How to Calculate the Churn Rate



This video shows how to calculate the churn rate.

The churn rate is the percentage of customers who stop being a customer during a period. For example, if 7% of the subscribers to an online movie rental business cancel their memberships each month, the monthly churn rate is 7%.

Companies closely monitor the churn rate; if it is increasing, this suggests customers are becoming increasingly dissatisfied.

The churn rate can be used to calculate the average length of time that a customer remains a customer. This is done by inverting the churn rate. For example, if a company has a monthly churn rate of 5%, this means the average customer remains a customer for 20 months (because 1/0.05 = 20).

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2 Comments

Carol_858918

Thank you for this lesson. I'm wondering–what span of time should elapse to come up with a good estimate of churn rate?

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