Churn rate is the percentage of customers who failed to reactivate their subscription during a period.
Always be conscious of the period being measured when talking about churn rate. Churn rate is usually talked about using either a monthly or yearly period. We always use monthly churn rate, and we use conversion formulas for subscriptions that are not billed monthly.
Acceptable churn rate can vary widely depending on your company's target market. B2B companies with high-value contracts should typically try to keep their monthly churn rate under 0.87%. Businesses that target consumers or have lower value contracts will tend to have much high churn rates. These companies tend to be in the 3% - 7% range.
How to use it:
- Churn rate is one of the most important metrics to monitor. It stands in direct opposition to growth. Always be working to lower your churn rate.
- Sudden spikes can be a sign of problems with your product.
- If you have plans with different billing periods (monthly, quarterly, yearly, etc.), then it is best to look at individual plan's churn rate instead of your overall churn rate.
How we calculate it:
- We divide the number of customers who churned by the total number of customers who were up for renewal during the month.
- We take into account the average billing frequency of the subscriptions that were up for renewal to generate your company's overall churn rate. We believe this provides a more accurate picture of your overall churn rate. However, it is best to look at the churn rate for individual plans if you have plans that use a wide variety of billing frequencies.
- We convert the churn rate for subscriptions that are not billed monthly to a monthly churn rate.