Churn rate, often referred to as attrition rate, is a business metric that calculates the percentage of customers who stop using a company’s products or services during a particular time frame. To determine the churn rate, one takes the number of customers lost during the period and divides it by the total number of customers at the beginning of the period. This figure is then multiplied by 100 to express it as a percentage. The churn rate is a significant indicator of customer satisfaction and loyalty and is particularly relevant in industries where revenue is heavily dependent on subscription-based services. A high churn rate suggests that a business may be facing issues with customer retention, which could be due to various factors such as poor product quality, inadequate customer service, or strong competition. Conversely, a low churn rate implies that customers are satisfied and less inclined to switch to a competitor. Monitoring churn rate is crucial for businesses as it can impact revenue and profitability. It also helps companies to develop strategies to improve customer retention, identify areas for product or service enhancement, and better understand customer needs and preferences.
