Terms

Churn

Churn, also known as the rate of attrition, is the percentage of customers who stop doing business with a company over a specific period. It is a critical metric for evaluating a company's health, reflecting its ability to retain clients and the perceived value of its offerings. While most often associated with subscribers, the term can also apply to the rate at which employees leave an organization.

Causes of Churn

Customers often leave due to core product issues, like poor quality, bugs, or a frustrating user experience. A mismatch between features and customer needs is another major factor. If the price is perceived as too high for the value delivered, customers will seek alternatives.

Poor customer service is also a significant driver of churn. In competitive markets, the availability of alternatives makes it easy for clients to switch. A lack of engagement or a damaged company reputation can also push customers away.

Impact of Churn on Business

High customer churn can have devastating effects that ripple throughout a business, impacting more than just the bottom line. It serves as a critical indicator of a company's financial health and long-term viability. The consequences of a high churn rate are multifaceted and severe.

  • Revenue: Directly reduces recurring income and overall profitability.
  • Growth: Stalls or reverses expansion by offsetting new customer acquisition.
  • Costs: Increases spending on marketing and sales to replace lost customers.
  • Profitability: Shrinks margins since retaining customers is far cheaper than acquiring new ones.
  • Reputation: Damages brand image and reduces valuable word-of-mouth referrals.

Churn vs. Attrition

While often used interchangeably, the terms 'churn' and 'attrition' carry different connotations depending on the business context.

  • Churn is primarily used for the rate at which customers cancel subscriptions, especially in SaaS and telecommunications. It's a key metric for gauging product satisfaction and financial health. For both enterprises and mid-market companies, a high churn rate signals issues with product-market fit or customer service, directly impacting revenue and growth forecasts.
  • Attrition is more commonly applied to employee turnover, helping HR departments analyze retention patterns and organizational health. While it can describe customer loss, its main advantage is in highlighting internal issues like management quality or compensation, a crucial consideration for companies of all sizes looking to maintain a stable workforce.

Strategies to Reduce Churn

Reducing churn requires a proactive approach focused on enhancing customer value and experience. By understanding why customers leave, businesses can implement targeted strategies to improve retention. These efforts not only secure revenue but also build long-term loyalty.

  • Onboarding: Ensure customers quickly understand and derive value from your product through effective training and support.
  • Service: Provide exceptional, multi-channel customer support to resolve issues promptly and build trust.
  • Feedback: Actively solicit customer input through surveys and interviews to identify and address pain points.
  • Engagement: Keep customers invested with valuable content, product updates, and proactive communication.

Measuring Churn Rates

Measuring churn rate involves calculating the percentage of customers lost over a specific timeframe. While the basic formula is simple, consistency in measurement is key to tracking performance accurately over time. This metric provides a clear snapshot of customer retention and business health.

  • Formula: Divide the number of customers lost during a period by the total number of customers at the start of that period.
  • Timeframe: Define a consistent period for measurement, such as monthly, quarterly, or annually, for accurate comparisons.
  • Consistency: Using the same calculation method every time is crucial for reliable tracking and identifying trends.

Frequently Asked Questions about Churn

What is considered a good churn rate?

A "good" churn rate varies by industry and customer segment. For SaaS companies targeting small businesses, 5-7% annually is often seen as acceptable. For enterprise clients, however, the target should be much lower, ideally under 1% annually, reflecting higher contract values.

How is customer churn different from revenue churn?

Customer churn measures the percentage of customers lost. Revenue churn, or MRR churn, measures the percentage of monthly recurring revenue lost. The latter provides a more accurate financial picture, as it accounts for the varying contract values of lost customers.

Is it possible to have zero churn?

Achieving zero churn is highly unlikely and often unrealistic. Some customer loss is inevitable due to factors outside your control, like business closures or strategy shifts. The goal is to minimize preventable churn through excellent service and product value, not eliminate it entirely.

Other terms

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B2B Leads

Learn about B2B leads, including identifying quality B2B leads, generating B2B leads effectively, & B2B leads vs. B2C leads: understanding the differences.

B2B Leads

Revenue Operations (RevOps)

Revenue Operations (RevOps) is a business function that aligns a company's sales, marketing, and customer service teams to drive predictable revenue.

Revenue Operations (RevOps)

Programmatic Advertising

Programmatic advertising uses AI and real-time bidding to automate the buying and selling of digital ad space, targeting specific audiences.

Programmatic Advertising

Chatbots

Chatbots are AI-powered programs that simulate human conversation. They interact with users via text or voice, typically for customer support.

Chatbots

Demand Capture

Demand capture is the strategy of engaging potential customers who are already actively looking for a solution that your company provides.

Demand Capture

X-Sell

X-Sell, or cross-selling, is a sales strategy of selling additional, related products or services to an existing customer base.

X-Sell

A/B Testing

A/B testing is a method of comparing two versions of something, like a webpage or email, to determine which one performs better with your audience.

A/B Testing

Funnel Analysis

Funnel analysis is a method for understanding the steps users take to complete a goal, revealing where they drop off in the conversion process.

Funnel Analysis

Sales Funnel

A sales funnel is a model illustrating the customer's journey from initial awareness to the final purchase, narrowing down leads at each stage.

Sales Funnel

Accessibility Testing

Accessibility testing is a software testing method that verifies an application is usable by people with disabilities, like vision or hearing loss.

Accessibility Testing

Call Disposition

Call disposition is the process of labeling the outcome of a call. It helps sales teams track interactions and plan their next steps effectively.

Call Disposition

Cloud Storage

Cloud storage is a service model where data is stored on remote servers and accessed from the internet, rather than on a local drive.

Cloud Storage

Touches

Touches are the individual interactions you have with a prospect throughout the sales process, from emails and calls to social media messages.

Touches

Customer Engagement

Customer engagement is the ongoing, value-driven relationship a business builds with its customers to foster brand loyalty and awareness.

Customer Engagement

Sales Development Representative (SDR)

A Sales Development Representative (SDR) is a sales specialist who finds and qualifies new leads, building a pipeline for the sales team.

Sales Development Representative (SDR)

Pipeline Coverage

Pipeline coverage is a key sales metric. It's the ratio of your total open pipeline value to your sales quota for a specific period.

Pipeline Coverage

Serverless Computing

Serverless computing is a cloud model where the provider manages servers, so developers can focus on code without worrying about infrastructure.

Serverless Computing

Customer Churn Rate

Customer churn rate is the percentage of subscribers or customers who cancel their service with a company during a given time frame.

Customer Churn Rate

Customer Loyalty

Customer loyalty is a customer’s devotion to a brand, shown by their repeat purchases and engagement, driven by positive experiences and trust.

Customer Loyalty

Competitive Intelligence (CI)

Competitive intelligence (CI) is the ethical gathering and analysis of market data to inform strategic business decisions and gain an advantage.

Competitive Intelligence (CI)

Sales Pipeline Velocity Formula

The sales pipeline velocity formula is a key metric that measures how quickly deals move through your pipeline and turn into revenue.

Sales Pipeline Velocity Formula

User Interface

A User Interface (UI) is the point where humans and computers interact. It encompasses all visual elements like screens, icons, and buttons.

User Interface

Guided Selling

Guided selling simplifies complex sales by giving reps step-by-step instructions and data-driven recommendations to close deals faster.

Guided Selling

Firewall

A firewall is a digital barrier that protects a network by monitoring and controlling traffic, blocking unauthorized access and malicious content.

Firewall

B2B Intent Data Providers

Learn about B2B intent data providers, including evaluating intent data quality, leveraging intent data for growth, & B2B intent data: key providers comparison.

B2B Intent Data Providers

Sales Dashboard

A sales dashboard is a visual tool that centralizes and displays key sales data, metrics, and KPIs to help teams track performance and goals.

Sales Dashboard

B2B Data Solutions

Learn about B2B data solutions, including unlocking the power of B2B data, & key components of effective B2B data solutions.

B2B Data Solutions

Compliance Testing

Compliance testing ensures a product or system adheres to specific regulations, standards, or policies set by governing bodies or organizations.

Compliance Testing

Decision Maker

A decision-maker is an individual with the authority to make significant choices for a company, especially regarding purchases or strategy.

Decision Maker

Sales Training

Sales training is the process of honing a salesperson's skills and knowledge to enhance their effectiveness and drive sales success.

Sales Training

Service Level Agreement

A Service Level Agreement (SLA) is a contract defining the level of service between a provider and a client, including metrics and penalties.

Service Level Agreement

Brand Loyalty

Learn about brand loyalty, including how to build brand loyalty, benefits of brand loyalty, measuring brand loyalty, & strategies for increasing loyalty.

Brand Loyalty

DevOps

DevOps is a culture and set of practices that merges software development (Dev) and IT operations (Ops) to shorten development cycles.

DevOps

Lookalike Audiences

Lookalike audiences are groups of potential customers who share similar characteristics and behaviors with your existing, high-value customers.

Lookalike Audiences

Cloud-based CRM

A cloud-based CRM is a customer relationship management tool hosted online, letting teams access and manage customer data from anywhere.

Cloud-based CRM

On-premise CRM

An on-premise CRM is a system hosted on a company's own servers, offering complete control over data, security, and system maintenance.

On-premise CRM

Marketing Qualified Opportunity

A Marketing Qualified Opportunity (MQO) is a lead vetted by marketing as a genuine sales opportunity, ready for direct sales follow-up.

Marketing Qualified Opportunity

Marketing Qualified Account

A Marketing Qualified Account (MQA) is a target company that has shown significant engagement, indicating it's ready for the sales team to pursue.

Marketing Qualified Account

Email Deliverability

Email deliverability is the ability for your emails to successfully land in your recipients' inboxes instead of their spam folders.

Email Deliverability

Lead Generation Tactics

Lead generation tactics are the strategies and methods used to attract potential customers and convert them into leads for your sales team.

Lead Generation Tactics

Serviceable Obtainable Market

Serviceable Obtainable Market (SOM) is the portion of the market you can realistically capture with your current resources, sales, and marketing.

Serviceable Obtainable Market

Custom API integration

A custom API integration is a bespoke connection between software, enabling them to communicate and share data to meet unique business requirements.

Custom API integration

Product Recommendations

Product recommendations are a marketing strategy that uses customer data to suggest relevant products, boosting sales and customer engagement.

Product Recommendations

BANT Framework

Learn about BANT framework, including implementing BANT in sales strategy, advantages of the BANT methodology, & BANT vs. other qualification models.

BANT Framework

Revenue Intelligence

Revenue intelligence is the process of collecting and analyzing customer data to provide insights that help sales teams make smarter decisions.

Revenue Intelligence

Closed Won

Closed Won is a CRM status for a sales deal that has been successfully concluded, resulting in a signed contract and a new customer.

Closed Won

No Spam

“No Spam” is a commitment to sending only relevant, solicited messages. It means avoiding bulk, unwanted emails to respect the recipient's inbox.

No Spam

Analytical CRM

Analytical CRM analyzes customer data to uncover actionable insights, helping businesses make smarter decisions and improve customer interactions.

Analytical CRM

Sales Operations

Sales Operations, or Sales Ops, streamlines sales processes, manages tools, and analyzes data to help sales teams sell more effectively.

Sales Operations

Sales Objections

Sales objections are reasons or concerns raised by a potential customer as to why they are hesitant or unwilling to make a purchase.

Sales Objections

User-generated Content

User-generated content (UGC) refers to any form of content, like images, videos, or text, created and shared by users on online platforms.

User-generated Content

Single Sign-On (SSO)

Single Sign-On (SSO) is an authentication method allowing users to access multiple applications with one set of login credentials.

Single Sign-On (SSO)

Logo Retention

Logo retention is a key B2B metric that measures a company's ability to retain its customers, or 'logos,' over a specific period.

Logo Retention

Cost Per Impression

Cost Per Impression (CPI) is the price an advertiser pays for each time their ad is displayed to a user, irrespective of clicks.

Cost Per Impression

CRM Data

CRM data is the information businesses use to manage customer relationships. It covers contact details, purchase history, and communication logs.

CRM Data

Salesforce Administrator

A Salesforce Administrator is a certified professional who manages and customizes the Salesforce platform to meet a company's specific business needs.

Salesforce Administrator

Business to customer

Learn about business to customer, including maximizing B2C sales strategies, B2C vs. B2B: unveiling differences, & core principles of B2C success.

Business to customer

Marketing Operations

Marketing Operations (MOps) is the engine of a marketing team, managing the technology, processes, and people to run campaigns effectively.

Marketing Operations

Content Rights Management

Content Rights Management involves controlling the use and distribution of copyrighted digital media to protect intellectual property.

Content Rights Management

Early Adopter

An early adopter is a user who embraces a new product or technology before the majority, helping to validate and popularize the innovation.

Early Adopter

Zero-Based Budgeting (ZBB)

Zero-based budgeting (ZBB) is a method where all expenses are re-evaluated and must be justified from scratch for each new budget period.

Zero-Based Budgeting (ZBB)

Outbound Leads

Outbound leads are potential customers a business proactively contacts through outreach like cold calls, emails, or social media.

Outbound Leads

Sales Pipeline Velocity

Sales pipeline velocity is a metric that measures how quickly deals move through your sales funnel to generate revenue for your business.

Sales Pipeline Velocity

Hadoop

Hadoop is an open-source framework designed for the distributed storage and processing of extremely large data sets across clusters of computers.

Hadoop

Branded Keywords

Learn about branded keywords, including identifying your branded keywords, & strategies for optimizing branded keywords.

Branded Keywords

Sandboxes

A sandbox is an isolated testing environment where new or untrusted code can be run safely without affecting the host device or network.

Sandboxes

Request for Quotation

A Request for Quotation (RFQ) is a document that a company sends to one or more suppliers to get a quote for specific products or services.

Request for Quotation

Data-Driven Marketing

Data-driven marketing uses customer data to inform marketing decisions, optimize campaigns, and deliver personalized experiences to consumers.

Data-Driven Marketing

Reverse Logistics

Reverse logistics is the process for goods moving from the customer back to the seller, covering returns, repairs, recycling, and disposal.

Reverse Logistics

Direct Sales

Direct sales involves selling products directly to consumers in a non-retail setting, such as at home, online, or person-to-person.

Direct Sales

No Cold Calls

No Cold Calls is a sales strategy that replaces unsolicited calls with warm outreach to prospects who have already demonstrated interest.

No Cold Calls

PPC

Pay-per-click (PPC) is an internet advertising model where businesses pay a fee each time one of their online ads is clicked by a user.

PPC

Kanban

Kanban is a visual project management method that uses a board to visualize workflow, limit work-in-progress, and maximize team efficiency.

Kanban

Personalization

Personalization is the practice of using data to tailor products, services, or content to an individual's specific needs and preferences.

Personalization

Customer Retention Cost

Customer Retention Cost (CRC) is the total amount a company spends to keep an existing customer over a certain period of time.

Customer Retention Cost

HTTP Requests

An HTTP request is a message sent by a client, like a web browser, to a server to ask for a resource, such as a web page or an image.

HTTP Requests

Google Analytics

Google Analytics is a web analytics service that tracks and reports website traffic, offering insights into user behavior and marketing effectiveness.

Google Analytics

Net New Business

Net new business is revenue from customers who have never purchased from your company before. It’s a crucial indicator of sustainable growth.

Net New Business

Gamification

Gamification applies game mechanics like points, badges, and leaderboards to non-game activities to boost engagement and motivate users.

Gamification

Sales Performance Metrics

Sales performance metrics are key data points that measure a sales team's effectiveness in achieving its goals and driving revenue.

Sales Performance Metrics

Sales and Marketing Alignment

Sales and marketing alignment means both teams work in sync, sharing goals and data to boost lead quality, conversions, and company revenue.

Sales and Marketing Alignment

Forward Revenue

Forward revenue is the total value of all active, committed contracts that are expected to be recognized as revenue in the future.

Forward Revenue

Personalization in Sales

Personalization in sales means tailoring outreach to a prospect's specific needs, interests, and context to make communication more relevant.

Personalization in Sales

Lightning Components

Lightning Components is a UI framework for building dynamic web apps for mobile and desktop devices on the Salesforce Lightning Platform.

Lightning Components

Sales Enablement Content

Sales enablement content refers to the materials and tools that empower your sales team to engage prospects and close deals more efficiently.

Sales Enablement Content

Brand Awareness

Learn about brand awareness, including understanding its importance, building an effective strategy, key metrics to track, & examples in the real world.

Brand Awareness

Conversational Intelligence

Conversational intelligence (CI) is AI technology that analyzes customer conversations to find insights that help sales and support teams improve.

Conversational Intelligence

Lead Enrichment

Lead enrichment adds third-party data to your raw lead lists, creating fuller prospect profiles for more effective and personalized outreach.

Lead Enrichment

Rollback Procedures

Rollback procedures are a set of steps to restore a system to a previous, stable version after a failed update, ensuring minimal disruption.

Rollback Procedures

Warm Outbound

Warm outbound is a sales strategy for contacting prospects who've shown interest in your brand through prior engagement, like website visits.

Warm Outbound

Video Prospecting

Video prospecting is the sales technique of sending personalized videos to potential customers to grab their attention and secure more meetings.

Video Prospecting

Technographics

Technographics is data that outlines a company’s technology stack, helping B2B teams identify prospects based on the software and hardware they use.

Technographics

B2B Marketing Analytics

Learn about B2B marketing analytics, including key components of B2B marketing analytics, & getting started with B2B marketing analytics.

B2B Marketing Analytics

Channel Partner

A channel partner is a company that works with a manufacturer or producer to market and sell their products, software, or services to customers.

Channel Partner

Closing Ratio

Closing ratio is a key sales metric that shows the percentage of leads or proposals that result in a successful sale.

Closing Ratio

Expansion Revenue

Expansion revenue is the extra money a business makes from its current customers via upgrades, new products, or additional services.

Expansion Revenue

Sales Pitch

A sales pitch is a persuasive presentation of a product or service, aimed at convincing a potential customer to make a purchase.

Sales Pitch

Nurture Campaign

A nurture campaign is a series of automated messages designed to build relationships with potential customers and guide them toward a purchase.

Nurture Campaign

Key Performance Indicators

Key Performance Indicators (KPIs) are measurable values that demonstrate how effectively a company is achieving its key business objectives.

Key Performance Indicators

Account

An account is a company or organization that you're targeting for sales. It can be a prospective, current, or even a past customer.

Account