Churn

Churn—or customer attrition—is a measure of the percentage of customers (or revenue) that a business loses over a given period. It is one of the most important key performance indicators for any company with recurring revenue, since it is often significantly more expensive to acquire a new customer than to retain an existing one. High churn undermines growth no matter how many new customers a company acquires.

How do you measure churn?

Churn can be measured in different ways depending on what you want to understand:

  • Customer Churn: The percentage of customers who leave during the period.
  • Revenue churn: The percentage of recurring revenue lost, weighted by customer size.
  • Net churn: It also takes into account additional sales to existing customers and can be negative (which is a good thing).
  • Link to market penetration: Low churn is essential for profitable growth.

Common Causes of High Churn

  • Lack of customer value: The customer does not perceive the product or service as providing sufficient value.
  • Poor onboarding: Customers who don't get started quickly will never see the value.
  • Reactive Customer Service: They don't take action until the customer has already decided to leave.
  • Unclear go-to-market: They're selling to the wrong customers, who never get the full benefit.

Here's How an Interim CRO or Sales Manager Can Reverse the Trend

Churn is directly relevant to the roles of CROs and sales managers and is linked to the entire go-to-market strategy.

  • Root Cause Analysis: One Interim CRO identifies where and why customers are leaving.
  • Enhances the customer journey: One interim sales manager develops processes for onboarding, upselling, and proactive customer care.
  • Focus on the right customers: Experience in targeting sales toward customers who are highly likely to remain loyal.
  • Quick Start: Interim Search's process ensures that you have the right talent in place within 48 hours.

Frequently Asked Questions About Churn

What is a good churn rate?

It varies significantly across industries, business models, and customer segments. In general, companies with recurring revenue strive for the lowest possible churn, and the best ones achieve what is known as negative net churn, where additional sales to existing customers exceed the number of customers lost. The key is to compare against relevant benchmarks and track the trend.

What is the difference between customer churn and revenue churn?

Customer churn measures the percentage of customers who leave, while revenue churn measures the percentage of recurring revenue that is lost. Revenue churn often provides a more accurate picture, since the loss of a large customer carries more weight than the loss of a small one—something that customer churn does not capture.

Why is reducing churn more important than acquiring new customers?

Retaining an existing customer is usually significantly cheaper than acquiring a new one, and loyal customers also tend to buy more over time. With high churn, you also have to constantly replace lost customers just to stay where you are, which makes profitable growth much more difficult.

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