How to Calculate Churn Rate in Your Business, Take Note!

In reality, every business will face the risk of losing customers. However, this usually happens unrecognized and is only predicted by the number. 

In fact, in the marketing industry, there is one metric that can help you anticipate potential repetitive customer loss in the future. This metric is called the churn rate or customer churn rate. So, how do you calculate the churn rate for accurate projections?

In this article, you will learn what customer churn is, how to calculate it, and how to minimize it. Please ensure you read this article to the end.

What Is Churn Rate?

Churn rate is a metric that shows the percentage of customers who no longer purchase products, stop using services, or cancel subscriptions. 

The higher the churn rate percentage, the more customers are lost and the greater the negative impact on the company.

A high churn rate percentage can occur due to several conditions, including a decline in product quality, poor customer service, price increases, or an inability to compete with competitors.

So, why is churn rate important to be aware of? The first reason is that by knowing the churn rate, companies can understand why customers stop using their products and then formulate solutions to address these issues.

The second reason is that the cost of acquiring new customers is generally higher than the cost of retaining existing customers. Therefore, companies need to monitor and reduce their churn rate to maintain the loyalty of existing customers.

In conclusion, the churn rate can be used as a benchmark to measure customer satisfaction,  streamline marketing costs, and evaluate the effectiveness of marketing strategies.

Read also: What Is Suggestive Selling? Benefits and Best Practices

How to Calculate Churn Rate

Before calculating the churn rate, make sure you have determined the time period for which the metric will be viewed, for example, which month or year. Next, perform the calculation using the following churn rate formula:

Calculation example:

ZCloud is a company that provides monthly subscription-based cloud storage services. ZCloud's marketing analyst wants to know how many customers canceled their subscriptions in March 2025 to evaluate the effectiveness of their retention program. Below are the details of the number of customers during the March 2025 period.

• Number of customers at the beginning of the period = 10,506 customers.
• Number of customers at the end of the period = 9,560 customers.

Therefore, the customer churn calculation is as follows:

From this number, it can be concluded that during March 2025, 9% of ZCloud customers canceled their subscriptions.

How Much Is a Good Churn Rate?

Actually, a good churn rate is zero because it means that the company has not lost any customers at all. But, obviously, that is very difficult and somewhat impossible to achieve.

So, what you can do is compare your company's churn rate with the average churn rate in the same industry. 

For example, in the SaaS (Software as a Service) industry, a churn rate of 5–7% per year is considered good, unlike in the telecommunications industry, where a churn rate of 15% may still be normal.

This way, you can determine whether the customer loss rate in your business is still reasonable or too high, which requires a more effective customer retention strategy.

How to Reduce Churn Rate

Considering that a high churn rate percentage could have a negative impact on the future of your business, you need to strategically take steps to minimize it. Here are some ways to minimize churn rate that you can implement:

1. Predicting At-Risk Customers

At-risk customers are those who show signs of stopping their purchases. These signs can include a decrease in purchase frequency, reduced interaction with the brand, or expressions of dissatisfaction. 

Predicting at-risk customers can be done by analyzing historical data and their interactions with the brand.

If you find these signs, especially from customer segments that are important to the business, do not ignore them. This is because losing these customers can have a significant impact on company revenue.

2. Improve Service Quality

In fact, service quality greatly influences customers' decisions to continue purchasing products or to leave. 

Therefore, to retain customers or reduce churn rates, companies need to improve service quality in terms of speed, completeness, and responsiveness.

In addition, companies must also treat old and new customers equally. This is because differentiating treatment risks makes customers feel ignored or undervalued. This could cause them to lose loyalty and stop using your products.

Read also: How to Develop Conventional Commerce Platforms for Business

3. Implementing a Loyalty Program

Customers can be considered loyal if they continue to choose the same brand over a long period of time, are not easily swayed to competitors, frequently interact positively, and are even willing to recommend products to others.

If your business has many loyal customers who meet these criteria, try implementing a loyalty program. The purpose of this program is to make customers feel valued while increasing retention. 

Some examples of loyalty programs that are often run by businesses are point rewards, cashback programs, memberships, exclusive member discounts, and referral programs. 

4. Personalize Your Offering

Did you know that providing offers that are irrelevant to consumer needs also poses the risk of them switching to competitors?

Therefore, it is crucial to personalize your offerings so that customers have a memorable experience that aligns with their needs and builds a deeper connection with your brand.

To personalize your offerings, you need to carefully identify customer data so that you can understand their preferences and purchasing habits.

5. Improving Marketing Content Quality

It cannot be denied that marketing content also plays a very important role in maintaining customer loyalty. In fact, many brands have lost a lot of customers at once due to releasing the wrong marketing content.

In this case, companies need to maintain their image and reputation by improving the quality and transparency of their content. 

This strategy can be implemented by developing a strategic content plan, strengthening visual and storytelling aspects, creating informative and relevant content, focusing on value and solutions for the audience, also utilizing data for evaluation. 

If these steps are executed correctly, companies not only have a great opportunity to retain existing customers but also attract new ones.

By understanding how to calculate churn rate and implementing strategies to minimize it, you are already one step ahead in maintaining long-term relationships with loyal customers. As a result, the potential risk of losing customers can be minimized.

When it comes to customer loyalty, you need to invest extra effort and time to achieve optimal results. In practice, you divide your attention among many things, including Digital Marketing optimization, which could cause less optimal results.

So, instead, focus your thoughts, time, and energy on completing core business matters, and let cmlabs execute your Digital Marketing needs. cmlabs offers end-to-end All-in-One Digital Marketing services that include the following:

• Search Engine Optimization (SEO): Technical website audit services, website projection development, and improving its authority on search engines.
• Search Engine Marketing (SEM): Services to help increase brand visibility on search engines using paid strategies.
• Creative Services: Services to provide creative assets to support various visual ad and social media needs.
• Website Development & Management: Website development services to help companies appear more professional in the digital realm.
• Media Placement: Services to help you gain positive exposure through reputable media platforms.

So, to cover all your Digital Marketing needs, cmlabs is the solution. Contact us now to get more information about cmlabs services and grab the best offer!

Read also: How to Apply a Full Funner Marketing Strategy for Business