Churn

Churn measures departures from a defined customer or subscriber population during a stated period. For a starting cohort with constant monthly customer churn and no reactivation, 5% monthly churn implies about 46% loss after twelve months; 3% implies about 31%, and 10% about 72%. These are simplified cohort calculations, not forecasts of total customer count or profitability.

A churn rate is interpretable only when the unit, population, event, and period are clear. Losing a customer, canceling one of several subscriptions, reducing recurring revenue, and becoming inactive are different events. Keep a starting cohort separate from new arrivals so growth does not conceal whether earlier customers remain.

Under a deliberately simplified assumption of constant monthly customer churn c, a starting cohort's expected retained fraction after twelve months is (1 − c)^12. That arithmetic describes cohort survival, not profitability or the best investment. Investigate who leaves and why before comparing retention work with acquisition, and distinguish a failure to deliver value from a customer successfully completing a temporary need.

When to use it

When recurring customer or participant relationships matter, consistent records can distinguish departures from additions, and a specific retention decision needs evidence.

How it can help

Separate acquisition from retention, distinguish customer and revenue measures, and investigate departures by customer type and tenure. Compare proposed retention improvements with alternatives using costs and customer value. The approximation of average lifetime as 1 divided by churn assumes a constant per-period departure probability; a lifetime-value estimate additionally requires revenue, margin, timing, and other assumptions.