In brief: Churn is the rate of customers, accounts or recurring revenue that a company lost during a chosen period, according to a predetermined definition of departure.
How I use churn in practice
In practice, I do not use the term churn as another number for a presentation. First, I determine which decision it should make more precise, which data or observations it is based on, and who will change something based on the result. I calculate customer and revenue churn separately, state the base at the start of the period, and distinguish voluntary departure from payment failure. I also record the baseline, measurement date and limits of interpretation. This makes it possible to later distinguish a genuine shift from a change in the tool, sample or query wording.
What to watch out for
The greatest risk is precision that is only apparent. A monthly percentage cannot simply be multiplied into a year without checking assumptions, and growth in new customers may temporarily conceal losses. I therefore compare the result over time, on a stable sample and together with the business context. If the term does not lead to a concrete next step, it has not produced an analysis, only a new label.
Questions for decision-making
- Are we counting customers, accounts or revenue?
- When exactly does departure occur?
- Which segment are we losing fastest?
- Which departure signals do we see in advance?