Definition

customer churn (customer attrition)

Contributor(s): Scott Shadley

Customer churn, also called customer attrition, is the number of paying customers who fail to become repeat customers. In this context, churn is a quantifiable rate of change that occurs over a specified amount of time. 

Organizations strive to measure, understand and minimize customer churn because the cost of acquiring new customers is significantly higher than the cost of customer retention. Churn can be voluntary or involuntary.

When customer churn is voluntary, it is the purchaser who makes the decision to stop buying the product or service. This may be because the customer no longer has a need for it or has decided to purchase the product or service from another vendor. Voluntarily churn is often caused by the customer's perception that the vendor's products to do not align with the customer's needs and/or values.

Customer churn can also be involuntary. In this case, it is the seller who decides not to continue a business relationship with the customer. Typically, this type of customer churn occurs because the customer has not met previous financial or logistical responsibilities.

If sales representatives and marketers can understand why customers churn, they can provide other stakeholders within the company with insight into how the organization's products and services can be improved.

Calculating churn rate

Customer churn rate measures the number of existing customers who fail to come back during a designated time period, as well as new customers who have been added during the designated time period but fail to make a repeat purchase.

Number of customers at beginning of month

100

Number of customers who did not return during the month

5

New customers gained during the month

50

New customers who did not return during the month

10

Total churns for month

5 + 10 = 15

Monthly churn rate

15 / 1000 = 0.015 or 1.5%

This was last updated in April 2019

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