What Does ‘Churn Rate’ Mean Within Digital Marketing?

Google search results for "what is churn rate".
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Churn Rate Defined In Digital Marketing

In digital marketing, churn rate (also known as attrition rate) most commonly refers to the percentage of customers who decide to stop using a product or service, such as AWeber or ClickFunnels. HubSpot defines this metric as follows:

Customer churn rate is the percentage of your customers or subscribers who cancel or don’t renew their subscriptions during a given time period.

Churn is closely connected with the concept of customer churn – the natural cycle of acquiring and losing customers.

 

Calculation Of Churn Rate

According to HubSpot, over a period (e.g. a week, a month, or a quarter), the customer churn percentage is calculated in the following way:

  1. First, the number of customers acquired and lost (churned) over the time period is determined.
  2. The number of lost customers is divided by the number of acquired customers.
  3. The result is multiplied by 100%.

In a mathematical way, this calculation is expressed via the following formula:

 

Customer churn rate = (Lost Customers / Acquired Customers) x 100%

Several ways to calculate this measurement exist. For example, here’s the formula given by Salesforce:

Customer churn percentage calculation according to Salesforce.
Courtesy of Salesforce.com.

 

High customer churn percentages indicate customer dissatisfaction and signal the necessity of identifying issues in a business’s products or services.

Customers aside, the term “churn” may also be used in relation to revenues and employee turnover. Churn percentages for revenues and employees are calculated similarly to customer churn. Salesforce gives an example of revenue churn calculation:

Revenue churn percentage calculation according to Salesforce.
Courtesy of Salesforce.com.

 

Here is a video on the concept of “churn rate” in relation to SaaS companies by Dan Martell:

 

 

 

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