Churn rate is a metric used to measure how frequently customers or employees discontinue their association with a company within a specific time frame. It is commonly utilized by companies providing subscription services to assess customer attrition. 

The term "churn rate" can apply to both customer and employee turnover. For instance, it can represent the number of employees who leave a company in a quarter, year, or other designated period. Typically, churn rate is calculated as a percentage and compared to the company's growth rate, which denotes the number of new customers or employees acquired during a specific time frame. For a company to achieve successful expansion, its growth rate must exceed the churn rate.

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What is a good churn rate?

Companies use churn rate to measure either customer or employee satisfaction. A low churn rate tends to mean that people are satisfied with a business’s services or have good job satisfaction. Industry professionals generally agree that an annual churn rate of 5 to 7 percent is a good range. Anything higher than those percentages may point to poor company performance.

How to calculate churn rate

In order to calculate churn rate, digital marketers use a mathematical formula called the churn rate formula. This formula calculates annual customer and employee attrition rates. The steps are as follows:

1. Determine the total number of customers or employees at the beginning of the period you are analyzing.

2. Identify the number of customers or employees who left during that period, and subtract it from the value in the first step.

3. Divide the value of the second step by the value of the first, and multiply by 100 to determine your churn rate percentage.

So, churn rate = (lost customers or employees / total number of customers or employees) x 100. This will give you the percentage of how many customers or employees left the company.

Churn rate analysis

The goal of performing a churn rate analysis is to learn why your customers are leaving. If you can successfully identify some of the factors that are contributing to the churn, you can take measures to mitigate your losses. Churn rate analysis can help you improve your customers’ experiences, identify friction points, optimize your product, and, ultimately, increase customer retention. 

What does churn rate mean in business?

Churn rate is a key part of a marketing strategy because it gives digital marketers insight into how their businesses are performing with customers. If the churn rate is high, it might point to a decrease in product or service quality. It’s a solid indicator that something needs to change, and quickly. A churn rate that increases year over year might be a sign that there’s a fundamental issue that needs to be addressed. Companies experiencing more attrition than retention won’t expand or grow over time.

That being said, it’s important to remember that, while churn rate lets you know how many people are leaving, it doesn’t tell you why they're leaving. It’s up to the digital marketer to dig deeper and find out exactly what’s causing the churn. It may be that people are leaving after taking advantage of a one-time promotion, or they might be part of the natural lifecycle of customer decay.

Related terms

• Bounce rate

• Clickthrough rate (CTR)

• User story

Learn more about digital marketing and how you might reduce your company’s churn rate

To learn more about churn rate and other marketing concepts, consider enrolling in Google’s Digital Marketing and E-Commerce Professional Certificate offered on Coursera. Gain the skills and insights needed to start a successful digital marketing career as you learn at your own pace from the experts at Google.

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Google Digital Marketing & E-commerce

Get on the fast track to a career in digital marketing. In this certificate program, you’ll learn in-demand skills, and get AI training from Google experts. Learn at your own pace, no degree or experience required.

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(33,334 ratings)

971,692 already enrolled

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Average time: 6 month(s)

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Skills you'll build:

Marketing, Email Marketing, Data Analysis, display advertising, Writing, Search Engine Optimization (SEO), Web Development, E-Commerce, Advertising, Strategy, Communication, Social Media, Sales, E-commerce store optimization, Job preparedness, Portfolio preparation, Building customer loyalty, Customer Relationship Management (CRM), Customer Engagement, Social Listening, Social Media Analytics, Social Media Branding, Social Media Bidding, Customer Awareness, Search Engine Marketing, Google, Website Structure, Email marketing analytics, Email Writing, Email marketing strategy, Contact management, Email list segmentation, E-commerce platforms, Fulfillment and delivery, Seasonality, E-Commerce Strategy, Marketing Analytics, Customer loyalty, Customer Outreach, Media planning and strategies, Presenting to stakeholders, Spreadsheet management, Digital marketing KPIs