All You Need to Know About Customer Churn

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Customer Churn & Churn Rate

Customer churn, also known as customer attrition, customer turnover, or customer defection, is a phenomenon that clients or customers of a business no longer make purchases or maintain partnerships.

Customer churn rate or customer attrition rate is the mathematical calculation of what percentage of customers stops making another purchase from a business. In data science modeling, churn rate is used when building a customer lifetime value model (LTV), and can also be used in marketing mix modeling (MMM) to measure return on marketing investment (ROI).

A basic formula of churn rate is:
Churn rate = number of customers lost in a period/ total number of customers in a period

Example:
5 buyer lost in June/ 200 total buyers in June = 2.5%

You can also measure churn rate regarding the starting or ending number of customers:
Churn rate = number of customers lost in a period/ total number of customers in the beginning
Churn rate = number of customers lost in a period/ total number of customers in the end

Example:
5 buyer lost in June/ 100 starting buyers from June 1 = 1%
5 buyer lost in June/ 300 ending buyers on June 30 = 1.7%

Related Topics

Customer acquisition
Customer retention
Marketing strategy

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