October 28th, 2022
Understanding your churn rate can help you understand
What is a healthy churn rate? And how is churn calculated
The optimal monthly user churn rate is 2-5% and a 5-7% annual churn is considered healthy. Your goal should be to keep your user churn number as low as possible. Users can churn at any point in time, but a quick reduction of the user base is a red flag, and a sign that a business is incapable of retaining users.
What is User Churn Rate:
User churn rate is the percentage of a company’s total customers that stop doing business with the company over a specified period of time (Source). An example of this would be cancelling a subscription, or closing an account. Knowing your user churn rate is integral to your understanding various factors about your business, its performance and its sales.
When churn rate is evaluated alongside other key user metrics, it is a powerful tool to assess what your brand is doing well, and where it needs to improve. You can monitor your churn rate on an annual, quarterly, monthly or even weekly basis depending on the nature of your business. Once you determine your user churn rate, you can determine why users are leaving and implement user retention strategies to retain them.
To determine your company's churn rate, choose a period of time you want to measure and identify the following values:
User churn rate formula: (Y/X) x 100 = Z
Why are users leaving?
Here are some examples of why users choose to leave;
How can you reduce customer churn?
It is important to understand that everything your business does, can affect user churn. Examining the various data points, and calculating your user churn rate, can help you establish ways to prevent or reduce user churn. This will empower you, and your team to concentrate on growing your business, while also adapting to user needs.
User churn impacts every aspect of your business, because lost users equal lost revenue. It is critical to improve user retention and reduce churn, as it is generally more expensive to find new users, than to keep existing ones. Companies that lose users aren't just losing the revenue from those users, they are also increasing their costs to find new ones.
We are going to explore the various ways that user churn can impact your business, and how you can reduce churn and keep your business running smoothly, while increasing your return on investment. First, let’s look at what user churn is, and how you can measure it.
Connect with us today to understand how Predikat can help you understand your users, reduce user churn and help you grow your business.
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