Churn Rate is a metric that measures the percentage of customers who stop using a product or service over a specific period of time. It is used to measure the effectiveness of a company’s retention efforts and to identify areas where the company could improve its customer retention strategies. High churn rate indicates that a company is losing customers at an alarming rate, which can negatively impact its revenue growth.
The formula for Churn Rate is:
Churn Rate = (Number of Customers Who Churn / Number of Total Customers) * 100%
It is calculated by dividing the number of customers who have stopped using a product or service over a specific period of time by the total number of customers at the beginning of that period, and then multiplying by 100% to express the result as a percentage.
For example, if a company had 100 customers at the beginning of the month and 10 of them stopped using the product or service, the Churn Rate would be 10%.
It’s important to track Churn Rate over time and compare it against industry benchmarks and historical data, to identify areas where the company could improve its customer retention strategies. It’s also important to track Churn Rate by different segments, such as demographic, geographic, or behavior groups, in order to identify where the problem is and take action to reduce the Churn Rate.
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