What is customer churn rate and how can you calculate it?

2 Why customer churn rate matters

Customer churn rate matters because it affects your customer lifetime value (CLV), which is the total revenue you can expect from a customer over their relationship with you. A high churn rate means that you are losing customers faster than you are acquiring them, which reduces your CLV and your profitability. A low churn rate means that you are keeping your customers loyal and happy, which increases your CLV and your revenue potential. Customer churn rate also indicates how well you are delivering value and meeting customer expectations, which are essential for building trust and reputation.

4 How to measure the impact of customer churn rate

Measuring the impact of customer churn rate is not only about tracking the number or percentage of customers who leave, but also about understanding the reasons behind their departure and the consequences for your business. To measure the impact of customer churn rate, you can look at several metrics, such as churn reason, churn cost, churn rate by cohort, and customer retention rate. Churn reason can be collected through surveys, interviews, or exit feedback. Churn cost is the amount of money you lose due to customer churn; it can be calculated by multiplying your average revenue per customer by your churn rate. Churn rate by cohort helps identify which segments are more or less likely to churn and why. Customer retention rate is the opposite of customer churn rate; it measures how many customers you keep over a given period of time and can be calculated by subtracting your churn rate from 1.

5 How to improve your sales development with customer churn rate

Customer churn rate is not only a metric that reflects your past performance, but also a tool that can help you improve your future sales development. By analyzing your customer churn rate and its impact, you can identify and target ideal customers who are more likely to stay with you, optimize your sales process and value proposition to align with customer needs and expectations, enhance customer experience and relationship to provide more value and benefits, increase customer loyalty and advocacy to generate more referrals and testimonials, and reduce customer acquisition cost while increasing customer lifetime value to boost profitability and growth.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?