Churn rate: what is the abandonment rate and how to calculate it

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There are all kinds of KPIs or indicators that can help you better understand the areas of improvement in your company or increase sales volume. Today we are going to explore the churn rate , a basic metric in any business. Find out what it is, the formula to calculate it , and an example that will help you understand the importance of using the churn rate.

What is churn rate
The churn rate, also known as abandonment rate, is the percentage of customers who stop using a company's products or services over a given period of time. Its importance is paramount as it provides a clear view of customer loyalty and business stability .

Customer relations
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So we can say that churn rate is a direct indicator of the health algeria phone number lead of a business . A high churn rate can signal serious problems in customer satisfaction, product quality, or market competition.

On the other hand, a low churn rate suggests that the company is managing to retain its customers effectively , which is perfect for sustainable development. If you know how to use this metric properly, you will be able to improve customer retention and enhance their experience.

How to calculate churn rate: formula and example
Calculating this KPI is very simple : divide the number of customers lost in a month by the total percentage at the beginning of that same month.

For example, let's say you have a hosting service with 1000 customers at the beginning of the month, but you have lost 50 customers. So the formula would be:

50 users / 1000 users: 5% churn rate

So your company has a monthly churn rate of 5%, since 5% of customers abandon your service. If you want to make it easier, here is an online churn rate calculator so you can measure the churn rate in your business.

Keep in mind that if you have an online sales business, calculating the churn rate is a little more complex, so we invite you to check out our guide to improving the churn rate in your e-commerce , which will help you.

How can I use churn rate in my business?
Once you understand and know how to calculate the churn rate with the appropriate formula, you will be able to improve aspects of your business to increase sales volume. Let's see how to take advantage of the information from this KPI.