Churn Rate – What is Churn Rate?
Churn rate or cancellation rate is the term that refers to the percentage of subscribers who decide to unsubscribe from a mailing list or any other type of database in a specific period of time.
It is an especially important metric in subscription business models and indicates the lifetime value of a customer.
How is Churn Rate measured?
A specific period of time is chosen (it can be done by months, quarters, etc.) and the following formula is applied to extract a percentage:
Number of cancellations in a period / Total number of subscribers at the beginning of the period
If at the beginning of the period They had 100 subscribers, and 5 have been lost, the Churn Rate would be 5%.
Although it is impossible or almost impossible to have a 0% cancellation rate, it is best to try to optimize so that it is as low as possible.
In SaaS businesses, a churn of between 5 and 7% is usually considered normal, although it varies depending on the sector.
How to avoid or reduce the cancellation rate?
To prevent the Churn rate from skyrocketing, it is worth taking the following elements into account:
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Offer a good service and/or product
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Do not create false expectations in order to get people to subscribe to something that you will not be able to offer them adequately.
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Have good support and customer service
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Maintain “active listening” to improve the product and the relationship with customers
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Carry out cross-selling or cross-selling actions
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Assume that there are clients that are better to lose if they do not adapt to your business model and are very far from your ideal client.