How do you calculate the customer churn rate?


Quick Answer

The customer churn rate is calculated by dividing the total number of customers that a business lost in a month by the total number of customers within the same month. The figure used for the total number of customers may be the number of customers at the beginning or at the end of the period. A company can modify this approach to suit its business model.

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Full Answer

The best way to approach the calculation of the customer churn is by viewing it as a probability unique to each customer. Such a probability should be based on the number of days that a customer stayed before deciding to churn within any given month. For example, if a customer stayed for a period of 12 days then churned, his ratio will be one-twelfth. This ratio is then applied to all customers to generate the most accurate customer churn rate.

This method works efficiently for companies that sell subscription services, such as subscription television networks and publications. Customer days are the number of days that each customer was an active subscriber, which is used to determine the percentage of churns per day. The customer churn rate can also be used to calculate the average customer life and the survival rate.

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