Churn rate: Use it to master customer acquisition costs

A sad fact of business is that you cannot retain a customer forever. Over time you will lose customers due to their changing needs, increased competition or simply because they move away (if you are a physical retailer). The percentage of customers you lose over a given period of time is known as your churn rate, or simply churn. Understanding your churn is critical to mastering your customer acquisition costs and ensuring that you can grow as a business. You want to make sure you are adding customers faster than you lose them!

Calculating your churn is deceptively hard. In fact, churn can be the most complex metric you use in your business because it is very hard to define and calculate reliably. This week, we’ll cover a number of different ways to calculate churn and, even if we don’t highlight a method ideal for your business, give you ideas on how to calculate your own churn.

Specifically we will cover:

Part 2Defining Churn
Part 3Revenue Churn
Part 4Transactional Churn
Part 5Cohorting

Tomorrow, we will get started by defining exactly what we mean by churn and understanding why that is easier said than done.

Do you need help understanding your customers? Outlier is a product designed to help! Outlier looks deep into who your customers are and how they behave to highlight changes that might indicate potential causes of churn. If you’re interested in seeing a demo, schedule a time to talk to us.

Quote of the Day: “Do not turn it too quickly.” – from Food Network’s butter churning recipe.