Customer Churn Rate
Lower is better
How is Customer Churn Rate calculated?
To calculate your customer churn rate, take the current number of customers or customers at the end of a given time period; many organizations use the end of the month for this metric. Subtract that number from the number of customers you had at the beginning of the month or time period. Divide the result by the number of customers you had at the beginning of the same time period and multiply that by 100 to arrive at your customer churn rate.
What is Customer Churn Rate?
It is exponentially more expensive to acquire a new customer than to retain your current customers. Churn rate reflects the overall satisfaction that your customers have with your product or service. If you have a high churn rate, you may also have a low NPS.
The average churn rate ranges from 2% to 8%. Churn rates often reflect the age of a business, with newer companies often seeing higher churn rates. If you have a high churn rate, you'll want to invest more into user research and retention efforts.
A high churn rate is an indicator that your product doesn't deliver enough value to your customers. Companies often focus on user experience, sales techniques, or marketing to decrease this metric. However, many enterprise-level companies still pay top-dollar for software that is frustrating to use because it still delivers tons of value. Make delivering customer value the center of every team.
Why is Customer Churn Rate important?
Churn rate reflects how well your product or service is addressing the needs of your existing customers. A high churn rate is dangerous for subscription-based companies as the loss of revenue will have compounding effects.
Start tracking your Customer Churn Rate
Create a KPI for Customer Churn Rate to monitor it over time and an OKR to track your impact against it in Commonality.
Customer Acquisition Cost (CAC)
Ensure you're staying lean and scaling efficiently by measuring how much it costs to acquire a single customer.
Lifetime Value to Customer Acquisition Cost (LTV/CAC)
Measure this leading indicator of prediciting future growth, customer profitability, and the efficiency of your sales and marketing efforts.