Customer Churn

TLDR by Tomas:
Churn is when customers leave you. Simple as that. They stop paying, cancel their subscription, gone. High churn kills businesses because you constantly have to replace lost customers just to stand still. Keeping churn low is job #1 for Customer Success – it means customers are happy, getting value, and sticking around.

Customer Churn, also known as customer attrition, refers to the phenomenon where customers stop doing business with a company or discontinue using its products or services.

It is typically measured as a rate (Churn Rate), representing the percentage of customers lost over a specific period (e.g., monthly or annually).

Churn is a critical metric, especially for subscription-based businesses, as high churn erodes the customer base, negates growth from new acquisitions, and significantly impacts revenue and profitability.

Understanding and minimizing churn is a primary objective of Customer Success.

How It Works


🔄 Definition: Define what counts as churn (e.g., subscription cancellation, inactivity, downgrade).
🔄 Measurement (Churn Rate): (Customers Lost ÷ Customers at Start) × 100%. Variations include revenue churn and net churn.
🔄 Tracking: Monitor over time and by segment (e.g., monthly, quarterly, by cohort).
🔄 Analysis: Conduct exit interviews, NPS reviews, usage trend analysis, and support ticket audits to understand root causes.
🔄 Prediction: Use customer health scores, low usage patterns, and other risk signals to flag at-risk customers early.
🔄 Prevention: Implement proactive CS initiatives (e.g., re-engagement campaigns, success plans, strategic check-ins).

Example
A SaaS company starts April with 1000 customers. By the end of the month, 20 have cancelled. The Customer Churn Rate is (20 / 1000) × 100% = 2%. A churn survey reveals that 60% of them left due to a missing reporting feature. That insight is shared with Product, and the CS team adjusts onboarding to highlight a workaround.

Advantages


✅ Retaining is cheaper than acquiring.
✅ New customers add to the base rather than replacing lost ones.
✅ Longer relationships = more revenue.
✅ Stability for forecasting and planning.
✅ Churn data informs product and process improvements.
✅ Happy, retained customers build advocacy.

Challenges


❌ Multiple issues often contribute to churn.
❌ Churn reflects past failures; prevention requires leading indicators.
❌ Needs coordination across CS, Product, Marketing, and Sales.
❌ Some customers will always leave (e.g., budget cuts, mergers).
❌ Definitions and timeframes can skew comparisons.

Key Considerations


💡 High logo churn ≠ high revenue churn (and vice versa).
💡 Look at industry, company size, tenure, acquisition channel, etc.
💡 Use adoption, engagement, and health scores to intervene early.
💡 Be consistent in how and when churn is counted.
💡 Act on churn feedback – update training, improve onboarding, enhance features.
💡 Track improvement efforts and their effect over time.

Wrapping it up

Customer Churn is a vital pulse-check on customer satisfaction and product-market fit. Proactively managing churn isn’t just a CS responsibility—it’s a company-wide effort and one of the most important levers for sustainable growth.