Churn Rate Calculator
The churn rate refers to the percentage of subscribers or customers who have canceled their subscriptions or stopped using the product/service of a company over a given period.
Calculating the churn rate helps understand how the customers use the product/service and identify the effectiveness of the customer retention strategies.
What Is the Churn Rate in Sales?
Customer churn rate, also known as attrition rate, describes the percentage of customers or subscribers that a company lost due to subscription cancellations, non-renewals, or account downgrades in a given time period. A low churn-rate increases the ACV and lowers CAC.
How to Calculate Churn Rate?
Here’s how teams can calculate Churn Rate:
Churn Rate = [ (Lost Customers ÷ Total Customers at the Start of Time Period) * 100 ]
For example, your OTT platform had 300 subscribers at the beginning of the last quarter. However, by the end of the quarter, you only have 210 subscribers left due to the non-renewal of subscriptions.
In that case, your quarter's churn rate would be
Customer churn rate = [ (Subscribers beginning of the month – Subscribers end of the month) / Subscribers beginning of the month ] * 100
Churn Rate = [ (300-210) / 300 ] *100 = 30%
Why Does Churn Rate Matter In Sales?
Calculating the churn rate is essential because it helps understand how the customer views your product/service.
Your churn rates give a better understanding of your marketing efforts and the overall satisfaction of your customers. Besides, acquiring customers is costlier than retaining the existing ones. So when a company loses customers, they are losing revenue and have to bear the cost of acquiring new ones.
Understanding the churn rate in your company and figuring out why customers leave will help your company better adapt to your buyer’s needs. This will help build long-term customer relationships, a start towards building a profitable business.
5 Tips to Reduce Customer Churn Rate
Here are five ways you can aim to reduce the churn rate.
#1: Understand Why Your Customers Are Leaving
Customers have reason to leave, and the best way to find out is by conducting surveys, gathering feedback, and taking interviews, to name a few.
#2: Know the Signs That a Customer Is At-Risk Of Leaving
There are several signs that could indicate a customer is at risk of leaving. For instance, when was the last time they visited your website? Are they returning products frequently? Were they satisfied with the customer support?
#3: Improve Customer Service
Customers are likely to stop doing business with a brand if they have one negative experience with customer service. If you want to gain customer loyalty, you need to offer personalized service at multiple touchpoints and invest in technology that can help resolve their grievances faster.
#4: Ensure That You Are Targeting the Right Audience
If you notice a higher churn rate than usual, it might be time to revisit your marketing efforts. The chances are you are attracting the customer segments that might not be the right fit for your product or service offer.
#5: Build a Customer Loyalty Program
If you want to retain your customers, offering incentives to them from the start is essential. Create a loyalty program where they earn redeemable points each time they make a purchase, give out discount coupons for reaching milestones, or other rewards that they look forward to.
Determine your company's churn rate with this Excel/Google Sheet template. Track how many customers you're losing over time with our churn rate calculator, so you can take action and improve your retention strategies.
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