The percentage of users who stop using a product or service within a specific time period. It is a key metric for understanding customer retention and business sustainability. > [!formula] > $\text{Churn Rate} = \frac{\text{Churned Users}}{\text{Number of Users at the Beginning of the Period}}$ ## Importance - A high churn rate signifies the loss of existing users, who are often more valuable than new users due to their history with the brand. - Returning customers tend to have higher [[Customer Lifetime Value (CLV or LTV)]] and are easier to convert into loyal customers. - An increasing churn rate can slow growth, reduce revenue, and in extreme cases, lead to business failure (e.g., a bank run due to mass customer withdrawals). ## Types & Causes of Churn 1. **Voluntary Churn** – Users actively choose to leave due to: ^35a7a9 - Poor user experience and usability issues. - Frustration due to performance issues or bugs. - Inadequate customer support and responsiveness. - Lack of innovation, missing features, or poor product-market fit. - Competitive alternatives offering better value. - Pricing adjustments that reduce perceived affordability. 2. **Involuntary Churn** – Users unintentionally stop using the product due to: - Failed payments (e.g., expired credit cards) - Temporary inactivity - Seasonalities ## Reducing Churn ### Short-term Tactics - Personalized outreach to at-risk users - Reminder campaigns and notifications - Discounts and promotional offers ### Long-term Solutions - Identifying root causes of churn through data analysis - Reviewing customer support tickets and complaints - Conducting user interviews to understand pain points - Running experiments to improve retention strategies