What is customer churn rate?
Customer churn rate, often referred to simply as "churn," measures the percentage of customers who stop using your product or service during a given timeframe. This metric is important for startups as it provides a good proxy for customer satisfaction and the overall health of the business. A high churn rate may indicate issues with your product, service quality, or customer engagement strategies.
How do you calculate customer churn rate?
To calculate your churn rate, use the following formula:
Churn Rate = (Customers at Start / Customers Lost) × 100
For example, let's say a subscription-based business starts the month with 500 customers and loses 50 during that period. Using the calculation above, their churn rate would be 10%.
Tips for reducing churn rate
If you have a high customer churn rate or are just looking to optimize it further, here are a few tactics you can implement to improve your retention rates:
- Action customer feedback: Actively seeking out and actioning feedback is the first step in creating a sense of value for customers. Whether through direct community, surveys, or some other medium, regularly solicit feedback from customers to identify common pain points and areas for improvement.
- Improve your onboarding processes: One of your earliest touch points—your onboarding process—should be as seamless as possible. Ensure that new customers understand how to use your product effectively and provide them with resources to help them succeed long-term.
- Monitor customer engagement: Keep track of how often customers use your product. If you notice a decline in usage, reach out to those customers proactively to understand their challenges and offer help.
- Provide best-in-class customer support: If a customer reaches out to you with an issue, be sure to respond as quickly as possible with a solution. The longer you leave customers waiting, the more you risk them churning over time.
Rho is a fintech company, not a bank. Checking and card services provided by Webster Bank, N.A., member FDIC; savings account services provided by American Deposit Management, LLC, and its partner banks.
Note: This content is for informational purposes only. It doesn't necessarily reflect the views of Rho and should not be construed as legal, tax, benefits, financial, accounting, or other advice. If you need specific advice for your business, please consult with an expert, as rules and regulations change regularly.