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What is the Churn Rate and how is it calculated?

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What is the Churn Rate and how is it calculated?

Measure the loyalty of your customers by calculating the Churn Rate to know how many of these are left with you and how many leave you to go with the competition. Today in I’m from Marketing we will see its formula to find out exactly the proportion of clients who abandoned us.

Capturing new customers is estimated to be about ten times more expensive than maintaining those that we already had in our senior vice president email list. In order to develop marketing strategies that allow us to retain customers, we first need to see an X-ray of the current state. For this the calculation of the Churn Rate is fundamental.

Some brands such as Harly Davison have managed to create a truly strong user community around to that lifestyle, for example, the need to own a brand bike. To get into the context, in the next section I discuss some of the results of a study on brand loyalty.

Point
The research carried out by Andema had 1009 surveys conducted in all the Autonomous Regions of Spain and taking into account the population of these, for which a weighting was made. The error is +/- 3.1%.

Based on the results, a positive relationship is observed between age and the degree of fidelity, which means that in general terms we find more infidel to brands among young people.
Women are more faithful than men in almost all categories except those that refer to female cosmetics.
In the cities of the intermediate size of the study, that is to say, those with between 50 and 100 thousand inhabitants, that is the groups with the most faithful consumers. about car brands
Those consumers in charge of making home purchases postulate themselves as more faithful than those who make individual purchases for the home
The group of respondents who declare to be a student seems to be more faithful to the brands in those groups of products and services where we are less faithful in a general line.
In addition, the study reflected the factors most in demand when evaluating a product / service according to the respondents. We must take into account the social desirability in the results. However, they serve for our starting point:

Churn Rate
The Churn Rate is a percentage that measures the rate of customer abandonment with respect to the service that is generally contracted by subscription. For example, telephone companies struggle to minimize their churn rate, which is synonymous with greater fidelity.
The CR formula is:

Churn Rate (CR): Customers that have failed in the period / Total customers of the period

The theory is always better understood with an example, so let’s see the practical application. In the following image we see the sales of a real service marketed by Internet, launched in a certain country in September:

The columns represent the clients that enter / stay month by month and differ according to the month they arrived. In this way we can see that in September 141 came and in February there were 114 of those who had hired in September. Also in October, 87 entered and one month later only one had failed (86). So on.

If we calculate the Churn Rate of each month (low / total customers) and we average, we obtain the monthly Chrun Rate of our service in the country. In this case, the Churn Rate is 3.20%.
Knowing the number of average clients that contract the service and the Churn Rate, we can calculate the average losses per month. In our example, there are 77 new clients and 10 monthly losses.