Churn rate is the percentage of customers, or recurring revenue, a business loses over a given period, used as a key indicator of customer retention and the overall health of an ongoing customer relationship.
How churn rate works
Customer churn rate is calculated as the number of customers lost divided by the number of customers at the start of the period, multiplied by 100. Revenue churn rate instead tracks lost recurring revenue, which can tell a different story if the customers leaving are larger or smaller than average. Businesses typically track churn monthly or annually, segmenting the figure by customer type, product or acquisition channel to spot patterns, and use it alongside Customer Lifetime Value to understand the financial impact of retention efforts.
How UK businesses use churn rate
- A subscription business calculates its monthly churn rate to track how many customers cancel their subscription each month relative to its total customer base.
- A company distinguishes customer churn rate from revenue churn rate, since losing a small number of high-value customers can affect revenue more than losing a larger number of low-value ones.
- A customer success team investigates which customer segments have the highest churn rate to identify common reasons customers in that segment leave.
- A business tracks churn rate alongside Customer Lifetime Value to understand how retention initiatives are affecting long-term revenue, not just short-term customer counts.
How Advantage supports churn rate tracking
Advantage helps businesses track churn rate within Dynamics 365 and Power BI, segmenting the data by customer type and product so retention efforts can be targeted where they will have the greatest impact.
Frequently Asked Questions
What is the difference between customer churn rate and revenue churn rate?
Customer churn rate measures the percentage of customers lost, while revenue churn rate measures the percentage of recurring revenue lost, which can differ significantly if the customers leaving are larger or smaller than average.
How often should churn rate be measured?
Most businesses track churn monthly and annually, since monthly tracking helps spot emerging problems quickly while annual figures support longer-term trend analysis.
Is a low churn rate always a good sign?
Generally yes, but it should be considered alongside other metrics such as Customer Lifetime Value and customer acquisition, since a low churn rate combined with slow new customer growth can still limit overall business growth.
