A metric indicating the percentage of users who canceled a service within a given period. It is one of the most critical KPIs for measuring the health of a subscription business, with monthly churn rate being the most widely used measure.
How to Calculate Churn Rate and Industry Benchmarks
Churn rate is calculated as "number of users who canceled during the period / number of users at the start of the period x 100." For example, if there were 10,000 members at the beginning of the month and 300 canceled by month's end, the monthly churn rate would be 3.0%.
Industry benchmarks vary significantly by business model. For B2C subscription services, a monthly churn rate of 5-7% is typical, while B2B SaaS targets 1-2%. Video streaming services tend to see large seasonal fluctuations, with churn rates spiking after popular content finishes airing.
The Business Impact of Churn Rate
Improving churn rate directly drives growth in a subscription business. At a monthly churn rate of 5%, approximately 46% of users will leave over the course of a year. Simply reducing this to 3% drops the annual attrition rate to about 31%, dramatically accelerating user base growth even with the same number of new acquisitions.
Strategies for reducing churn include strengthening onboarding, enhancing customer support, offering retention deals (discount proposals) before cancellation, and continuously updating content. Conducting cancellation reason surveys to identify the root causes of attrition is the first step toward improvement.
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