What is churn rate?
Intoduction
The definition of churn rate is the percentage of users who have stopped using an app. This could be customers who have lapsed in use, so they are no longer starting sessions, or it could be customers who have uninstalled the app. The difference between which of these two options is used to define churn is determined by an app’s vertical and business goals. For example, customer churn rate, specifically, refers to the cohort of users who have stopped using the app’s products or services. This is particularly useful for apps that use a subscription model.
At its core, an app’s churn rate is the number of users that leave the app in a given time frame.
Why is churn rate important?
If your churn rate is high, this could mean you’re spending a lot of money on user acquisition but not getting the maximum ROI from the user. By identifying what the issues are, you can improve user retention — and subsequently revenue. Some mobile app verticals are prepared for a high churn rate. For example, hyper casual gaming developers tend to view high churn rates as an inevitable part of their overall business strategy and have adapted their models to accommodate for it.
How to calculate churn rate
To tailor a churn rate calculation to your app’s needs, first determine whether you will be measuring inactive users, users who have uninstalled the app, or users who have canceled a subscription. Then, choose your time frame. Do you need to measure annual churn rate, monthly churn rate, or another period?
In-app event tracking can help you see exactly where in the user lifecycle your users tend to churn, providing both an idea of which period will be most useful to measure and the exact places you might need to intervene to reduce churn.
Churn rate formula
To calculate your churn rate, divide churned customers over a period of time by the number of customers you had at the start of that time frame.
What is a good churn rate?
One of the rare times a negative KPI is a positive result, a negative churn rate means an app has made more revenue from new and existing customers than it has lost from churned users.
However, churn is a natural part of doing business. Some users will not like an app, find an alternative that better fits their needs, or simply have no further need for its features. Nevertheless, churn rate is an important KPI for apps to consider.
By analyzing the rate of churn, app developers can figure out if changes need to be made to help retain customers such as improving UX, optimizing features, or adjusting prices. Churn rate benchmarks will depend on your app’s vertical, region, and operating system.
It’s important to remember that a churned user is not lost forever; there are plenty of win-back strategies.
Get examples of deeper use cases for using churn rate as a KPI in our guide to understanding the user lifecycle. Or, learn more about what makes a good retention rate and get 10 strategies for improving your app’s retention.
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