{"id":558,"date":"2026-05-29T13:48:05","date_gmt":"2026-05-29T13:48:05","guid":{"rendered":"https:\/\/www.useproactiveai.com\/blog\/?p=558"},"modified":"2026-05-29T13:48:05","modified_gmt":"2026-05-29T13:48:05","slug":"customer-churn-rate","status":"publish","type":"post","link":"https:\/\/www.useproactiveai.com\/blog\/customer-churn-rate\/","title":{"rendered":"Customer Churn Rate: Formula, Benchmarks & How to Reduce It"},"content":{"rendered":"

Your marketing is on fire! You have a team of salespeople who are closing deals. However, there\u2019s a hidden problem in the background: customers are leaving. They are not sending cancellation emails or complaints. They just don’t renew, they don’t buy, they don’t show up. And, if you don’t track your customer loss rate in real time, you might not realize it until it becomes an issue you can’t ignore.<\/span><\/p>\n

It is one of the most painful truths in today’s business: It takes five times as much money to attract a new customer as it does to keep an existing one, but most companies invest most of their budget into attracting new customers. A powerful way to grow your business is to understand and reduce customer churn, particularly for SaaS providers, eCommerce businesses, and subscription-based companies.<\/span><\/p>\n

Here, you’ll learn the complete breakdown of the customer churn rate, including what it means, how to calculate it, where it’s supposed to be in your industry, and the strategies that have proven to work to reduce the churn rate. Oh, and we’ll also share with you how you can gain actionable insights from raw churn data with the help of ProActiveAI.<\/span><\/p>\n

What Is Customer Churn?<\/span><\/h2>\n

Churn rate, also known as customer attrition rate, measures the percentage of customers who leave a business over a given time frame. It gives companies a sense of customer satisfaction and loyalty, and can indicate what changes in a company’s bottom line are possible.<\/span><\/p>\n

In particular, churn is critical for SaaS companies, subscription-based businesses, telecom companies, and e-commerce sites, where recurring revenue is the lifeblood of the business. Churn is one of those metrics that can affect annual recurring revenue by millions of dollars with a single percentage-point change.<\/span><\/p>\n

Churn Rate Formula & How to Calculate Churn Rate?<\/span><\/h2>\n

The churn rate formula is simple, but how you apply it changes the insights you get.<\/span><\/p>\n

\"Churn-Rate-Formula\"<\/p>\n

Monthly Churn Rate<\/span><\/h3>\n

If churn rate is tracked using monthly start\/end, then use the same formula. A monthly view provides quicker feedback loops, particularly with retention campaigns.<\/span><\/p>\n

\"monthly-churn-rate\"<\/p>\n

Revenue Churn Rate<\/span><\/h3>\n

In addition to customer numbers, the revenue churn rate shows how much revenue you are losing, not just how many customers. This is particularly important when there are a variety of plan sizes.<\/span><\/p>\n

\"revenue-churn\"<\/p>\n

What are The Types of Customer Churn?<\/span><\/h2>\n

Not all churn is the same. Understanding what’s causing the people to leave is the first step in solving the problem. The two main types are:<\/span><\/p>\n

Voluntary Churn<\/span><\/h3>\n

It is the most practical type. The reasons customers leave include a poor customer experience, dissatisfaction with the product’s cost, and simply finding another product they like better. Product-market fit and customer success can be directly indicated through voluntary churn.<\/span><\/p>\n

Involuntary Churn<\/span><\/h3>\n

This occurs when customers are terminated from the game without actively wishing to end their association (due to failed payment processing, expired credit card, service disruptions, etc.). Up to 20-40% of churn can be involuntary, but it is easily recovered if the proper systems are in place.<\/span><\/p>\n\n\n\n\n\n\n\n\n
Voluntary Churn Signals<\/b><\/td>\nInvoluntary Churn Signals<\/b><\/td>\n<\/tr>\n
Cancelled subscriptions<\/span><\/td>\nPayment failures<\/span><\/td>\n<\/tr>\n
Switch to competitor<\/span><\/td>\nExpired cards\/billing errors<\/span><\/td>\n<\/tr>\n
Price objections<\/span><\/td>\nTechnical issues at renewal<\/span><\/td>\n<\/tr>\n
Poor onboarding experience<\/span><\/td>\nService downtime at key moments<\/span><\/td>\n<\/tr>\n
Lack of product value perceived<\/span><\/td>\nSubscription plan removal<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Average Churn Rate by Industry<\/span><\/h2>\n

The “good” churn rate is largely dependent on your business. A churn rate considered healthy in one industry may be harmful in another. Context is everything.<\/span><\/p>\n\n\n\n\n\n\n\n\n\n\n\n
Industry<\/b><\/td>\nAvg. Annual Churn Rate<\/b><\/td>\nAvg. Monthly Churn Rate<\/b><\/td>\nDifficulty in Retaining<\/b><\/td>\n<\/tr>\n
Enterprise SaaS<\/span><\/td>\n5\u20137%<\/span><\/td>\n~0.5%<\/span><\/td>\nLow<\/span><\/td>\n<\/tr>\n
SMB SaaS<\/span><\/td>\n10\u201315%<\/span><\/td>\n~1.2%<\/span><\/td>\nMedium<\/span><\/td>\n<\/tr>\n
E-Commerce (Subscription)<\/span><\/td>\n20\u201330%<\/span><\/td>\n~2\u20133%<\/span><\/td>\nMedium<\/span><\/td>\n<\/tr>\n
Digital Media \/ Streaming<\/span><\/td>\n30\u201350%<\/span><\/td>\n~4\u20135%<\/span><\/td>\nHigh<\/span><\/td>\n<\/tr>\n
Telecom<\/span><\/td>\n20\u201338%<\/span><\/td>\n~2.5\u20133.5%<\/span><\/td>\nHigh<\/span><\/td>\n<\/tr>\n
Financial Services<\/span><\/td>\n10\u201325%<\/span><\/td>\n~1.5\u20132%<\/span><\/td>\nMedium<\/span><\/td>\n<\/tr>\n
Healthcare \/ Wellness<\/span><\/td>\n5\u201310%<\/span><\/td>\n~0.7%<\/span><\/td>\nLow<\/span><\/td>\n<\/tr>\n
Retail (General)<\/span><\/td>\n25\u201345%<\/span><\/td>\n~3\u20135%<\/span><\/td>\nHigh<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Industry Context<\/span><\/p>\n

Recurly research suggests that the typical churn rate for a subscription business is around 4%, with 3% voluntary and 1% involuntary. Digital entertainment rates are significantly higher, and software and professional services are lower.<\/span><\/p>\n

Churn Rate vs Retention Rate: What’s the difference?<\/span><\/h2>\n

These two metrics measure opposite outcomes. They’re like the two sides of a coin, and one shows you how many customers you are losing, the other shows you how many you are keeping.<\/span><\/p>\n

\"\"<\/p>\n

The retention rate is frequently used in presentations to stakeholders and in investor decks, since a high percentage is easier to motivate with. But for campaigns where you’re testing A\/B on retention efforts, it’s important to track both of these together.<\/span><\/p>\n\n\n\n\n\n\n\n
Metric<\/b><\/td>\nWhat It Measures<\/b><\/td>\nBest Used For<\/b><\/td>\n<\/tr>\n
Churn Rate<\/span><\/td>\nThe percentage of customers who drop out during a time period<\/span><\/td>\nDiagnosing problems, risk alerts<\/span><\/td>\n<\/tr>\n
Retention Rate<\/span><\/td>\n% of customers retained<\/a> during a specific time interval<\/span><\/td>\nMeasuring the success of loyalty programs<\/span><\/td>\n<\/tr>\n
Revenue Churn<\/span><\/td>\nRevenue lost due to churned accounts<\/span><\/td>\nForecasting financial performance and investor reporting<\/span><\/td>\n<\/tr>\n
Net Revenue Retention<\/span><\/td>\nRevenue retained + expansion from existing customers<\/span><\/td>\nSaaS growth benchmarking<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Churn Rate in E-Commerce: A Special Case<\/span><\/h2>\n

In ecommerce, the concept of churn rate is similar to, yet distinct from, that of a subscription model. In ecommerce, churn usually refers to customers who stop making purchases over time.<\/span><\/p>\n

A commonly cited metric closely related to repurchase rate is the percentage of customers who repurchase the same item (also called the “return rate”). Daasity says improving repurchase rate<\/a> is one of the biggest ROI levers in eCommerce because a second purchase is a good indicator that a user will return for future business.<\/span><\/p>\n

How E-Commerce Brands Define a Churned Customer?<\/span><\/h3>\n