UK Accounting Glossary
Churn rate is a measure of customer attrition. The churn rate is defined as the percentage of customers who stopped doing business with a company in a period divided by the average number of customer existing in that period. Churn rate is a useful business metric for any subscription-based or other account driven service, such as a credit card issuer or mobile phone provider. The year, quarter, and month are common churn rate periods. The churn rate can be computer for a firm’s entire customer base or individual customer segments. If the churn rate exceeds the growth rate of new accounts, the number of customers falls. An increase in the churn rate can indicate a decline in competitiveness. Companies often develop customer retention strategies to reduce churn rate, particularly for the most profitable customer segments. For example, if an ISP has 1,000,000 subscribers in the quarter, and 30,000 discontinue service that quarter, the churn rate is 3%.
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This glossary post was last updated: 4th February 2020.