'Why Does a 'Good Customer Churn Rate' Matter?' chartmogul churnrate
At a high level, the customer churn rate gives you the rate at which your customers are canceling their subscriptions. A high customer churn rate can be deadly for your business. In this post, we analyze, anonymized and aggregated data from ChartMogul to find out what is a good target customer churn rate for a SaaS subscription business. We also discuss why it is important to track customer churn rate and the underlying reasons behind a high customer churn rate.
The best companies should target a customer churn rate of <2% per month. This goes down to <1% as your ARPA increases.As you’ll notice, the monthly Customer churn rate of a median company is higher in the initial stages of the business . As more companies find product-market fit and hone into their customer category the churn reduces.
Calculation Methodology. Monthly Customer churn rate is calculated as the ratio of the number of customers who churned in the month / Total number of customers at the start of the month.for all companies for easier comparability.Quick feedback — compared to other cohort-based metrics such as Net or Gross dollar/customer retention, churn gives you immediate feedback. You can run tests on your platform and then see feedback in a few days or months.
Churn is deadly. A monthly churn rate of 5% corresponds to an annual churn rate of 46%. That means you’ll lose close to half your existing customers in the next year if you don’t contain your churn.
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