The rate at which consumers cease doing business with a company is known as the churn rate, sometimes referred to as the rate of attrition or customer churn.
The most popular way to express it is as the percentage of service subscribers that cancel their memberships within a predetermined time frame. It is also the frequency of employees quitting their positions within a predetermined time frame. A company’s growth rate (determined by the number of new customers) must be higher than its attrition rate to grow its customer base.
The profitability and growth could be negatively impacted by a high churn rate.
The churn rate is a crucial element in the telecom sector. Since many of these businesses are in competition with one another, switching service providers is usually simple for consumers. The churn rate considers both moving carriers and discontinuing service without switching carriers. In subscriber-based firms where subscription payments make up most of the income, this metric is particularly useful.
Calculating a firm’s turnover rate has the benefit of making it clear how effectively the company is keeping consumers, which is a reflection on the calibre of the service the company is offering as well as its value. When a firm notices that its churn rate is rising over time, it realizes that a key aspect of the way it is managing its operations is incorrect.
The company may be offering a defective product, offering subpar customer service, or having a product that is not alluring to customers who have decided that the price is not worth the benefit.