What is churn? Churn meaning for a subscription business

Churn, in one sentence

Churn is customers leaving. In a business that charges every month or every year, churn is the people who cancel or stop paying during a stretch of time, and a customer who has left is said to have churned.

The word comes up most with software sold by subscription, because there the customers you keep matter as much as the ones you win. A shop sells something once. A subscription has to be earned again every month.

Churn rate

Churn rate turns churn into one number you can watch: the share of the customers you had at the start of a month who left during it. If you began the month with 200 customers and 9 cancelled, that month's churn rate is 4.5%.

The churn rate calculator works it out for you, along with what a monthly rate adds up to over a year and how much of your monthly revenue left with those customers.

Voluntary and involuntary churn

Not everybody who churns decided to leave.

• Voluntary churn is a customer choosing to cancel. Maybe the product didn't do what they hoped, maybe they stopped needing it, maybe the price stopped making sense.
• Involuntary churn is a customer who never meant to go. Their card expired or was declined, the payment failed, and the subscription ended without anybody deciding anything.

The two need different fixes. Voluntary churn is about the product and the first weeks with it. Involuntary churn is often just an email nobody sent: a short note the same day the payment fails, with a link to update the card. There is a failed payment email template for exactly that.

Churn and attrition

Attrition is the older, broader word for people gradually leaving, and you hear it about staff as often as customers. Churn is the word subscription businesses use, usually with a number and a time period attached. When somebody talks about customer attrition, they almost always mean churn.

What churn tells you

A churn rate on its own says little. It's most useful compared with itself: this month against last month, or customers who joined in spring against customers who joined in summer. If churn jumps after a price change or a redesign, that's worth knowing.

It also helps to look at when people leave. Customers who cancel in their first month usually never got going, which points at the first days after sign-up. Customers who leave after a year often outgrew the product or found a cheaper one.

What lowers it

Most of what lowers churn is keeping in touch at the moments that matter, rather than anything clever:

• The first days. People who never get to the point of the product are the likeliest to leave. A plain email the day after sign-up, from you, asking what they hoped it would do, finds out early. See activation emails.
• A failed card. Email the same day, before the payment provider's retries run out.
• The day they cancel. Ask why, in one line. The answer tells you what to fix, and sometimes it fixes things on the spot. See the cancellation survey email template.
• After they've gone. A short note a few weeks later, when something they asked for has shipped. See win-back emails.

Kicklace writes and sends these for you from what each customer did, and nothing goes out until you switch it on. You can try the demo without signing up.

FAQ

What does churned mean?

A churned customer is one who has left: they cancelled, or they stopped paying and the subscription ended.

What is churn in business?

The customers a business loses over a period of time. It is said most about subscriptions, where losing a customer means losing every future payment from them too.

Is churn rate monthly or yearly?

Either, as long as you say which. Most small subscription businesses track it monthly, because a monthly number moves fast enough to notice a change. A yearly rate can be worked out from a monthly one with the churn rate calculator.

Is churn the same as retention?

They are two sides of the same thing. Churn counts who left and retention counts who stayed. See what customer retention is.