Churn refers to the rate at which customers or subscribers stop using a company’s product or service over a certain period of time. It is a critical metric for businesses, particularly those with subscription-based models like software as a service (SaaS), telecommunications, or media streaming services.

Churn can be expressed as a percentage and is typically calculated by dividing the number of customers lost during a specific period by the total number of customers at the beginning of that period. This provides insights into customer retention and the health of a company’s customer base.

There are two main types of churn:

1. Customer Churn: This refers to the loss of individual customers over a period of time. Customer churn can result from various factors such as dissatisfaction with the product or service, better offers from competitors, or changes in the customer’s circumstances.

2. Revenue Churn: Also known as dollar churn or revenue attrition, revenue churn measures the lost revenue from existing customers due to downgrades, cancellations, or reduced usage of additional services or features. It provides a more nuanced view of the financial impact of churn on a business.

Reducing churn is a key priority for companies as it directly impacts revenue and profitability. Strategies for reducing churn typically involve improving customer satisfaction, enhancing product or service quality, providing excellent customer support, and implementing retention initiatives such as loyalty programs or targeted offers. Analyzing churn trends and identifying the root causes of churn can help businesses develop effective retention strategies and ultimately improve customer lifetime value.