Churn Rate
The percentage of customers/subscribers who stopped buying or paying in a given period. High churn means every new customer just replaces an old one. Per Harvard research: cutting churn by 5% increases profit by 25-95%.
In practice
Churn is a 'leak in the bucket.' As long as you're filling from the top (acquisition) and losing from the bottom (churn), you're not really growing. Reducing churn is equivalent to growth — at a lower cost. A store that cuts churn by 2% doesn't need an extra $5,500 in ad spend.
Common misconception
'Churn is inevitable.' True, some natural churn exists — but 70% of causes are solvable: poor service, a product that didn't meet expectations, competition, and forgetfulness. Only about 30% are 'life circumstances' (moving abroad, a change in financial situation).
How to fix it
High churn? (1) Send an exit survey: 'Why did you cancel?' — max 3 questions, (2) run a churn cohort analysis — when do most people leave? (after month one? three?), (3) add an offboarding flow — before cancellation, offer to pause or downgrade, (4) try to save them with 'stay a month and get X.'
Example
An Israeli SaaS company: 7%/month churn. An exit survey found 62% said 'I didn't understand how to use it.' They improved onboarding: 3 video tutorials plus a week-2 check-in call. Churn fell to 2.8% within 4 months — a 4x ROI on the onboarding investment.
Priority
Track churn rate monthly. Benchmark: eCommerce < 5%, SaaS < 2%, Subscription Box < 7%. Above benchmark, run an exit survey immediately. Reduce churn before increasing ad spend.
Related terms
Keep learning. Metrics that touch the same area:
- ROI – Return on InvestmentFinanceA general profitability metric: (net profit / investment cost) × 100. Different from ROAS — it includes all expenses.
- AOV – Average Order ValueFinanceTotal revenue divided by number of orders. The biggest lever for increasing revenue without more advertising.
- LTV / CLV – Customer Lifetime ValueFinanceTotal expected profit from a customer over the entire relationship. A healthy LTV:CAC ratio is 3:1.
- Gross MarginFinance(Sale price - COGS) / sale price × 100. The basis for every pricing and advertising decision.
- COGS – Cost of Goods SoldFinanceThe direct cost of producing or acquiring products sold. Includes: product + import shipping + customs + packaging.
- Cash FlowFinanceThe movement of cash in the business. 'Profitable on paper, broke in the bank' — a common problem in growing stores.
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