Churn Rate
Churn Rate
The percentage of paying customers who cancel a service within a given period.
In Simple Terms
Churn rate is the percentage of a service's members who cancel their subscription. For example, it's used with subscription-based streaming services to calculate how many people cancelled their contract over the course of a month. The lower this percentage, the more users are sticking with the service instead of cancelling.
Behind the Name
"Churn Rate" combines "churn," meaning to stir or agitate vigorously, with "rate," meaning a measured proportion. The word "churn" also names the container used to make butter by vigorously agitating cream, and this term borrows that image of constant, turbulent motion to describe how customers keep coming and going.
Take a Closer Look!
Churn rate is the percentage of customers who cancel a service within a specific period.
It's a key metric for businesses that rely on customers sticking around long-term, like subscription-based music apps, streaming services, and business software.
By putting a number on how many customers are leaving, you can judge whether a service is performing well.
There are broadly two ways to calculate churn rate.
One is based on the number of customers who cancel, calculating what percentage of the total member base left.
The other is based on the revenue lost through cancellations, measuring the impact in monetary terms.
To grow a service steadily, it's not enough to bring in new customers—keeping this churn rate low is essential too.
Think of it like filling a bucket with a hole in the bottom: no matter how much water you pour in, it won't fill up.
No matter how many new customers a company brings in, the total customer count won't grow if even more are cancelling.
That's why companies survey customers to find out why they're cancelling, use that feedback to improve the service, and work to plug the hole by lowering churn rate.