Keep Customer Attrition in Check by Utilizing The Customer Churn Rate KPI
Customer Churn Rate (also known as Customer Attrition Rate) is the rate at which a subscription based company (such as a SaaS company, a telephone company, an internet service company or a bank etc.) is losing its customers due to account cancellations or non-renewal of subscriptions. Customer Churn Rate is a critical KPI for these types of businesses because (1) the cost of retaining a current customer is almost always less than attaining a new one1, and (2) for businesses with recurring revenue models, keeping a customer can be worth hundreds and even thousands of dollars in future revenue.
Companies concerned with customer churn often distinguish between gross versus net Customer Churn Rate. Gross Customer Churn Rate is the rate at which a company is losing customers, while Net Customer Churn is a measure of the difference between Gross Customer Churn Rate and New Customer Acquisition Rate. For example, if a company’s Gross Customer Churn Rate is 7% and its New Customer Acquisition Rate is 5%, the company’s Net Customer Churn Rate is 2%. For subscription based businesses, a positive Net Customer Churn Rate is an indication that the company is in trouble, as customer growth is contracting.
Due to the importance of keeping Customer Churn Rates down, subscription based companies often have departments dedicated to engaging and improving relations with unsatisfied customers, or winning back lost customers.
1Zero Defections: Quality comes to service., Reichheld & Sasser. Harvard Business review. 1990.
Monitoring SaaS KPIs on a Dashboard
Once you have established benchmarks and targets for measuring Customer Churn Rate, you’ll want to establish processes for monitoring this and other SaaS KPIs. Dashboards can be critical in this regard.
Learn more about how to track your Customer Churn Rate on a SaaS Dashboard.