What is Churn Rate?
Churn rate, also known as customer attrition rate, measures how many customers a business loses within a defined period, typically monthly, quarterly, or annually. It’s usually expressed as a percentage and helps businesses understand how well they are retaining their customers.
The standard formula is:
Churn Rate (%) = (Customers Lost During Period ÷ Total Customers at Start of Period) × 100
For instance, if a business starts a month with 1,000 customers and loses 80 by month’s end, its churn rate is 8%.
While commonly associated with subscription-based models, churn rate is also widely applied in customer service and contact centre environments. It acts as an early warning signal of potential dissatisfaction, service issues, or competitive pressures.
Why Churn Rate Matters
A high churn rate means that more customers are leaving than staying, and that’s a direct hit to long-term profitability. Acquiring new customers costs significantly more than retaining existing ones, so keeping churn under control is essential for sustainable growth.
In contact centres, churn rate is often analysed alongside other performance indicators such as first contact resolution, wait times, and satisfaction scores. It can reveal whether service issues are contributing to customer departures, helping managers prioritise improvements in processes, agent training, or system performance.
Reducing churn not only improves customer lifetime value, it also boosts brand reputation, employee morale, and operational efficiency.
Churn vs. Retention
Churn is the inverse of customer retention. While retention focuses on who stays, churn focuses on who leaves. Ideally, you want to keep churn low and retention high both are vital metrics for evaluating service performance and customer experience.
It’s also important to segment churn data. Analysing who is leaving by product line, channel, customer profile, or interaction history allows for more targeted interventions and proactive customer engagement strategies.
Common Causes of Churn
- Poor or inconsistent customer service
- Long wait times or repeated call transfers
- Unresolved issues or service failures
- Better offers from competitors
- Lack of perceived value or product relevance
Understanding the root causes of churn helps businesses take specific, measurable actions to improve loyalty and reduce loss.
Related Terms
- Customer Retention
- Customer Lifetime Value (CLV)
- Net Promoter Score (NPS)
- Customer Satisfaction (CSAT)
- First Contact Resolution (FCR)