Churn Rate: Calculation & Reduction

What is Churn Rate?

Churn rate, also called customer attrition rate or turnover rate, measures the percentage of customers who stop buying from you over a given period. It's the inverse indicator of retention.

In e-commerce, customer attrition refers to customers who haven't made a purchase for a certain time (typically 12 months) or who have unsubscribed from your services.

Customer churn is a crucial warning signal because:

• Acquiring a new customer costs 5 to 25 times more than retaining an existing one
• A 5% increase in retention can increase profits by 25-95%
• Loyal customers spend an average of 67% more than new ones

Reducing churn is therefore a major growth lever, often underutilized.

How to Calculate Churn Rate?

Several formulas help measure churn rate depending on your business model.

Classic Churn Rate Formula

Churn Rate = (Customers Lost / Customers at Start of Period) x 100

Example: 1000 customers on January 1st, 950 on January 31st (50 lost) = 5% monthly churn.

Churn for E-commerce (Non-subscription)

For non-subscription models, define an inactivity threshold:

Churn = Customers without purchase for X months / Total active customers

The threshold depends on your natural purchase frequency (3, 6, or 12 months).

Cohort Churn

Analyze churn by acquisition group to identify:

• Channels that attract more loyal customers
• Evolution of your acquisition quality
• Impact of your retention actions

Revenue Churn vs Customer Churn

Revenue churn measures loss of revenue, not customers. Losing a big customer impacts more than losing a small one — this metric captures that nuance.

Why is Churn Rate Crucial for Your E-commerce?

Churn rate directly impacts your profitability and growth.

Impact on LTV

Churn shortens customer lifespan, mechanically reducing Lifetime Value. A 5% monthly churn means an average lifespan of only 20 months.

The "Leaky Bucket" of Acquisition

High churn forces constant acquisition of new customers to offset losses. You're filling a leaky bucket — costly and inefficient.

Signal of Deep Problems

Rising churn often reveals problems with customer experience, product quality, or price positioning. It's a symptom to investigate.

Effect on Valuation

For investors, controlled churn signals a healthy business. High churn drops valuation multiples.

How to Reduce Churn Rate?

Here are the most effective strategies against customer churn.

Identify Early Warning Signs

Detect at-risk customers before they leave:

• Decreased purchase frequency
• Lower average order value
• Fewer email opens
• Multiplied support tickets

Address Root Causes

Analyze departure reasons to treat real problems:

• Exit surveys
• Analysis of negative verbatims
• Interviews with lost customers

Re-engagement Programs

Create targeted campaigns for inactive customers:

• "We miss you" offers
• New products since their last purchase
• Personalized incentives

Improve Onboarding

The first days are critical. Good onboarding significantly reduces early churn:

• Engaging welcome emails
• Product usage guides
• Post-first purchase satisfaction follow-up

Invest in Customer Loyalty

Well-designed loyalty programs create exit barriers and reward loyalty.

How Review Collect Helps You Reduce Churn

Review Collect acts on several levers to combat churn.

Detect Dissatisfaction Early

Post-purchase NPS surveys identify detractors before they leave silently. You can intervene proactively.

Understand the Real Reasons

Verbatim analysis reveals causes of dissatisfaction: quality, delay, price, service... Actionable insights to course-correct.

Transform Detractors into Promoters

By responding to negative reviews and solving problems, you can recover customers about to leave.

Strengthen Emotional Connection

Soliciting customer feedback shows you value their opinion. This simple gesture strengthens attachment to your brand.

Review Collect transforms customer feedback into an anti-churn weapon, allowing you to act before it's too late.