThispostwasoriginallypublishedinJanuary2018andhasbeenupdatedforcomprehensiveness. Topics: CustomerRetention TicketingSystem Don'tforgettosharethispost! RelatedArticles previous next 15SaaSCustomerRetentionStrategies(ThatActuallyWork) HowtoRetainCustomers&BeatChurninTimesofInflation[ConsumerData] 25CustomerServiceEmailTemplatestoSupport,Renew,&RefundCustomers HowtoCalculateCustomerLifetimeValue Here’sWhyCustomerRetentionisSoImportantforROI,CustomerLoyalty,andGrowth 12VoiceoftheCustomerMethodologiesToGenerateaGoldMineofCustomerFeedback WhatisAbandonmentRate?[&7WaysYouCanImproveIt] WhatIsaRetentionSpecialist?(AndWhyTheyMatter) 10CustomerRetentionMetrics&HowtoMeasureThem HowtoLetCustomersKnowAboutaPriceIncrease(WithoutMakingThemMad) Join64,500+Customer-FacingProfessionals ThanksforSubscribing! Close Getexpertinsightsstraighttoyourinbox,andbecomeabettercustomersuccessmanager.SubscribetotheServiceBlogbelow. Close We'recommittedtoyourprivacy.HubSpotusestheinformationyouprovidetoustocontactyouaboutourrelevantcontent,products,andservices.Youmayunsubscribefromthesecommunicationsatanytime.Formoreinformation,checkoutourPrivacyPolicy. PopupforFREECUSTOMERSERVICEMETRICSCALCULATOR FREECUSTOMERSERVICEMETRICSCALCULATOR FREECUSTOMERSERVICEMETRICSCALCULATOR CalculateyourNPS,CSAT,CAC,andmoreforfreewiththiscalculator. DOWNLOADFORFREE DOWNLOADFORFREE