Churn Rate Definition:
Churn rate, also known as customer churn, is a measure of the number of customers who stop using a company's product or service over a given period of time. It is expressed as a percentage of the total number of customers at the beginning of the period.
For example, if a company has 100 customers at the beginning of a month and 10 of them stop using the company's product or service by the end of the month, the churn rate for that month would be 10%.
Why does churn rate matter?
High churn rates can be a sign of a problem with the product or service, the customer experience, or the business model, and they can have a negative impact on a company's revenue and profitability.
For subscription or technology businesses (i.e. SaaS), churn rate is an important metric in evaluating the performance of the business. Investors will typically expect to see information on churn rate as part of a business plan, or regular reporting.
Therefore, it is important for companies to monitor their churn rates and take steps to reduce them. This might involve improving the product or service, providing better customer support, or offering incentives to encourage customers to continue using the company's offerings.