{"id":139180,"date":"2022-02-25T02:00:06","date_gmt":"2022-02-25T07:00:06","guid":{"rendered":"https:\/\/ahrefs.com\/blog\/?p=139180"},"modified":"2022-02-23T03:36:59","modified_gmt":"2022-02-23T08:36:59","slug":"churn-rate","status":"publish","type":"post","link":"https:\/\/ahrefs.com\/blog\/churn-rate\/","title":{"rendered":"How to Calculate Churn Rate + 9 Ways to Decrease It"},"content":{"rendered":"\n<div class=\"intro-txt\">Churn rate is a proportion of customers who stop paying for a product or service during a given&nbsp;time period. It\u2019s the complete opposite of growth rate, making it one of the most important marketing and sales metrics for subscription-based companies.<\/div>\n\n\n\n<p>It\u2019s a seemingly easy-to-understand metric. But the simple formula to calculate churn rate has some limitations and potential traps many marketers may not take into account. Also, contrary to popular belief, you can influence churn long before someone becomes a customer.<\/p>\n\n\n\n<p>There\u2019s quite a lot to explore here. In this article, you\u2019ll learn the following:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><a href=\"#1-what-makes-churn-rate-important\">What makes churn rate so important<\/a><\/li>\n<li><a href=\"#2-how-to-calculate-churn-rate\">How to calculate churn&nbsp;rate<\/a><\/li>\n<li><a href=\"#3-what%E2%80%99s-good-churn-rate\">What\u2019s a good churn rate for your business<\/a><\/li>\n<li><a href=\"#4-nine-ways-decrease-churn-rate\">Nine ways to decrease churn&nbsp;rate<\/a><\/li>\n<\/ul>\n\n\n\n<p>Let\u2019s dive into&nbsp;it.<\/p>\n\n\n\n<div class=\"post-nav-link clearfix\" id=\"section1\"><a class=\"subhead-anchor\" data-tip=\"tooltip__copielink\" rel=\"#section1\"><svg width=\"19\" height=\"19\" viewBox=\"0 0 14 14\" style><g fill=\"none\" fill-rule=\"evenodd\"><path d=\"M0 0h14v14H0z\" \/><path d=\"M7.45 9.887l-1.62 1.621c-.92.92-2.418.92-3.338 0a2.364 2.364 0 0 1 0-3.339l1.62-1.62-1.273-1.272-1.62 1.62a4.161 4.161 0 1 0 5.885 5.884l1.62-1.62L7.45 9.886zM5.527 5.135L7.17 3.492c.92-.92 2.418-.92 3.339 0 .92.92.92 2.418 0 3.339L8.866 8.473l1.272 1.273 1.644-1.643A4.161 4.161 0 1 0 5.897 2.22L4.254 3.863l1.272 1.272zm-.66 3.998a.749.749 0 0 1 0-1.06l2.208-2.206a.749.749 0 1 1 1.06 1.06L5.928 9.133a.75.75 0 0 1-1.061 0z\" style \/><\/g><\/svg><\/a><div class=\"link-text\" data-anchor=\"What makes churn rate so important?\" data-section=\"1-what-makes-churn-rate-important\">\n\n\n\n<h2 class=\"wp-block-heading\">What makes churn rate so important?<\/h2>\n\n\n\n<\/div><\/div>\n\n\n\n<p>There are multiple reasons why keeping track of your churn rate and working with it can help to boost your marketing performance. Well, five main reasons to be specific.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">1. Direct revenue impact<\/h3>\n\n\n\n<p>Churn rate is a decelerator of your growth rate. But unlike the growth rate, a&nbsp;certain percentage of churn is here to stay. Many fast-growing companies may fall into the trap of ignoring high churns when their growth is much higher, but it\u2019s not a sustainable business model.<\/p>\n\n\n\n<p>A 15% churn rate may not seem that bad when a startup grows 200% year-over-year. But that growth rate will eventually fall, and the churn may not. Any company will sooner or later suffer from high churn rates even if they weren\u2019t such a big problem initially.<\/p>\n\n\n\n<p>The sooner you start tackling your churn rate, the better. It has compounding effects. Let\u2019s consider two companies with $1M ARR (annual recurring revenue) each and a similar growth rate of 25%. But they have different churn rates (<em>scroll horizontally to see all table columns<\/em>):<\/p>\n\n<table id=\"tablepress-119\" class=\"tablepress tablepress-id-119 tablepress-responsive tablepress-ahrefs-width-720px\">\n<thead>\n<tr class=\"row-1 odd\">\n\t<th class=\"column-1\"><\/th><th class=\"column-2\">Year 0 ARR<\/th><th class=\"column-3\">Year 1 ARR<\/th><th class=\"column-4\">Year 2 ARR<\/th><th class=\"column-5\">Year 3 ARR<\/th><th class=\"column-6\">Year 4 ARR<\/th><th class=\"column-7\">Year 5&nbsp;ARR<\/th>\n<\/tr>\n<\/thead>\n<tbody class=\"row-hover\">\n<tr class=\"row-2 even\">\n\t<td class=\"column-1\">25% growth<br>\n5%&nbsp;churn<\/td><td class=\"column-2\">$1,000,000<\/td><td class=\"column-3\">$1,200,000<\/td><td class=\"column-4\">$1,440,000<br>\n<br>\n<\/td><td class=\"column-5\">$1,728,000<br>\n<br>\n<\/td><td class=\"column-6\">$2,073,600<br>\n<br>\n<\/td><td class=\"column-7\">$2,448,320<br>\n<br>\n<\/td>\n<\/tr>\n<tr class=\"row-3 odd\">\n\t<td class=\"column-1\">25% growth<br>\n10%&nbsp;churn<br>\n<\/td><td class=\"column-2\">$1,000,000<\/td><td class=\"column-3\">$1,150,000<\/td><td class=\"column-4\">$1,322,500<br>\n<\/td><td class=\"column-5\">$1,520,875<br>\n<br>\n<\/td><td class=\"column-6\">$1,749,006<br>\n<\/td><td class=\"column-7\">$2,011,357<br>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<!-- #tablepress-119 from cache -->\n\n\n\n\n\n<p>That\u2019s what a difference of 5 percentage points in churn rate can do to revenue. The higher you churn, the slower you grow. Easy as&nbsp;that.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">2. Influence your word-of-mouth marketing<\/h3>\n\n\n\n<p><a href=\"https:\/\/ahrefs.com\/blog\/word-of-mouth-marketing\/\">Word-of-mouth marketing (WoMM)<\/a>&nbsp;is the process of influencing and encouraging natural discussions about a product, service, or company. I\u2019m sure you\u2019ve subscribed to some product or service because someone you trust told you about it. For this reason, WoMM can be one of the most powerful marketing channels.<\/p>\n\n\n\n<p>The fact that more than 14,000 new customers in 2020 told us they were referred to <a href=\"https:\/\/ahrefs.com\/\">Ahrefs<\/a>&nbsp;by their friends is the best proof of WoMM\u2019s importance:<\/p>\n\n\n\n\n<div class=\"wp-block-image\">\n<figure class=\"is-style-default aligncenter\"><img decoding=\"async\" src=\"https:\/\/ahrefs.com\/blog\/wp-content\/uploads\/2022\/02\/1-word-of-mouth-marketing.jpeg\" alt=\"Person said in registration form they learned about Ahrefs through friends \"><\/figure>\n<\/div>\n\n\n<p>Churn rate reflects how well you meet the expectations of people who sign up for your product or service. While we can\u2019t directly translate high churn into dissatisfaction, we can assume it\u2019s a signal for a need to significantly improve your&nbsp;WoMM.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">3. Early indicator of bad news for your business<\/h3>\n\n\n\n<p>Noticed a big spike in your monthly churn rate? Chances are you did something wrong that&nbsp;month.<\/p>\n\n\n\n<p>Maybe product changes got negative feedback? Increased pricing? Any bad publicity? Or it could be your competitors stepped up their game and poached a significant number of your customers.<\/p>\n\n\n\n<p>At any rate, having such an early indicator of these changes always comes in&nbsp;handy.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">4. Customer lifetime value variable<\/h3>\n\n\n\n<p>Customer lifetime value (LTV) is a metric that estimates how much money an individual customer will spend on your products or services. Increasing your average customer\u2019s worth not only improves your financial metrics but also allows you to spend more on acquiring new customers.<\/p>\n\n\n\n<p>LTV is yet another important metric, even a <a href=\"https:\/\/ahrefs.com\/blog\/marketing-kpis\/\">marketing KPI<\/a>, that you should keep track of. The best way for subscription-based companies to calculate the metric is as follows:<\/p>\n\n\n\n<blockquote><em>LTV = avg. monthly revenue per customer\/avg. customer monthly churn&nbsp;rate<\/em><\/blockquote>\n\n<p>The fact that churn enables calculations of other crucial marketing metrics should make it a staple in your spreadsheets and dashboards.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">5. Proxy for performance forecasts<\/h3>\n\n\n\n<p>Many companies and their analysts engage in forecasting future performances. Accordingly, the churn rate is an essential variable in the calculations.<\/p>\n\n\n\n<p>We\u2019re not talking about in-house uses only. Churn rate is also an important indicator when it comes to investing in subscription-based companies.<\/p>\n\n\n\n<p>So what does it take to calculate churn&nbsp;rate?<\/p>\n\n\n\n<div class=\"post-nav-link clearfix\" id=\"section1\"><a class=\"subhead-anchor\" data-tip=\"tooltip__copielink\" rel=\"#section1\"><svg width=\"19\" height=\"19\" viewBox=\"0 0 14 14\" style><g fill=\"none\" fill-rule=\"evenodd\"><path d=\"M0 0h14v14H0z\" \/><path d=\"M7.45 9.887l-1.62 1.621c-.92.92-2.418.92-3.338 0a2.364 2.364 0 0 1 0-3.339l1.62-1.62-1.273-1.272-1.62 1.62a4.161 4.161 0 1 0 5.885 5.884l1.62-1.62L7.45 9.886zM5.527 5.135L7.17 3.492c.92-.92 2.418-.92 3.339 0 .92.92.92 2.418 0 3.339L8.866 8.473l1.272 1.273 1.644-1.643A4.161 4.161 0 1 0 5.897 2.22L4.254 3.863l1.272 1.272zm-.66 3.998a.749.749 0 0 1 0-1.06l2.208-2.206a.749.749 0 1 1 1.06 1.06L5.928 9.133a.75.75 0 0 1-1.061 0z\" style \/><\/g><\/svg><\/a><div class=\"link-text\" data-anchor=\"How to calculate churn rate?\" data-section=\"2-how-to-calculate-churn-rate\">\n\n\n\n<h2 class=\"wp-block-heading\">How to calculate churn&nbsp;rate?<\/h2>\n\n\n\n<\/div><\/div>\n\n\n\n<p>You might have already noticed that I talked about churn rates in relation to both customers and revenue. These are two types of churn rates, and here\u2019s everything you need to know about calculating them.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Customer churn formula<\/h3>\n\n\n\n<blockquote><em>Customer churn rate = (customers lost during period\/customers at start of period) x&nbsp;100<\/em><\/blockquote>\n\n<p>For example, on May 1, you had 1,000 active customers. And on May 31, you lost 25 of them. That means your monthly customer churn rate is 2.5%.<\/p>\n\n\n\n<p>Easy start. Let\u2019s move&nbsp;on.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Revenue churn formula<\/h3>\n\n\n\n<blockquote><em>Revenue churn rate = (revenue lost during period\/revenue at start of period) x&nbsp;100<\/em><\/blockquote>\n\n<p>As you can see, it\u2019s basically the same formula. Only the variable is different and a bit more tricky.<\/p>\n\n\n\n<p>Here\u2019s the thing: You should only take into account the revenue generated or lost from the customers you had at the start of the period.<\/p>\n\n\n\n<p>Let\u2019s say you have $100K MRR (monthly recurring revenue) at the start of the period. You manage to upgrade some of your existing customers for an additional $5K MRR, lose a few customers who contributed to $4K MRR, and notice $2K worth of downgrades.<\/p>\n\n\n\n<p>The revenue lost during the period is $1,000. This is as you lost $6K due to churned and downgraded customers. But you made $5K from customers who decided to upgrade. Your revenue churn rate for that period is therefore 1%, as the formula is <em>(1,000\/100,000) x 100<\/em>.<\/p>\n\n\n\n<p>Sometimes, your upgrades will be worth more than the revenue lost. In that case, you\u2019ll have a negative number in the numerator, making the overall churn for that period negative. That\u2019s your best-case scenario, as it means growth even without taking any new customers into account.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">When to use which churn rate formula?<\/h3>\n\n\n\n<p>It doesn\u2019t take a math genius to figure out that customer and churn rates usually differ. I recommend you calculate both churns because they provide additional information.<\/p>\n\n\n\n<p>If:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Customer churn rate &gt; revenue churn rate<\/strong>, then your churned customers have a below-average lifetime value.<\/li>\n<li><strong>Customer churn rate &lt; revenue churn rate<\/strong>, then some of your higher-value customers churned.<\/li>\n<\/ul>\n\n\n\n<p>Always try to put the numbers into context. For example, it\u2019s possible to have a high revenue churn despite having done exceptionally well during a certain period.<\/p>\n<p>Such a scenario happens when, for example, a business has a few percent of customers who contribute to the vast majority of revenue. If one of those huge accounts churned, it would make the revenue churn look&nbsp;bad.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">What are the limitations of the basic churn formula?<\/h3>\n\n\n\n<p>Calculating churn rate is easy until it isn\u2019t. I won\u2019t dive into all the nitty-gritty, but you should be aware of the following:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The formula works best when calculating churn rates on a monthly basis.<\/li>\n<li>For longer periods of time, newly acquired customers who churn within the given period can skew the results. You have two options here. Disregard all churns from customers acquired during that period or add up monthly data and calculate a weighted average churn.<\/li>\n<li>Consider calculating churns for some of your plans separately, especially if you target completely different market segments at the same time (e.g., SMBs vs. enterprises).<\/li>\n<li>If you\u2019re a startup, your churn rates will likely fluctuate a lot. That\u2019s because you experience rapid&nbsp;growth and new customers tend to churn more frequently than those who stick around for a while. Your likely small sample size (# of customers) is also a factor here.<\/li>\n<li>Your business may suffer from seasonal swings, so a higher churn rate may be natural during some months.<\/li>\n<\/ul>\n\n\n\n<p>But the bottom line is that no matter how you calculate your churn, you should stick with it and work on decreasing whatever the number is.<\/p>\n\n\n\n<p>So what\u2019s really a bad, so-so, or good churn&nbsp;rate?<\/p>\n\n\n\n<div class=\"post-nav-link clearfix\" id=\"section1\"><a class=\"subhead-anchor\" data-tip=\"tooltip__copielink\" rel=\"#section1\"><svg width=\"19\" height=\"19\" viewBox=\"0 0 14 14\" style><g fill=\"none\" fill-rule=\"evenodd\"><path d=\"M0 0h14v14H0z\" \/><path d=\"M7.45 9.887l-1.62 1.621c-.92.92-2.418.92-3.338 0a2.364 2.364 0 0 1 0-3.339l1.62-1.62-1.273-1.272-1.62 1.62a4.161 4.161 0 1 0 5.885 5.884l1.62-1.62L7.45 9.886zM5.527 5.135L7.17 3.492c.92-.92 2.418-.92 3.339 0 .92.92.92 2.418 0 3.339L8.866 8.473l1.272 1.273 1.644-1.643A4.161 4.161 0 1 0 5.897 2.22L4.254 3.863l1.272 1.272zm-.66 3.998a.749.749 0 0 1 0-1.06l2.208-2.206a.749.749 0 1 1 1.06 1.06L5.928 9.133a.75.75 0 0 1-1.061 0z\" style \/><\/g><\/svg><\/a><div class=\"link-text\" data-anchor=\"What's a good churn rate for your business?\" data-section=\"3-what\u2019s-good-churn-rate\">\n\n\n\n<h2 class=\"wp-block-heading\">What\u2019s a good churn rate for your business?<\/h2>\n\n\n\n<\/div><\/div>\n\n\n\n<p>If you Googled this, you\u2019d encounter anything between 2% and 8% to be an acceptable churn rate. That\u2019s useless information for a metric where a 1% difference could mean tons of money. On top of that, some resources don\u2019t even mention what type of churn over how long they\u2019re referring to.<\/p>\n\n\n\n<p>But we need a number. It\u2019s important to have an anchor to recognize instances when churn is a minor problem and we should, thus, prioritize achieving other <a href=\"https:\/\/ahrefs.com\/blog\/marketing-objectives\/\">marketing objectives<\/a>. Fortunately, all we need here is to get more specific with Google queries.<\/p>\n\n\n\n<p>Make a list of competitors. Google their names in combination with \u201cchurn rate\u201d or \u201cretention rate\u201d (the inverse metric). Voil\u00e0:<\/p>\n\n\n\n\n<div class=\"wp-block-image\">\n<figure class=\"is-style-default aligncenter\"><img decoding=\"async\" src=\"https:\/\/ahrefs.com\/blog\/wp-content\/uploads\/2022\/02\/2-cloudflare-churn.png\" alt=\"Google SERP for &quot;cloudfare 'churn rate'&quot;\"><\/figure>\n<\/div>\n\n\n\n<div class=\"wp-block-image\">\n<figure class=\"is-style-default aligncenter\"><img decoding=\"async\" src=\"https:\/\/ahrefs.com\/blog\/wp-content\/uploads\/2022\/02\/3-fastly-retention.png\" alt=\"Google SERP for &quot;fastly 'retention rate'&quot;\"><\/figure>\n<\/div>\n\n\n<p>You should get some specific numbers. If you have publicly traded companies on your list, the chances of getting more numbers for your benchmarking are&nbsp;high.<\/p>\n<p>That\u2019s because these companies regularly publish financial reports and have their executives share metrics and data in interviews. But you can get lucky with private companies as&nbsp;well.<\/p>\n\n\n\n<p>One important thing to keep in mind. You and your competitors likely target different segments of the market, and that has a huge impact on churn&nbsp;rates.<\/p>\n<p>As you can see in the example above, Cloudflare reports 36% annual churn, while Fastly is at 0.7%. They\u2019re both Content Delivery Network (CDN) providers, but Cloudflare caters to everyone in the market (including a free plan option). But Fastly is only targeting enterprise and high-value customers who usually sign long-term contracts.<\/p>\n\n\n\n<p>All right. So you found out that your churn is probably too high and you should work on decreasing it. That\u2019s what the second half of this post is all&nbsp;about.<\/p>\n\n\n\n<div class=\"post-nav-link clearfix\" id=\"section1\"><a class=\"subhead-anchor\" data-tip=\"tooltip__copielink\" rel=\"#section1\"><svg width=\"19\" height=\"19\" viewBox=\"0 0 14 14\" style><g fill=\"none\" fill-rule=\"evenodd\"><path d=\"M0 0h14v14H0z\" \/><path d=\"M7.45 9.887l-1.62 1.621c-.92.92-2.418.92-3.338 0a2.364 2.364 0 0 1 0-3.339l1.62-1.62-1.273-1.272-1.62 1.62a4.161 4.161 0 1 0 5.885 5.884l1.62-1.62L7.45 9.886zM5.527 5.135L7.17 3.492c.92-.92 2.418-.92 3.339 0 .92.92.92 2.418 0 3.339L8.866 8.473l1.272 1.273 1.644-1.643A4.161 4.161 0 1 0 5.897 2.22L4.254 3.863l1.272 1.272zm-.66 3.998a.749.749 0 0 1 0-1.06l2.208-2.206a.749.749 0 1 1 1.06 1.06L5.928 9.133a.75.75 0 0 1-1.061 0z\" style \/><\/g><\/svg><\/a><div class=\"link-text\" data-anchor=\"Nine ways to decrease churn rate\" data-section=\"4-nine-ways-decrease-churn-rate\"><\/div><\/div>\n\n\n\n<h2 class=\"wp-block-heading\">Nine&nbsp;ways to decrease churn&nbsp;rate<\/h2>\n\n\n\n<p>There seems to be a misconception that churn happens after someone becomes your customer. No. You can influence your churn rate in all stages of the <a href=\"https:\/\/ahrefs.com\/blog\/marketing-funnels\/\">marketing funnel<\/a>:<\/p>\n\n\n\n\n<div class=\"wp-block-image\">\n<figure class=\"is-style-default aligncenter\"><img decoding=\"async\" src=\"https:\/\/ahrefs.com\/blog\/wp-content\/uploads\/2022\/02\/4-marketing-funnel.png\" alt=\"Funnel with six sections. From top to bottom (Awareness, Interest, Consideration, Action, Loyalty, Advocacy)\"><\/figure>\n<\/div>\n\n\n<p>Let\u2019s show you&nbsp;how.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">1. Collect feedback from churned customers<\/h3>\n\n\n\n<p>Talking to your customers is an important part of <a href=\"https:\/\/ahrefs.com\/blog\/market-research\/\">market research<\/a>. But you may learn even more when you talk to people and companies that stopped paying for your product or service.<\/p>\n\n\n\n<p>Now don\u2019t fall into the trap of taking action on everything you hear from those who churned. Just systematically collect the feedback to get a solid sample. Then decide if taking action on their objections and problems makes sense for your product roadmap and <a href=\"https:\/\/ahrefs.com\/blog\/marketing-strategy\/\">marketing strategy<\/a>.<\/p>\n\n\n\n<p>Since prioritization mainly revolves around two variables\u2014effort and outcome\u2014you\u2019ll probably focus more on problems brought up by your most valuable customer segments.<\/p>\n\n\n\n<p>You may also find out that a certain percentage of your customers only need to use your product for a month or two every year. You\u2019ll get these insights after collecting such feedback for a while. Then you can account for this natural churn to help you tackle the more important churn.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">2. Fix your positioning<\/h3>\n\n\n\n<p>Positioning is how your target market should perceive your brand. It\u2019s the intended brand image that consists of associations people have of your brand and products.<\/p>\n<p>Positioning allows you to differentiate from your competitors and, in some cases, even influence how the target market perceives your competitors.<\/p>\n\n\n\n<p>Let\u2019s give the theory a more actionable spin. Your marketing communication should consistently convey what your product does and how a potential customer can benefit from that. For example, here\u2019s a humble brag about <a href=\"https:\/\/ahrefs.com\/\">our homepage<\/a>&nbsp;that does the job of providing clear communication well:<\/p>\n\n\n\n\n<div class=\"wp-block-image\">\n<figure class=\"is-style-default aligncenter\"><img decoding=\"async\" src=\"https:\/\/ahrefs.com\/blog\/wp-content\/uploads\/2022\/02\/5-ahrefs-homepage-positioning.png\" alt=\"Ahrefs' homepage positioning and CTA button below to sign up for Ahrefs \"><\/figure>\n<\/div>\n\n\n<p>This plays a huge role in having new users who know what to expect from Ahrefs and how we can help them. We\u2019re also confident that we can meet or, even better, exceed those expectations.<\/p>\n\n\n\n<p>Churns often happen when you overpromise and underdeliver. Good positioning helps fix the first. So how do you figure out how to position your product?<\/p>\n\n\n\n<p>Again, we\u2019re back at <a href=\"https:\/\/ahrefs.com\/blog\/market-research\/\">market research<\/a>&nbsp;that should tell you about the preferences of each of your market segments and what\u2019s important for them. Adjust your positioning and communication based on&nbsp;this.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">3. Make sure you target the right audience<\/h3>\n\n\n\n<p>Some customer segments churn more than others. You saw the brutal contrast between Cloudflare (with 36% churn) and Fastly (with 0.7% churn). In an ideal world, you\u2019d be spending most of your resources on reaching audiences that allow for <a href=\"https:\/\/ahrefs.com\/blog\/product-market-fit\/\">product-market fit<\/a>.<\/p>\n\n\n\n<p>In other words, you can decrease your churn rates if you get more qualified visitors to your website. This especially applies to the middle and bottom parts of the marketing funnel.<\/p>\n\n\n\n<p>Most people probably associate the word \u201ctarget\u201d with advertising. You can be visible at more relevant places, narrow down targeting options in advertising platforms, etc. That\u2019s pretty straightforward.<\/p>\n\n\n\n<p>But you can also improve the quality of your organic traffic. It influences all parts of the funnel and is a major traffic driver for many companies.<\/p>\n\n\n\n<p>The key to this is <a href=\"https:\/\/ahrefs.com\/seo\/keyword-research\" data-ahr=\"https:\/\/ahrefs.com\/blog\/keyword-research\/\">solid keyword research<\/a>. Your best content opportunities are found in topics with high traffic potential, low keyword difficulty, and high business value that\u2019s about naturally plugging your product. However, in reality, you\u2019ll almost never find a keyword that meets all three criteria, so you\u2019ll have to make compromises.<\/p>\n\n\n\n<p>For example, the keyword \u201cchurn rate\u201d has a solid traffic potential and a so-so KD score (for our website):<\/p>\n\n\n\n<div style=\"width: 1610px\" class=\"wp-caption alignnone\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/ahrefs.com\/blog\/wp-content\/uploads\/2022\/02\/6-keywords-explorer.png\" alt=\"Overview of keyword &quot;churn rate&quot;\" width=\"1600\" height=\"569\"><p class=\"wp-caption-text\">Screenshot from Ahrefs\u2019 <a href=\"https:\/\/ahrefs.com\/keywords-explorer\">Keywords Explorer<\/a>.<\/p><\/div>\n\n\n\n<p>It also provides a few opportunities to naturally mention Ahrefs as a solution to some of the problems here. See what I did right&nbsp;now?<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">4. Better sales and customer service experience<\/h3>\n\n\n\n<p>The experience you have with the customer-facing staff makes a big difference in how you perceive a product, service, or brand. Just think about your best hotel or restaurant experience, how you felt there, and how much of that experience was influenced by great customer service.<\/p>\n\n\n\n<p>This principle can apply to any service you\u2019re subscribed to. I once worked for a B2B company that made \u201cbest customer experience\u201d as one of its USPs (unique selling points). Customers truly cherished that, especially if they had so-so or bad experiences with that company\u2019s competitors.<\/p>\n\n\n\n<p>What\u2019s more, even if a customer thinks about churning, a great sales or customer service representative can save the&nbsp;day.<\/p>\n\n\n\n<p>Here are a few suggestions to improve direct communication with your prospects and customers:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Have communication guides or SOPs that your staff adheres to<\/li>\n<li>Implement an evaluation and feedback system for your customer-facing teams<\/li>\n<li>Build&nbsp;a product that your sales and customer service teams truly believe in and&nbsp;like<\/li>\n<li>Make sure to not shoot your staff in the foot, e.g., don\u2019t make huge changes on Friday or plan outages for busy periods<\/li>\n<li>Be a good employer<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">5. Offer a trial or freemium version of your product<\/h3>\n\n\n\n<p>Yes, there are still subscription-based companies that don\u2019t let you try their product without any commitments. This is especially true for enterprise products.<\/p>\n\n\n\n<p>The objective of a trial or freemium is to meet or even exceed a prospect\u2019s product expectations. Making your prospects confident in their decisions when they\u2019re about to make the conversion pays off in the context of higher LTV and lower&nbsp;churn.<\/p>\n\n\n\n<p>An important takeaway here is you can make people try your product way before they\u2019re ready to sign up. Our <a href=\"https:\/\/ahrefs.com\/keyword-generator\">keyword generator<\/a>,&nbsp;for example, is one of <a href=\"https:\/\/ahrefs.com\/free-seo-tools\">many free SEO tools we offer<\/a>:<\/p>\n\n\n\n\n<div class=\"wp-block-image\">\n<figure class=\"is-style-default aligncenter\"><img decoding=\"async\" src=\"https:\/\/ahrefs.com\/blog\/wp-content\/uploads\/2022\/02\/7-keyword-generator.png\" alt=\"Excerpt of Ahrefs' &quot;free keyword generator&quot; page; some text and then below is a picture of Phrase match report  \"><\/figure>\n<\/div>\n\n\n<p>People looking up keywords that lead to this page aren\u2019t often well-versed in what SEO toolsets&nbsp;like Ahrefs have to offer. But providing free solutions to problems higher up the funnel makes them familiar with our tools one step at a&nbsp;time.<\/p>\n\n\n\n<p>A similar use case is our free <a href=\"https:\/\/ahrefs.com\/webmaster-tools\">Ahrefs Webmaster Tools<\/a>. It provides SEO data, insights, and recommendations that are useful and actionable even for beginners. After a few weeks or months of using these products, the beginner may consider stepping up their SEO game and signing up for the full version.<\/p>\n\n\n\n<p>But it\u2019s difficult to make SEO beginners experience the&nbsp;full potential of our tools right away. This leads us&nbsp;to\u2026<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">6. Improve onboarding experience<\/h3>\n\n\n\n<p>The best way to keep a customer is to show them how they can squeeze the most out of your product as soon as possible. This hugely depends on the complexity of your product, so I\u2019ll show you how we do it. (By the way, I already mentioned that our <a href=\"https:\/\/ahrefs.com\/\">all-in-one SEO toolset<\/a>&nbsp;can be complex and overwhelming for a beginner.)<\/p>\n\n\n\n<p>We start by sending an email that sets the stage for diving deeper into each&nbsp;tool:<\/p>\n\n\n\n\n<div class=\"wp-block-image\">\n<figure class=\"is-style-default aligncenter\"><img decoding=\"async\" src=\"https:\/\/ahrefs.com\/blog\/wp-content\/uploads\/2022\/02\/8-onboarding-email.jpg\" alt=\"Ahrefs' onboarding email. &quot;Welcome&quot; video above and list of main tools hyperlinked for easy access to more information \"><\/figure>\n<\/div>\n\n\n<p>OK, an onboarding sequence of emails is a common practice. Let\u2019s level&nbsp;up.<\/p>\n\n\n\n<p>We have an <a href=\"https:\/\/ahrefs.com\/academy\">extensive academy of video courses<\/a>&nbsp;going through every nook and cranny of the toolset, showing you how to crush&nbsp;SEO:<\/p>\n\n\n\n\n<div class=\"wp-block-image\">\n<figure class=\"is-style-default aligncenter\"><img decoding=\"async\" src=\"https:\/\/ahrefs.com\/blog\/wp-content\/uploads\/2022\/02\/9-ahrefs-academy.jpg\" alt=\"Ahrefs Academy page with Sam's picture and link to each course\"><\/figure>\n<\/div>\n\n\n<p>And if that\u2019s not enough, all of our tools and reports contain explanations, tooltips, and how-to guides so that you can apply the best practices right&nbsp;away:<\/p>\n\n\n\n<div style=\"width: 1610px\" class=\"wp-caption alignnone\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/ahrefs.com\/blog\/wp-content\/uploads\/2022\/02\/10-content-explorer-explanations.jpg\" alt=\"Tooltips in Content Explorer \" width=\"1600\" height=\"1198\"><p class=\"wp-caption-text\">Screenshot taken from Ahrefs\u2019 <a href=\"https:\/\/ahrefs.com\/content-explorer\">Content Explorer<\/a>.<\/p><\/div>\n\n\n\n<h3 class=\"wp-block-heading\">7. Provide great product education resources<\/h3>\n\n\n\n<p>This is related to the previous point but applied to the whole marketing funnel. Product education is at the forefront of our communication strategy. And there\u2019s one thing we know for sure: You can\u2019t over-educate your audience about the product. There are countless ways to use Ahrefs, and we\u2019re glad that even independent experts share their&nbsp;tips:<\/p>\n\n\n\n<p><\/p><blockquote class=\"twitter-tweet\" data-width=\"500\" data-dnt=\"true\"><p lang=\"en\" dir=\"ltr\">12 none obvious SEO use cases of <a href=\"https:\/\/twitter.com\/ahrefs?ref_src=twsrc%5Etfw\">@ahrefs<\/a> \ud83d\udd25<br><br>Here\u2019s a thread of threads (that no one asked&nbsp;for):<\/p>\u2014 Jake (@jsvxc) <a href=\"https:\/\/twitter.com\/jsvxc\/status\/1457769184700502025?ref_src=twsrc%5Etfw\">November 8,&nbsp;2021<\/a><\/blockquote><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script>\n\n\n\n<p>The more complex your product is, the more you should prioritize <strong>education<\/strong>&nbsp;in your marketing communication.<\/p>\n\n\n\n<p>Generally, our prospects already know Ahrefs pretty well before signing up. We took this to the extreme and even discouraged some people from signing up for our <strong>now-discontinued<\/strong>&nbsp;$7 trial:<\/p>\n\n\n\n\n<div class=\"wp-block-image\">\n<figure class=\"is-style-default aligncenter\"><img decoding=\"async\" src=\"https:\/\/ahrefs.com\/blog\/wp-content\/uploads\/2022\/02\/11-homepage-signup-nudge.png\" alt=\"Quote by Tim Soulo\"><\/figure>\n<\/div>\n\n\n<p>We can afford this claim since we produce <a href=\"https:\/\/ahrefs.com\/blog\/\">product-led content<\/a>&nbsp;and educate our readers on how Ahrefs can help them solve hundreds of SEO and marketing problems.<\/p>\n\n\n\n<p><a href=\"https:\/\/ahrefs.com\/blog\/marketing-channels\/\">Use every channel<\/a>&nbsp;possible to distribute your product education resources. Here\u2019s a list of all the channels we own and use for product education (feel free to take inspiration from&nbsp;them):<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li>Newsletter<\/li>\n<li>Ahrefs social media accounts + our personal accounts<\/li>\n<li><a href=\"https:\/\/www.facebook.com\/groups\/ahrefsinsider\">Ahrefs FB Insider group<\/a><\/li>\n<li><a href=\"https:\/\/ahrefs.com\/blog\/\">Ahrefs blog<\/a><\/li>\n<li><a href=\"https:\/\/www.youtube.com\/channel\/UCWquNQV8Y0_defMKnGKrFOQ\">Ahrefs YouTube channel<\/a><\/li>\n<li><a href=\"https:\/\/ahrefs.com\/academy\">Ahrefs Academy<\/a><\/li>\n<li>Ubiquitous how-to guides and tooltips&nbsp;across the&nbsp;tool<\/li>\n<\/ol>\n\n\n\n<h3 class=\"wp-block-heading\">8. Keep on improving your product<\/h3>\n\n\n\n<p>You can have the best product in your niche, but there will always be a huge list of features and improvements you can work on. Getting a new customer who assesses that you have the best product for them is great. But that favorable opinion can change in months or years to come if you rest on your&nbsp;oars.<\/p>\n\n\n\n<p>There are three ways to guide your product roadmap:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li>Collect and evaluate customer feedback (<a href=\"https:\/\/ahrefs.canny.io\/\">we do this partially in public<\/a>)<\/li>\n<li>Monitor what the market wants (on social media, forums, industry events)<\/li>\n<li>Consult with experts using the product<\/li>\n<\/ol>\n\n\n\n<h3 class=\"wp-block-heading\">9. Track and improve Net Promoter Score (NPS)<\/h3>\n\n\n\n<p>Remember the point about the influence of churn rates on your WOMM? NPS is the best proxy for improving both churn rate and&nbsp;WoMM.<\/p>\n\n\n\n<p>NPS represents customer satisfaction and loyalty based on how likely they are to recommend your product or service to others.<\/p>\n\n\n\n<p>You\u2019ve surely encountered many NPS surveys already. Often, they look like&nbsp;this:<\/p>\n\n\n\n\n<div class=\"wp-block-image\">\n<figure class=\"is-style-default aligncenter\"><img decoding=\"async\" src=\"https:\/\/ahrefs.com\/blog\/wp-content\/uploads\/2022\/02\/12-nps-survey.png\" alt=\"NPS survey ranging from 1 to 10; 1 being &quot;not likely to recommend Revolut&quot; and 10 being &quot;extremely likely to recommend Revolut&quot;\"><\/figure>\n<\/div>\n\n\n<p>The score the user selects dictates whether they\u2019re a detractor, passive, or promoter:<\/p>\n\n\n\n\n<div class=\"wp-block-image\">\n<figure class=\"is-style-default aligncenter\"><img decoding=\"async\" src=\"https:\/\/ahrefs.com\/blog\/wp-content\/uploads\/2022\/02\/13-nps-scale.png\" alt=\"Scale from 1 to 10. Less than 6 are detractors. 7 and 8 are passives. 9 and 10 are promoters\"><\/figure>\n<\/div>\n\n\n<p>The NPS score is then calculated by subtracting the percentage of detractors from the percentage of promoters. It can range between -100 and 100. Anything above zero means that you have more promoters than detractors.<\/p>\n\n\n\n<p>Most types of software that manage these surveys for you will also calculate the NPS. Generally speaking, an NPS score above 70 is considered exceptionally good. But always <a href=\"https:\/\/www.retently.com\/blog\/good-net-promoter-score\/\">check benchmarks for your industry<\/a>, as they may be much&nbsp;lower.<\/p>\n\n\n\n<p>Improving your NPS will most likely decrease your churn and vice versa. Do note the tactics for achieving these objectives are interchangeable. NPS is just another method for tracking your progress and gaining more insights.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Final thoughts<\/h2>\n\n\n\n<p>Now, as we\u2019re approaching the end, I want to mention a tactic that can decrease your churn but will most likely hurt your brand and reputation in the long run. And that\u2019s making your subscriptions difficult to cancel. Don\u2019t do this. Make your sign-up and cancellation processes clear and frictionless.<\/p>\n\n\n\n<p>And remember this: A certain percentage of churn rate is completely fine and natural. Don\u2019t obsess over the metric if you\u2019re already doing well against the industry benchmarks.<\/p>\n\n\n\n<p>Here\u2019s wishing you lower churns and higher growth! If you\u2019ve got any questions, ping me <a href=\"https:\/\/twitter.com\/michalpecanek\">on Twitter<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>It\u2019s a seemingly easy-to-understand metric. But the simple formula to calculate churn rate has some limitations and potential traps many marketers may not take into account. Also, contrary to popular belief, you can influence churn long before someone becomes a<span class=\"ellipsis\">\u2026<\/span><\/p>\n<div class=\"read-more\">Read more \u203a<\/div>\n<p><!-- end of .read-more --><\/p>\n","protected":false},"author":149,"featured_media":139182,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"wp_typography_post_enhancements_disabled":false,"footnotes":""},"categories":[390],"tags":[],"coauthors":[375],"class_list":["post-139180","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-marketing","odd"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>How to Calculate Churn Rate + 9 Ways to Decrease It<\/title>\n<meta name=\"description\" content=\"Churn rate is a proportion of customers who stop paying for a product or service during a given time period. 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