Churn Rate

Churn rate is calculated by dividing the number of customers lost during a period by the number of customers at the start of that period.

For example, if a streaming service starts the month with 20,000 subscribers and 600 cancel during the month, its monthly churn rate is 3%.

Churn is a critical measure for subscription businesses, telecoms providers, software companies and banks. Even a small monthly churn rate adds up. A monthly churn of 3% means the business loses roughly 30% of its customers over a year, so it must keep winning new customers just to stand still.

Reducing churn is often cheaper than winning new customers. Businesses analyse why customers leave, such as price, poor service, better alternatives or lack of use, and respond with improvements, loyalty rewards or better onboarding.

Churn can also be measured in revenue rather than customers. Revenue churn shows the share of recurring revenue lost from cancellations and downgrades, which can differ from customer churn if larger customers are more or less likely to leave.