What is churn rate?
Churn rate, also known as attrition rate, is a critical metric used by subscription-based and ecommerce businesses to measure the percentage of customers who cancel their subscription or stop purchasing within a given period. For instance, the annual churn rate calculates how many customers stop engaging with the business over the course of a year.
This metric is particularly valuable for understanding customer satisfaction and forecasting long-term business growth. If, for example, customers tend to churn shortly after redeeming a discount or free trial, it may indicate issues with retention strategies or a mismatch between marketing promises and the actual customer experience.
How to reduce churn rate
Minimising churn rate requires a focus on customer satisfaction, flexibility, and long-term engagement. Strategies include:
- Offering flexible subscriptions: Allowing customers to skip deliveries, pause their subscriptions, or customise their orders increases convenience and builds loyalty.
- Improving communication: Setting clear and accurate expectations around pricing, delivery times, and product value helps prevent disappointment and confusion.
- Empowering customers: Letting users manage their own subscriptions, payments, and preferences creates a sense of control and trust in the brand.
- Shifting to a relational commerce approach: Building ongoing, meaningful customer relationships rather than relying on transactional sales helps reduce churn and boost customer lifetime value.
By monitoring churn rate regularly and addressing the root causes of customer drop-off, businesses can retain more customers, improve their bottom line, and support sustainable growth.
