How critical is Churn rate?

Ever walked out of a shop empty handed due to the vendor taking his own sweet time to attend you or the pricing is higher than it is worth? 

Here the vendor is losing a customer/ customers due to his negligence because of which he has lost the revenue he could have earned and that now must have profitable for his competitors. 

This is called CHURN in business.  

What is Churn? 

• Churn, also known as Churn rate, is a measurement of percentage of customers who cancel or choose not to renew their service subscriptions.  
• It is the measure of how many customers discontinue using a product or terminate doing business with an organisation. 
• It can also refer to the amount of revenue lost because of the exits. 
• The establishment’s services, customer satisfaction, pricing, duration, and competition may provide an insight into the increase/ decrease in churn rate. 

Online shopping sites like Amazon, Flipkart, Snapdeal etc. Might also lose its customers due to its customer service, delivery time, pricing or impaired products.  

Why is calculating customer churn rate critical? 

• Calculating customer churn rate is important because it requires more time and energy to grab a new client than to sell more to a prevailing customer.  
  This is an essential measure which can be the life-death for the business. 
• It provides clarity on the quality of the service provided by the business and its usefulness, which will be reflected in customer retention.  
• Its implication to a company is that it needs to get a picture of why it's clients are leaving and repair business.  
• It will put light on how a company is performing against its competitors and tweak the plan of action to amplify and fortify subscriber loyalty. 

How to Calculate Customer Churn? 

Two pieces of data are required to connect the puzzle of customer churn: 

• the number of customers at the start of the duration.  
• the number of customers at the at the end of the duration. 

The result is the number of customers that cancelled your subscription service or stopped buying your product. 

This formula can be observed to calculate the total churn rate for a month, quarter, or year:

What Is a Good Churn Rate? 

A business will always lose subscribers for one reason or another. Ideally, the best churn rate would be zero, as that would indicate a business is retaining its subscribers; however, that would seem too far-fetched. Some churn is unforeseen. 

However, churn rates higher than the company's growth rate could be a threat to subscription business, as that would imply problem with  

• Pricing 
• Service 
• product quality 
• Delivery  

or some other aspect of the customer experience. 

"...an acceptable churn rate is in the 5 – 7% range ANNUALLY, depending upon whether you measure customers or revenue." 

Lincoln Murphy, Sixteen Ventures 

 With MYFUNDBOX, subscription billing business have found the mountain climbing task of reducing churn easy due to its excellent customer service along with other utilities.  

Don't miss to checkout our customer sharing his fair share of experience with MYFUNDBOX! 

Reference: 

https://www.productplan.com/glossary/churn/ 

https://www.netsuite.com/portal/resource/articles/human-resources/customer-churn-analysis.shtml 

ASRA ANJUM 

Content writer 

MYFUNDBOX