Churn Rate


Churn rate, also known as attrition rate, measures the percentage of customers a company loses within a specified time frame. At SaaS software companies, it signifies the number of subscribers who either cancel or opt not to renew their subscriptions. A higher churn rate means that more customers are ending their relationship with the company, whereas a lower churn rate indicates better customer retention.The churn rate is computed using the formula: (Lost Customers ÷ Total Customers at Start) x 100. For instance, if a business begins the quarter with 100 customers and loses 10 by the end, the churn rate would be calculated as (10 ÷ 100) x 100, resulting in a 10% quarterly churn rate.

Why it matters

Churn rates shed light on the success of the company's marketing efforts and the levels of customer satisfaction. Retaining existing customers is generally more cost-effective than acquiring new ones.