Digital marketing term
Churn Rate
Churn Rate is the metric that expresses the percentage of customers who stop using a brand's service or product within a given period; it's a critical indicator of sustainable growth in subscription-based businesses.
Detailed explanation
This rate is calculated by dividing the number of customers lost by the total number of customers at the start of the period. A high rate can signal a problem with product-market fit, customer service, or pricing.
The cost of acquiring a new customer is typically much higher than retaining an existing one; that's why lowering this rate is one of the most effective ways to increase LTV and protect profitability.
When this metric is combined with cohort analysis, it becomes clear which customer segment or which signup period carries the highest churn risk.
Frequently asked questions
- Why is churn rate important?
- A high churn rate reduces the return on customer acquisition investment and threatens long-term growth.
- How is churn rate reduced?
- Improving customer experience, offering loyalty programs, and proactively tracking early warning signals to offer support all help lower churn rate.
Related terms
Internal links for the topic cluster — read these concepts together.
- LTV (Customer Lifetime Value)LTV is the estimated total revenue a customer will generate for a company over the course of their relationship with the brand; it's a core metric for evaluating long-term marketing return.
- Cohort AnalysisCohort Analysis is a method of comparing the behavior of groups of users who engaged with a brand within the same time period or around the same event, such as signup or first purchase, over time.
- Repeat Purchase RateRepeat Purchase Rate measures the share of customers who have previously purchased from a brand at least once and go on to make another purchase within a given period.
- CACAcquisition Cost is the total amount a business spends, on average, to win one new customer or conversion.