What is Churn Rate?

Generally reported on a monthly basis, the Churn Rate is calculated by dividing the number of lost customers by the total number of customers, multiplied by 100. Let’s say, last month you started with 400 customers and lost 20 by the end of the month. For that month, your Churn Rate is 5%.

(20/400) * 100 = 5%

Churn Rate is an important KPI for SaaS companies because it helps keep track of the amount of business that comes in and goes out, based on which you can predict the growth of your company. Additionally, keeping your existing customers is cheaper and easier than acquiring new ones, so knowing your Churn Rate can also give you an indication of how effective your marketing strategy is and how satisfied your customers are.

Depending on the main cause of your Churn Rate, you can take certain business decisions, such as:

• Measuring customer satisfaction on a regular basis and tracking your monthly NPS (Net Promoter Score).
• Improving website performance and optimization score, so users can navigate easily and have a seamless customer experience.
• Investing in a reliable support team.
• Investing in a brand loyalty program and implementing up-selling and cross-selling strategies.
• Personalizing communication that is triggered before customers churn, such as sending out a message asking if they would want a different offer.
• Managing customer expectations by promising less and delivering better.
• Offer promotions to ease the renewal decision.