Churn & Retention
Who leaves, measured against the group you started with.
In your head, jot if needed · no calculator why?
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the idea
Churn is the share of the customers you started a period with who left during it. The denominator is always the starting group. Customers who join during the month don't change it, and they don't cancel out the losses: a business can grow while losing a fifth of its customers.
more of the idea
Retention is the other side: 10% churn means 90% retention. When churn repeats month after month, each month loses a share of whoever is left, so the losses shrink as the group shrinks.
techniques
Lost over the starting group
- Take the customers lost from the starting group.
- Divide by the number you started with, not the ending number.
- Multiply by 100. New sign-ups play no part.
A plant-care service starts the month with 80 customers. 6 of them cancel, and 15 new customers join. What is this month's customer churn rate, as a percent?
- 6 ÷ 80 = 0.075.
- 0.075 = 7.5%.
- The 15 new customers don't change it.
Answer: 7.5%
Keep a share each month
- The share kept is 1 minus the churn: 20% churn keeps 0.8.
- Multiply the customers by that share once for each month.
You start with 500 customers. Assume you lose 10% of whoever is left each month, with no new sign-ups. How many customers remain after 2 months?
- Each month keeps 0.9.
- 500 × 0.9 = 450.
- 450 × 0.9 = 405.
Answer: 405
watch out for
- Dividing by the ending count. With 50 at the start, 5 lost and 12 new, churn is 10%, not 5 out of 57.
- Netting the new customers against the losses. Churn counts only who left the starting group.
- Taking 10% of the original group every month. Month 2 loses 10% of a smaller group, so 1,000 becomes 810, not 800.
- For the month-end count, subtracting the sign-ups or adding the cancellations.
practice
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Monthly churn
worked example
A month starts with 40 customers. 7 of them cancel, and 24 new customers join. What is this month's customer churn rate, as a percent?
- Churn = customers lost from the starting group ÷ the starting group = 7 ÷ 40 = 17.5%.
- New customers don't change the denominator.
Answer: 17.5%
Customers at month-end
worked example
A month starts with 400 customers; 8 cancel and 35 sign up. How many customers are there at month-end?
- 400 − 8 + 35 = 427.
Answer: 427
Customers left after months of churn
worked example
You start with 10,000 customers. Assume you lose 10% of whoever is left each month, with no new sign-ups. How many customers remain after 2 months?
- Each month keeps 90% of the month before.
- 10,000 × 0.9 = 9,000; × 0.9 = 8,100.
Answer: 8,100