{"id":3969,"date":"2023-01-12T11:24:30","date_gmt":"2023-01-12T16:24:30","guid":{"rendered":"https:\/\/canny.io\/blog\/?p=3969"},"modified":"2026-03-10T21:06:28","modified_gmt":"2026-03-11T01:06:28","slug":"5-steps-to-learn-from-churning-customers-churn-rate-formulas","status":"publish","type":"post","link":"https:\/\/canny.io\/blog\/5-steps-to-learn-from-churning-customers-churn-rate-formulas\/","title":{"rendered":"5 steps to learning from churning customers [+churn rate formulas!]"},"content":{"rendered":"\n

If you\u2019re like most companies, a big focus for 2023 is winning new business. But how much effort are you putting into keeping existing ones around and happy? And what about churn? <\/p>\n\n\n\n

Churn is the number of customers that leave a company. Sometimes it\u2019s expressed as a percentage of the total number of customers. It\u2019s an inevitable part of doing business. So what can we do if we can\u2019t avoid it?<\/p>\n\n\n\n

That\u2019s right \u2013 learn from it and move on. In this article, we\u2019ll explain what exactly you can learn from these experiences and how you can use it to your advantage.<\/p>\n\n\n\n\n\n

Step 1: identify the churn<\/strong><\/h2>\n\n\n\n

Before we dive in, let’s first define the different types of churn.<\/p>\n\n\n\n

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  1. Churn rate<\/strong> is the raw percentage of lost customers over a specific time period<\/li>\n\n\n\n
  2. Negative churn <\/strong>is where you want to be, of course. It happens when revenue from expansion overshadows the lost revenue from customer churn. Upsells, add-ons and upgrades help to achieve that.<\/li>\n\n\n\n
  3. Positive churn<\/strong> is common in certain industries that operate under the outcome model. Recruitment, dating, weight loss and health services are some examples. A customer achieves the desired outcome and leaves. The goal is still achieved, so this churn is viewed as positive. <\/li>\n\n\n\n
  4. Voluntary churn (aka active churn) <\/strong>happens when an existing customer decides to and then leaves.<\/li>\n\n\n\n
  5. Involuntary churn<\/strong> (aka (<\/strong>delinquent<\/strong><\/a> churn) <\/strong>occurs when there’s a payment failure or some other issue that prevents a customer from continuing to use the product.<\/li>\n<\/ol>\n\n\n\n

    It\u2019s important to understand what types of churn you\u2019re facing. That lets you understand and respond appropriately. <\/p>\n\n\n\n

    Step 2: break it down<\/strong><\/h2>\n\n\n\n

    Understanding why customers leave is the key to providing a better experience and avoiding customer churn in the future. <\/p>\n\n\n\n

    To start, you can look at your data on churn rates, current customers, and their usage of your product or service. Calculate the churn rate (we\u2019re explaining how to do that in step 4) and explore how they\u2019re using the product. This will help you understand when and why customers choose to leave. As with any set of data, try to identify patterns<\/em>. When only one customer leaves, it\u2019s unfortunate, but likely not a dealbreaker. But, when five or more customers leave for exact same reason, you need to investigate.<\/p>\n\n\n\n

    To learn from churning customers, you need to offer them a way to give you feedback. Typically, exit surveys are used here.<\/p>\n\n\n\n

    Step 3: check yourself<\/strong><\/h2>\n\n\n\n

    Maybe you lost quite a few customers in the past quarter. You\u2019re probably feeling a bit down. But have you compared your customer churn rate to the industry average? Maybe there\u2019s something going on in the world (ahem, recession, ahem<\/em>) that\u2019s affecting everyone around you and not just you.<\/p>\n\n\n\n

    It\u2019s hard to tell what the average churn rate is. But here are some guidelines. In SaaS, the churn rate you want to strive for is 2%-8% of MRR<\/a>. Of course, this varies by the age and of the company, the number of customers, and the amount (and quality) of competition.<\/p>\n\n\n\n

    General rule<\/strong>: the lower the churn rate, the better. But don\u2019t focus as much on the number itself. Rather, notice the trends. If your churn rate is decreasing over time, do more of what you\u2019re doing! If not, think of other customer retention strategies<\/a>.<\/p>\n\n\n\n

    Here are some of the common reasons why customers churn:<\/p>\n\n\n\n

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    1. No longer need your product<\/li>\n\n\n\n
    2. Dissatisfied by the product\n