Set up measurement and reporting for churn rate

Define what you mean by active subscribers or active customers to prevent confusion in calculating churn rates.

Consider:

• Who are your returning customers? How long does a customer have to be inactive to be considered a new customer again?
• Do you consider those in free-trial mode as customers?
• What about customers with inconsistent subscription lengths?

Choose the period of time over which you calculate churn. Customer churn rate is measured on a monthly, quarterly, or annual basis.

It’s important to define a churn event before calculating your company’s churn rate. For example, does a churn event constitute X days of customers not placing an order for your product or X months of customers not using your app?

Track the customers who become inactive or stop subscribing to your products. Next, calculate the customer churn rate to gain insight into the health of your business.

Identify the number of customers you had over a specific time. Note the number that left over the same period. Divide the number of customers who left by the total number of customers. Express your answer as a percentage. For example, if you had 1,000 customers and 50 customers left in a month, your churn rate is:

Churn rate = 50/1000 X 100 = 5%

`````````You can also calculate your churn rate using this formula:

``````
``````Customer churn rate = Customers at the start of the month – customers at the end of the month/customers at the start of the month
``````
``````## Track revenue churn by subtracting end-of-month MRR from beginning-of-month MRR and then dividing by beginning-of-month MRR.

``````

Revenue churn = (BoM MMR - EoM MMR) / BoM MMR

``````

## Segment customer churn to better understand the different types of customers leaving your business.

Some common ways to segment are:

- Cohort reporting, which looks at when customers initially signed up and what events may have led to an increase or decrease in churn.
- MRR and Customer lifetime value (CLTV).
- Subscription plan level or product purchased.
- Firmographics for B2B customers, such as industry, annual revenue, and company size.
- Demographics for B2C customers, such as age, gender, geographical location, income, and interests.