Churn Rate ,Why it matters & How to Measure it.

What is Churn Rate?

When a consumer unsubscribes from your service, quits purchasing from you, or just ceases engaging with your brand, this is known as customer churn. To put it another way, your customer abandons you in favor of a competition.

Existing clients are worth significantly more than newly acquired consumers, according to research. According to Bain and Company’s Prescription for Cutting Costs study,they found increasing customer retention rates by 5% increases profits by 25% to 95%.

There are two kinds of actions a user takes related to churn: either lapsing in use (which means no more sessions being recorded) or uninstalling the app from the device itself. But essentially, churn rate is the number of users that leave your app in a given period of time.

Why it matters?

Why should you be concerned with churn rate? Because it inhibits growth.

It’s the leaky bucket analogy: you’re trying to refill your bucket by adding new users as uninstalled users drip out. And that gets expensive.

• Acquiring a new customer is 5–25x more expensive than retaining one
• Reducing churn by just 5% can boost profitability by 75%
• Improving retention has a 2–4x greater impact on growth than acquisition
• The probability of selling to an existing customer is 60–70%, but only 5–20% for a prospect

Churn Rate Benchmark

All apps will experience some churn, even the most successful ones

• After 30 days, worldwide retention on iOS and Android is only 3.7 %.
• After just launch, 25% of apps are uninstalled.
• The average US smartphone user spends 90% of their time on their top five apps.
• While total app sessions increased by 30% from September 2019 to September 2020 due to the COVID-19 pandemic, average retention rates fell by 12% over the same period. With so much competition, users are quickly abandoning apps that do not capture their attention.

For most industries, average eight-week retention is below 20 percent.

There’s still a lot of space for growth.

How to Measure Customer Churn Rate

A customer churn rate allows you to measure how many of your customers leave within a specific time period. Taken as a percentage, a customer churn rate is often measured on a monthly, quarterly, or annual basis.

Before you measure your churn rate, it’s important to first define what constitutes an actual churn event for your business. For a software as a service (SaaS) company, it makes sense to measure churn based on the length of a subscription/membership. You define a churn event as when a customer does not renew or cancels their subscription.

Once you’ve clearly established how you identify your churned customers, you can then calculate your churn rate.

Churn Rate= # of customers lost in a period/ #of customers at the beginning