The acquisition is only half the battle. And (almost) anyone can do it.

While it doesn’t necessarily get any affordable, acquisition surely becomes easier – at least from the technical POV. 

Internet behemoths Facebook and Google dominate the online ad market and are heavily pushing AI to help with campaigns’ performance. Their ultimate goal is eliminating gatekeeping and making it easier for people to spend money on advertising.

You have Customer Churn & Customer Retention on the counterpole: the final eCommerce battle. In this part, organizations either flourish or crash and burn.

When more customers are leaving than staying with you regularly, you have a problem. 

Check out this article and discover more about the phenomena of customer churn: what it means, how to calculate it, and how it ties in with other crucial metrics.

churn rate

What Is Customer Churn?

Customer Churn refers to the action of customers leaving a brand.

Customer churn represents any situation that leads to lost customers: 

  • people stopping their subscriptions,
  • shoppers moving to another brand,
  • or clients ending their contracts with a brand.

In eCommerce specifically, Customer Churn happens when people stop buying from you

*Frequently, Customer Churn is also referred to as Customer Attrition. 

While both concepts measure how many customers left an eComm brand, attrition pays more attention to customer fluctuations. With attrition, you’ll look at the total number of customers: how many of them left and how many were acquired over a certain period. 

Likewise, the ​​attrition rate refers to the same fluctuation expressed as a percentage.

Customer churn can be further divided into two distinct categories:

  • Voluntary Churn: when the customers make a conscious decision to stop buying from you. 

Voluntary Churn can result from customer dissatisfaction, no longer seeing a use for the product, or finding the value of your brand insufficient. 

  • Involuntary Churn: when customers are forced to stop purchasing your products. 

Involuntary Churn can happen because of friction in the purchasing process: 

  • incorrect card number,
  • wrong address,
  • insufficient funds, 
  • or other reasons unrelated to your brand.

As opposed to voluntary Churn, if you’re looking to reduce customer churn, you can directly impact the factors producing involuntary Churn. 

You can contact customers with declined payments or wrong addresses and rectify the mistakes.

Why Is Customer Churn Important?

While some natural churn will always occur inside your business, you need to perform churn analysis and identify if it happens regularly. Churn also allows to asses if:

  • your retention strategies pay off,
  • your services are satisfactory, 
  • and if your business heads in the right direction.

With the current surge in customer acquisition costs, high customer churn translates into fewer profits and an unstainable business model in the long run. 

In fact, according to Bloomberg, brands lose $29 (a record number) for each new customer.

Customer Acquisition Costs (CAC) have increased by 60% in the last five years after the latest developments in the online environment: 

  • The infamous iOS 14.5 update and its privacy regulation.
  • The death of third-party cookies.
  • The strict Privacy Legislation (e.g., the CCPA and the GDPR).

The increased costs + the difficult tracking brought retention into the minds of forward-thinking eComm professionals, who understand that eCommerce is about acquisition AND retention.

In the new eCommerce era, your customer base is your most valuable asset. While you shouldn’t neglect acquisition, equal efforts are required for retention and, by extension, customer churn

Achieving sustainable growth is challenging; however, keeping your customer (and revenue) Churn low is an excellent first step.

What Is a Churn Rate?

Customer Churn Rate is the percentage of shoppers that stopped buying from you over a specific period.

For example, if you had 40,000 customers at the end of January and 35600 at the end of December, your churn rate is 11%. (you lost 4400 customers over one year).

Churn Rate Formula

Let’s move on to the formula to calculate Customer Churn:

Churn Rate Formula
Churn rate = 
(number of lost customers / total amount of customers) * 100

For example, if your company loses 15 customers from a 1400 customer base, your churn rate would be (15/1400)*100 = 1.07%

How Do You Calculate Customer Churn Rate?

In theory, it’s simple: to calculate your churn rate, you must apply the churn rate formula to your customer base using your specific numerical values.

For eCommerce businesses, the churn calculation is not as straightforward as in other industries.

For example, when a SaaS professional calculates the churn rate, he will look at the number of canceled subscriptions

However, in eCommerce, there is no definite action to signal a customer churning. If a customer stops buying from you, there’s no way to predict whether he’ll return in the next month or year. 

Therefore, we advise you to track Churn over set periods and periodically analyze the user churn rate.

You can look at your average churn rates in a particular season, then compare them with last year’s trends, for example. For repeat buyers, you can look at the Average Days Between Transactions (ADBT) metric and check how many customers return regularly. 

The Difference between Churn Rate and Revenue Churn Rate

You must ask the right questions to better understand the difference between revenue churn and customer churn. 

In this case, the two metrics, although similar, answer completely different questions:

→Churn rate: what % of customers did we lose this past quarter?
→Revenue rate: what % of revenue did we lose this past quarter?

To calculate the revenue churn, you need to divide your initial monthly recurring revenue (MRR) and divide it by the MRR you lost come to the end of that month.

Remember to exclude all gained revenue (upsells, cross-sells, or new customers) from the sums of money you’re using. 

Since you’re only interested in lost revenue, anything you gained in this period must be disregarded from your calculations. 

Sometimes, when calculating your revenue churn, you might reach a negative Churn

A negative Churn appears when your revenue from existing customers is more substantial than the revenue you lost along the way.

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Does one metric count more than the other?

Not really. 

At first glance, customer and revenue churn might be similar indicators of your company’s financial performance. Yet, the two metrics tell different stories. 

According to the RFM segmentation methodology (and common sense), not every customer is the same

You have your power customers, bringing in a significant portion of your revenue. Then you have the lower categories, who aren’t that valuable, monetary speaking. 

Always look at your calculated Churn in relation to your revenue churn. 

A 15% annual churn rate of bad-fit customers might have a more negligible impact on your revenue than a 5% churn rate of Soulmates and lovers.

Since it’s all relative, it would be dangerous to calculate customer churn rate and perform churn analysis in a vacuum. Your metrics are firmly linked, so your safest bet is to analyze your KPIs in the larger context of your business. 

Speaking of which…

How Does User Churn Rate Affect other SaaS metrics?

Looking at the churn definition, we can better understand how Churn prevents or delays growth: the higher your churn rate, the more difficult it will be to grow your eCommerce business.

Growth is not the only metric brutally affected by your churn rate. To grasp the true churn impact on your business, look at these critical metrics and how they’re affected by customers leaving your business. 

  • Revenue Churn 

As mentioned above, your revenue is directly related to your churn rates. Even if you’re a SaaS with different pricing plans or an eCommerce with regular buyers, customer churn definitely threatens your profits. 

In the end, preventing Churn means preventing the loss of revenue. 

  • Customer Lifetime Value

CLV represents the amount of $ a customer will spend on your brand as long as he is a paying customer. 

This metric helps you predict the amount of revenue and value you can get from each customer if you retain him over an extended period. 

Your existing customers will pay +67% more than newly acquired ones.

Evidently, you must think of churn rate calculation before going into the CLV. The higher the Churn, the more work you have to do within your organization and fix friction points inside the customer journey. 

Unfortunately, even though CLV is a crucial metric for business growth, it can’t be a priority unless you achieve an acceptable churn. 

  • Costs of Acquisition

As Kate Cook beautifully explained during her panel at the CLV Revolution, your CLV gives you the freedom to make those risky decisions you wouldn’t otherwise have the opportunity to take. 

clv revolution

Ok, but what does it have to do with the Cost of Acquisition? You might ask. 

When you reduce your Churn and get the churn rate under control, you gain the space (and resources) to invest more in media spending, branding, and long-term strategies. 

Evidently, the costs of acquisition are higher than ever. And, unless you retain customers, you’re losing money for every new customer. 

This changes when you keep an eye on your churn rates, correlate them with the context of your business and earn more from your customer base

While Churn doesn’t impact your CAC directly, it can definitely influence it. 

Reduce Churn, nurture your customers, and create more powerful customers. You can reduce acquisition costs by mirroring your best customers in your target audiences.

  • Net Promoter Score

At the opposite spectrum of Customer Churn, you will find the Net Promoter Score (NPS) – the metric showing how many of your customers will recommend you to their communities. 

In reality, NPS is a metric that highlights customer happiness and customer satisfaction. Customer Churn occurs when customers aren’t satisfied with the value you’re delivering. 

Following this logic, the higher your churn rates, the lower your NPS. 

Customer Feedback is crucial in attaining low churn rates. Negative NPS results are an indicator of customer happiness – well, the somewhat lack of joy inside your customer base.

As you can see, all metrics are directly related to your customers: their happiness, their value (pre and post-acquisition), their costs, and their loyalty. 

These aren’t just buzzwords and nice-to-haves anymore. Just look at the industry trends – it’s becoming more and more evident that relying on acquisition alone is betting on the wrong horse. 

Instead, strive to find the right balance between acquisition and retention, and ultimately, find the right balance between earning more market share while simultaneously taking care of your loyal customers. 

What is a Good Churn Rate?

Of course, by now, you are probably wondering about your churn rate: 

What does your churn rate mean?

As with any rate in marketing, the answer is never straightforward. 1+1 might not necessarily mean 2 in marketing (as we realized when we looked at revenue churn vs. customer churn). 

However, there is a science to your churn analysis; the best part is that it’s effortless to understand and implement. 

Step 1 – Look at your Churn Rate in the context of your other metrics.

As discussed earlier in the article, looking at Churn as if it existed inside a vacuum is dangerous. 

Instead, look at your Churn and how it stands compared to other essential metrics inside your business (such as revenue, CAC, and growth). 

Calculate your Churn, then analyze it against your retention rate. 

Suppose the gap is striking in favor of the churn rates. In that case, you have a problem: your business is losing significant customers, certainly more than it is bringing in.

You can also look at the Churn Rate for each RFM group inside your customer base. 

For example, high churn rates for low-value customers aren’t as worrying as regular Churn for customers in the power segments. 

Churn can be either natural or a tragedy for your business, depending on its long-term impact. It’s up to you to find the meaning behind the numbers. 

Step 2 – Look at the Industry Benchmarks.

It’s interesting to research Churn in a global context, looking at the average rates in various industries, then analyzing the fluidity of the market.

After you have looked inside your organization and compared your churn rates with your overall business performance, it’s time to look at your Industry Benchmark and see where you’re at.

Remember: numbers don’t mean anything unless given context. 

For example, you would think the business is doomed if you hear of a churn rate of over 25%. 

However, this particular rate comes from the Cable Industry, where this Churn is natural. The Cable Industry is notorious for offering lousy customer experiences. Customers migrate between their many options, hoping to find a better business. 

The exact rate would be alarming in the Electronics industry, where customers need regular upgrades and the shoppers’ nature is cyclical. 

So, after you calculate the churn rate, compare it to the industry average, and get a more accurate sense of your company’s health. 

For other fascinating insights from +1000 stores in various industries, check out Omniconvert’s Real-time Customer Lifetime Value (CLV) Benchmark Report. Get access to 50+ crucial eCommerce Stats – completely free.

Churn Rate Examples

Were you hoping to find real-life churn rate examples? Here they come! 

*Disclaimer: look at these examples of churn rates from a pure research perspective. 

They are not industry benchmarks or standards that guarantee success. Remember that each eCommerce is different, with various products, core values, and types of customers. 

Don’t let yourself get discouraged if your business has a higher churn rate than other businesses in the same industry. It’s your opportunity for improvement! 

1. Netflix

Netflix used to be the golden standard in streaming services. 

However, according to US-based analytics, with the apparition of Disney+ and HBO Max as heavy competitors, Netflix’s churn rate reached a record of 3.3%.

However, this churn rate follows a natural phenomenon in the video streaming industry: 37%* of U.S. viewers canceled a streaming video service subscription in the past six months (Deloitte reports). 

Keep an eye on Netflix and see how they respond to this trend. Consumers agree it’s easier than ever to migrate between different platforms. 

2. Spotify

Spotify has a 4.8% monthly Churn Rate. This rate is considered relatively low in the industry. However, suppose you look at Spotify’s affordable plans, highly targeted music libraries, and excellent marketing. 

In that case, it’s no wonder so many users choose to stay with the company. 

3. Amazon 

Moving on to eCommerce, it’s time to look at the industry giant – Amazon. 

Their churn rates have reached an average of 12.1% since June 2021 (according to Insider). For Amazon, Customer Churn more than doubled in recent years, so it will be fascinating to see how they react.

Wrap-Up

Most eCommerce companies are worried about expanding in this day of age. Consumers have more options than ever before and will leave a business if they feel unvalued. 

Here’s why customer churn is crucial in building and developing your business. 

After all, it’s impossible to reduce your churn rate unless you look at each customer segment and assess precisely how many customers are leaving these segments. 

Once you see where you’re standing, it will be easier to prioritize retention strategies that help with customer stickiness. 

Good luck!

Frequently Asked Questions about the Churn Rate

What does Churn mean?

Customer Churn refers to the action of customers leaving a brand. It can be voluntary (when the decision is conscious) or involuntary (when customers leave brand without their will – they have insufficient funds, delivery address is wrong, they wrote a wrong cards number, etc.)

How do you calculate a churn rate?

To calculate your churn rate, you need to divide the number of lost customers by total amount of customers (over a certain period), then multiply the result by 100 to get the percentage.

Is high or low churn rate good?


Customer Churn represents your customers leaving your brand. The higher your churn rate, the more customers you’re losing. Therefore, your aim is to lower your churn.

What does 5% churn mean?


A 5% churn rate means that, out of the total number of customers you had over the time you’re tracking the churn, 5% of them left your business. To get the context of this rate, you might want to check your Industry Benchmarks.