The share of customers you had at the start of a period who stopped buying or cancelled during it. For a shop without subscriptions you decide what 'stopped' means, such as no purchase in six months.
Formula
Churn rate = customers lost in the period ÷ customers at the start of the period × 100
Example
Meera counts anyone who bought in the last six months as active. She starts the quarter with 1,000 active customers and 250 of them lapse. Churn rate = 250 ÷ 1,000 = 25%.
How you'll hear it
“Churn is at 25% a quarter; we're filling a leaking bucket with ad money.”
What it helps you decide
Whether to spend on win-back and loyalty programs or on finding new customers, and which customer groups need attention first.
Where people misread it
Total customers can grow while churn is high, because new customers hide the losses. For non-subscription businesses the number depends on how you define 'lapsed', so keep the definition fixed when comparing periods.
The story
Meera defines an active customer as anyone who bought in the last six months.
| Active customers at start | 1,000 |
| Lapsed during the quarter | −250 |
| New customers | +480 |
| Active customers at end | 1,230 |
|---|
The number looks right. The customer base grew 23%, from 1,000 to 1,230.
What it hides. Churn was 250 ÷ 1,000 = 25%. She wins about 160 new customers a month, 480 in the quarter, at a CAC of ₹750 each. Replacing the 250 who left cost ₹1,87,500 in that quarter alone.
| Customers lost | 250 |
| Cost to win each (CAC) | ₹750 |
| Spend just to replace them | ₹1,87,500 |
|---|
What to look at instead. Churn by group: first-time buyers versus repeat buyers, store versus online. She sets up a workflow that sends a 'new arrivals in your size' email and a WhatsApp message to customers at month four without a purchase, before they cross six months.
All figures are fictional and illustrative.
Work out your churn rate
The example's numbers are filled in. Replace them with yours.
Compare this across the same length of period and the same definition of a lost customer.
Don't confuse it with
- Unsubscribe rate: people leaving an email list; they may still buy.
- Customer retention rate: the other side of the same coin, the share who stayed.