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What is churn rate?

churn rate
noun

Churn rate, also referred to as attrition, is a key performance indicator that quantifies the pace at which a company loses its customers. This metric is influenced by a multitude of factors and serves as a vital measure to assess customer retention and overall business health.

How does the churn rate (attrition) work?

Churn rate can be categorized into two main types: voluntary churn and involuntary churn.

Voluntary churn occurs when customers make a deliberate decision to discontinue product usage or downgrade to a free version. To mitigate this, strategies such as email reminders, manual renewal offers, adjusting cancellation processes, soliciting customer feedback or transitioning customers into auto-renewal plans are often employed.

Involuntary churn, on the other hand, occurs when a subscription is terminated without any action taken by the customer. This is frequently a result of failed payment authorizations. Payment failures can occur for various reasons, and addressing them effectively involves approaches like using account updater services, managing dunning processes, and implementing intelligent payment routing systems to proactively prevent and resolve payment issues.