Churn Analysis 101: Quick Introduction and Key Concepts
Last updated:Definition
The Churn Rate of users for a product or service equals the fraction of users who disengage (see concepts below) relative to the total number of users, in a given time frame.
Customer Churn Rate = (Customers beginning of month - Customers end of month) / Customers beginning of month
Contractual vs Non-Contractual Churn
Contractual: Customer cancelled a recurring payment option or subscription.
Non-contractual: Customers don't explicitly opt out of a service; they simply stop don't actively use it anymore. E.g. you used to shop at Amazon regularly, but you have not purchased anything in more than a year.
Voluntary vs Involuntary Churn
Voluntary Customer actively cancelled/closed their account.
Involuntary: Account deactivation due to inactivity, account expiration, payment failures
User Cohorts
It's very important to split churn analysis along several dimensions, for example:
Months since purchase
User Demographics (Age, Sex, Location)
Product/Service Usage patterns
Cutoff Dates (Churn rate last year VS churn rate this year)
References
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- lots of good infos here