Churn rate is a proportion of customers who stop paying for a product or service during a given time period. It’s the complete opposite of growth rate, making it one of the most important marketing and sales metrics for subscription-based companies. It’s a seemingly easy-to-understand metric. But the simple formula to calculate churn rate has some limitations and potential traps many marketers may not take into account. Also, contrary to popular How to Calculate belief, you can influence churn long before someone becomes a customer. There’s quite a lot to explore here.
In this article
You’ll learn the following: What makes churn rate so important? There are multiple reasons why keeping track of your churn rate and working with it can help to boost executive data your marketing performance. Well, five main reasons to be specific. 1. Direct revenue impact Churn rate is a decelerator of your growth rate. But unlike the growth rate, a certain percentage of churn is here to stay. Many fast-growing companies may fall into the trap of ignoring high churns when their growth is much higher, but it’s not a sustainable business model. A 15% churn rate may not seem that bad when a startup grows 200% year-over-year. But that growth rate will eventually fall, and the churn may not.
How to Calculate will
Sooner or later suffer from high churn rates even if they weren’t such a big problem initially. The sooner you start tackling your churn rate, the better. It has Text Services compounding effects. Let’s consider two companies with $1M ARR (annual recurring revenue) each and a similar growth rate of 25%. But they have different churn rates Influence your word-of-mouth marketing Word-of-mouth marketing (WoMM) is the process of influencing and encouraging natural discussions.
About a product, service, or company. I’m sure you’ve subscribed to some product or service because someone you trust told you about it. For this reason, WoMM can be one of the most powerful marketing channels. The fact that more than 14,000 new customers in 2020 told us they were referred to Ahrefs by their friends is the best proof of WoMM’s importance: Noticed a big spike in your monthly churn rate? Chances are you did something wrong that month.