Definition

Churn rate is the percentage of customers who stop doing business with you during a given period. It is the inverse of retention — high churn means you are losing customers faster than you can replace them.

Detailed Explanation

Customer Churn Rate = (Customers Lost in Period ÷ Customers at Start of Period) × 100

For subscription businesses: Revenue Churn = (MRR Lost ÷ MRR at Start) × 100

Churn directly caps LTV. If monthly churn is 5%, average customer lifespan ≈ 1 ÷ 0.05 = 20 months. Reducing churn from 5% to 3% can increase LTV by 67%.

Nepal Context

Nepali SaaS and subscription services (hosting, SaaS tools, gym memberships) face churn from payment friction (annual renewals via bank deposit), seasonal usage (coaching classes), and competition from free alternatives. Track churn by payment method — wallet auto-pay reduces churn vs. manual renewal.

Practical Examples

  1. 1,000 customers at month start, 40 cancel → churn = 4%
  2. Identify churn cohort: users who skip onboarding step 3 churn at 2× the rate — fix the step.
  3. Win-back email to churned customers with a limited offer — target 10–15% reactivation.

Key Takeaways

  • Churn rate = customers (or revenue) lost as a % of starting base.
  • Even small churn reductions compound LTV significantly.
  • Segment churn by acquisition channel — some channels produce stickier customers.

Common Mistakes

  1. Measuring churn only at cancellation — silent churn (no login for 90 days) matters for SaaS.
  2. Ignoring gross vs. net churn — new sales can mask high churn in headline numbers.
  3. Not connecting churn to CAC payback — high churn makes expensive acquisition unviable.