Churn Rate (sometimes called attrition rate) is a very useful metric, that measures the number of individuals or items moving into or out of a collective over a specific period of time. Churn rate, when applied to a customer base, refers to the proportion of contractual customers or subscribers who leave a supplier during a given time period. It is a possible indicator of customer dissatisfaction, cheaper and/or better offers from the competition, more successful sales and/or marketing by the competition, or reasons having to do with the customer life cycle (Wikipedia).
So if you work in a company that provides mobile phoning services, you will count the churn rate as the quantity of clients that leaves the services in an specific period of time. Simple and sweet.
Our friend Albert Einstein said once “In theory, theory and practice are the same, in practice they are not“. So let’s go for some of those case in which Churn Rate is not that easy and sweet.
If you have a community website and wanted to measure the Churn Rate of your community, how can you determine that a particular user is leaving your community?. I mean, the opt-out in a newsletter is not a Churn…in communities the user don’t tell you “I’m leaving your community”, so…how can you measure your churn rate?
Probably there are many ways, I’ll tell you mine. Snoop your database looking for the period in which the 80% of the leavers don’t come back again. So, let’s say you start snooping from February 2011 (Last year). In January 100 people login into your site but they didn’t login in February. From now on, we have to take those for our analysis.
1- From those 100 users, 10 login again in march.
2- From those, 5 login again in april.
3- From those, 5 login some day between Jun and (‘current_date’).
4- 80% of the original analyzed population never came back again.
So we can count as our Churn users those who login last time three month ago. Let’s say that three month ago was last January 2012, then your query should something like Where (‘last_login’) between (’01-01-2012′) and (’01-31-2012′).
So, now you have one of the most important metrics for the KPI Churn Rate. The other metric you will need to calculate the KPI is the quantity of your database during the same period of time. That is simple, just run a query where last login is from (‘registration_date’) to (‘three_month_ago’).
CR = Churn / Users in Database
So, what’s your Churn Rate?