Churn denotes the proportion of customers who leave a company in a given period. The term is used especially in subscription and service-based businesses, where customer loyalty and retention are of decisive importance for growth and earnings.
What does churn mean?
When you talk about churn, you typically refer to kundeafgang. It is thus the opposite of customer approach. Churn can be measured in different ways – both in the number of customers and in lost revenue.
- Kunde-churn: Number of customers who terminate or leave the company.
- Revenue churn: The value of the subscriptions or contracts that are terminated.
How is churn calculated?
A simple formula to calculate churn for a period is:
Churn rate = (Number of customers lost during the period ÷ Number of customers at the start of the period) × 100
Example: If a company has 1,000 customers at the start of the month, and 50 of them cancel their subscription during the month, the churn rate is:
(50 ÷ 1.000) × 100 = 5 %
Why is churn important?
High churn can be a sign of dissatisfied customers, competitive pressure or a lack of value in the product. Since it is often more expensive to acquire new customers than to retain existing ones, many companies work actively to reduce their churn.
Methods to reduce churn
- Improved customer service and support.
- Ongoing customer feedback and analyses of reasons for termination.
- Loyalty programs and incentives to stay.
- Customized offers and flexible subscription models.
Churn i praksis
In SaaS companies and other subscription businesses, churn is a key KPI. Investors, management and sales departments keep a close eye on churn, as a high churn rate can erode growth even in companies with many new customers.