In discussions about customer churn, you may sometimes come across the term revenue churn.
These concepts are related but distinct.
Whereas customer churn refers to the percentage of customers you lose over a given period, revenue churn refers to the percentage of revenue you lose because of lost customers over a given period.
Likewise, whereas customer churn is measured by the ratio of customers lost to total customers for a given period, revenue churn is the ratio of revenue lost through customer churn to total revenue. This can also include customers who have downgraded their subscription.
From these definitions, you can see that revenue churn and customer churn are distinct concepts. At the same time, they are closely related.
The higher your customer churn, the more revenue you will lose from departing customers. Conversely, retaining customers maintains and increases revenue.
The relation between revenue churn and customer churn underscores why customer churn is important. Customer attrition directly cuts into your revenue.
The higher your customer churn rate, the faster your revenue is shrinking.
If left unchecked, customer churn can result in your business losing money instead of making money.
Customer churn is important for other reasons as well.
Analyzing customer churn and identifying its causes can help you pinpoint problems with your product or service so that you can correct them.
For example, if you notice that you have a high churn rate coupled with customers failing to complete their onboarding goals, this can alert you that you need to update your onboarding process and reevaluate the goals you're setting with customers.
If you notice that you have a high churn rate among customers who have requested support for a particular service issue, this may be a sign you need to fix the underlying issue or improve your support process.
Monitoring customer churn can help you respond to these types of problems before they escalate to the point where they’re hurting your business.