Churn Rate Meaning & Examples
Definition
Churn rate is the percentage of customers who stop buying from a store or cancel a subscription within a given period. It measures how quickly you are losing customers compared to the ones you are keeping.
Good or Bad?
Good, when the churn rate is low, showing customers are loyal and continue purchasing.
Bad, when the churn rate is high, meaning customers are leaving faster than new ones are joining.
Why does it matter?
Because churn rate directly affects long-term revenue and growth.
Acquiring new customers is more expensive than retaining existing ones, so reducing churn protects profitability.
Common Mistakes
- Ignoring the reasons why customers leave.
- Focusing only on acquisition while neglecting retention.
- Not following up with inactive or one-time buyers.
- Overlooking subscription management in recurring revenue models.
How to Improve It?
- Collect feedback to understand why customers leave and address it.
- Offer loyalty programs, discounts, or perks to repeat buyers.
- Personalize communication with targeted emails and product recommendations.
- Monitor churn regularly and act on patterns quickly.
Recommended Plugin
Wishlist for WooCommerce by WPFactory.
This plugin helps reduce churn by keeping customers engaged with saved products, encouraging them to return and complete purchases.
Real-World Example
A WooCommerce subscription box service notices a churn spike after three months. They introduce a loyalty discount for customers who stay beyond three months, lowering churn significantly.
Related Terms
FAQs
How is churn rate calculated?
Churn Rate = (Customers Lost ÷ Customers at Start of Period) × 100.
What is a good churn rate for eCommerce?
It varies by industry, but lower is always better. Subscription businesses often aim for less than 5% monthly churn.
Is churn rate the same as retention rate?
No. Churn rate measures how many customers leave, while retention rate measures how many stay.
