How to calculate churn rate?
Churn rate is the rate at which your customers are leaving every month. A high churn rate means that your customers are not satisfied with your product - this could be for various reasons (bugs, lack of features, performance, customer services etc.). Before you spend a lot of money on marketing you need to know why customers are leaving and how you can fix that. It is like having a hole in your bucket. Would you fix the hole first or pour more water in it?
Here is a simple formula to calculate your monthly churn rate:
Customers that canceled your service in May 2010: 10
Total Customers at the end of May: 100
May Churn Rate: ((10/100)*100) = 10%
Keeping an eye on the churn rate every month is crucial. If customers cancel, find out why they are doing so (through a form on the cancellation page, personalized email, phone survey etc.) you have a better grip on improving things in the coming months.
