Deviation from Target Churn Rate

Date created: Mar 15, 2021  •   Last updated: Mar 15, 2021

What is Deviation from Target Churn Rate?

Deviation from Target Churn measures how close or far away you are from hitting your ideal target churn rate in a specific time period. It is calculated by finding the difference between the forecasted churn rate and the target churn rate.

Alternate names: Delta from Target Churn Rate

Formula

ƒ Avg(Forecasted Gross MRR Churn Rate) - Avg(Target Gross MRR Churn Rate)

How to calculate

A business has a gross MRR churn rate target of 1% a month or less. Their forecasted gross MRR churn rate this week is 2%, meaning their Deviation From Target Churn Rate is 1%. To enable their team to see and efficiently focus on closing the biggest deviations, the business charts the actual deviation from target churn against a linear churn target line.

Deviation from Target Churn Rate

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What is a good Deviation from Target Churn Rate benchmark?

You want this metric to be 0 or negative, meaning you are on track to hit your target churn rate, or below your target churn rate.

More about this metric

The logic behind calculating a Deviation from Target Churn Rate metric is to provide early warning signs of forecasted increases in churn that give teams such as Customer Success the ability to intervene so that actual churn stays within or below target levels.

This can be an especially helpful Customer Success operational metric in a high volume SaaS business with a monthly renewal cycle. For example, a customer subscription may be queued for cancellation simply because their payment method failed. In some companies, there is a period of time between account cancellation and deactivation. By tracking Deviation from Target Churn Rate at a granular level by day, you can foresee when spikes in churn are forecasted to occur. Then by targeting accounts with the highest dollar volume who are forecasted to churn in the period between account cancellation and deactivation, you can potentially prevent some clients from churning simply by updating their payment method.

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