Churn rate, also known as the attrition rate, is the total percentage of your customers or subscribers who completely stop paying for your product or service. In other words, it shows customers who have been acquired by your competitors. It is usually calculated annually but in some cases, businesses keep a check on churn rate periodically.
It is an important pirate metric in the AARRR framework, especially for businesses whose customers pay on a recurring basis for a product or service. To calculate the churn rate, divide the difference in the total number of customers at the beginning and end of a defined time period with the total number of customers at the beginning of the time period.
Churn Rate = Total of customers at the beginning – Total # of customers at the end x 100
Total #of customers at the beginning
For example, you have 2000 customers at the beginning of the quarter, and at the end of the quarter, you have 1500. Your churn rate for that quarter is
Churn Rate = 2000 – 1500/ 2000 * 100 ⇒ 25%