Churn Rate in a Nutshell
Understanding what a churn rate calculation is, and then being able to effectively apply the resulting metric, can make a significant difference to your business. The churn rate calculation is a powerful tool that virtually all e-commerce and iGaming enterprises use on a daily, weekly or monthly basis to calculate their current churn rate.
However, before one can begin to use the churn rate calculation tool, you first need to get the basics down. That starts with understanding what churn is in the first place, and how it affects your bottom line.
Churn Rate in a Nutshell
Here’s the quickest and simplest explanation regarding churn rate that you will ever hear:
Churn rate = the number of customers/account holders that have stopped using your services. This number is calculated over a specific period of time.
Calculating Churn Rate
Calculating your customer churn rate is really just as simple as the definition of churn rate that you’ve just read.
To begin, take the number of customers (members) that you lost over a given period of time. This can be over a month, two months or a quarter. Most companies go with a quarter.
Next, divide that number by the total number of customers that you started that quarter with. The number that you arrive at, as a percentage figure, represents your churn rate.
For example, let’s say that you started your last quarter with 100 members or customers. By the end of that quarter you lost 4 people. This means that your churn rate would be 4%.
Alternative Methods to Calculate Your Churn Rate
The above example is the most straightforward way to calculate your churn rate, and is the method most businesses use.
However, there are a few other useful methods that you could also use to arrive at your churn rate:
- Number of customers/members lost (as above)
- Percentage of recurring value lost
- Value of recurring business lost
Whichever method of calculating churn rate that you choose to use will depend on your business as well as on your specific objectives. The bottom line here is that retaining customers is the end goal. Why? Simply because it is far more cost effective to retain existing customers, than it is to acquire new ones.
Find out more about Player Reactivation in our articles section or get in touch with Andrew Foster, Director of our B2B team, andrew.foster@enteractive.se.
