What is Churn Rate?
Definition
The percentage of subscribers who cancel their subscription during a given time period, typically measured monthly or annually.
Understanding Churn Rate
Churn rate is one of the most important metrics for subscription businesses. It measures how many customers leave. A monthly churn rate of 5% means 5% of subscribers cancel each month.
Good SaaS churn rates are typically 3-5% monthly for B2C and under 2% monthly for B2B. High churn indicates dissatisfaction, poor onboarding, or strong competition. Companies combat churn through better onboarding, engagement features, loyalty programs, and improved customer support.
For consumers, understanding churn helps evaluate service stability.
Related Terms
Retention Rate
The percentage of subscribers who continue their subscription over a given period, calculated as the inverse of churn rate.
MRR
Monthly Recurring Revenue — the predictable total revenue a subscription business expects to earn each month from all active subscriptions.
Lifetime Value
The total revenue a business expects to earn from a single customer account over the entire duration of their subscription relationship.
Subscription
A recurring payment arrangement where a customer pays at regular intervals to access a product or service.