Churn

Churn, in a business context, refers to the rate at which customers or subscribers discontinue their relationship with a company over a given period. It is a key metric for subscription-based models where ongoing revenue depends on retaining users. Churn can be measured at the level of customers (logo churn) or revenue (revenue churn).

Customer churn rate is typically calculated as the number of customers who cancel or do not renew during the period divided by the number of customers at the start of the period. Revenue churn, or churned revenue, measures the loss of monthly recurring revenue (MRR) or annual recurring revenue (ARR) due to cancellations and downgrades, relative to starting revenue. Distinctions are made between gross churn, which counts only losses, and net churn, which subtracts any revenue gained from existing customers through expansions, upsells, or price increases.

Churn can be voluntary (a customer chooses to discontinue) or involuntary (for example, payment failures or deactivations). Factors that influence churn include product value, pricing, customer support, usage patterns, and competitive alternatives. Companies often analyze usage data, engagement scores, and renewal likelihood to predict churn and target interventions.

Management efforts aim to reduce churn by improving onboarding, increasing product value, offering flexible pricing, and implementing proactive customer success programs. Since retaining existing customers is frequently cheaper than acquiring new ones, churn rates are central to revenue forecasting and growth planning. Limitations include differing definitions and calculation methods across industries, which can complicate benchmarking.