Mastering churn rate: Top strategies to cut customer loss

Churn is like that friend who says, 'I'll be right back,' but never shows up.😭🚪 

However, unlike that friend, your customer's leave isn't random; they indicate and leave signs before they leave your brand.

But you can save from losing customers (churn) only if you know how to track those signs.

In this blog, we'll break down -

• What Churn is?
• Why it happens?
• How can you stop it?

Let's begin understanding the churn rate meaning.

What is churn rate? 

The churn rate is the percentage of customers or revenue a business loses over a specific period. It's a critical metric for subscription-based businesses, SaaS companies, and e-commerce brands.

In simple terms, the churn rate tells you how many customers "walk away" from your business. For instance, if a company had 500 customers at the beginning of the month and lost 50 by the end, the churn rate would be:

(50 ÷ 500) × 100 = 10%

Businesses experience two key types of churn:

A high churn rate indicates that customers leave too quickly, signaling the need for better customer experience, pricing adjustments, or improved product value.

Analyzing churn rates helps businesses improve customer satisfaction and understand its impact. While churn rate focuses on how many customers leave, it's equally important to understand its counterpart - the retention rate.

Customer churn rate tracks who leaves, while customer retention rate tracks the number of customers who stay.

Why churn matters – 5 Key impacts on a business 

Churn is like trying to fill a bucket with a hole at the bottom. Here's why it matters:

1. Direct hit on growth and profitability 

Every customer that leaves takes a chunk of your revenue with them. Churn directly impacts key metrics like Monthly Recurring Revenue (MRR), Annual Recurring Revenue (ARR), and Customer Lifetime Value (CLV). 

Plus, it signifies deeper issues like product misfit or poor support. Plugging the churn gap is often faster — and cheaper — than chasing new revenue.

2. Retention wins over acquisition 

While acquiring new customers sounds exciting, it's also expensive. Studies show that retaining existing customers costs 5x to 7x less than acquiring new ones. 

Also, retaining customers increases customer loyalty, and since existing customers already trust your brand, they require less convincing and are more likely to buy again. 

3. Customer churn is a customer experience (CX) alarm 

In most cases, customer churn is a reaction to poor customer experience (CX). Customers leave when they feel unsupported, confused, or unappreciated.

Poor onboarding, delayed responses, or unresolved support issues are all red flags that push customers out the door.

4. Revenue forecasting gets shaky 

If you can't predict churn, you can't predict revenue. Sudden customer losses throw off forecasts, especially for SaaS businesses. Tracking churn trends helps avoid financial surprises and builds more accurate revenue projections.

Types of churn that businesses should monitor

The major types are customer and revenue churn. These tell you whether you're losing customers, revenue, or — in the worst case — both. With this understanding, you can take targeted action to keep customers and cash flow steady. 

1. Customer churn 

This is the classic type of churn where you lose actual customers (subscribers, users, or buyers). For SaaS, it's a user who cancels their plan. For eCommerce, it could be a customer who stops repeat purchases. 

There are two key forms of customer churn: 

1.1 Voluntary customer churn 

This is when customers choose to leave. It's intentional and often driven by these factors:

• Price sensitivity — They find a cheaper option. 
• Poor product fit — Your solution no longer serves their needs. 
• Competitor switch — A better or more enticing alternative appears. 
• Customer dissatisfaction — Poor support, bad onboarding, or a frustrating experience. 

Example: A SaaS project management tool user cancels their subscription because a competitor offers better collaboration features. 

1.2 Involuntary customer churn 

This type of churn happens without the customer intending to leave. It's usually caused by technical or payment issues, such as: 

• Expired credit cards — Their card expired but they didn't update it. 
• Failed payment attempts — Insufficient funds or declined transactions. 

Example: An eCommerce subscription box service fails to renew a subscriber's plan because their credit card expired. 

Must check- 10 of the Most Effective Customer Retention Strategies

2. Revenue churn 

Unlike customer churn, revenue churn tracks how much money is lost — even if customer numbers stay the same. It's especially important for SaaS and subscription models, where revenue often comes from recurring payments. 

There are two key forms of revenue churn: 

2.1 Gross revenue churn 

This is the total revenue lost due to cancellations or downgrades. It doesn't factor in any revenue you gain from upsells or cross-sells. 

• Cancellations: When a user completely leaves and stops paying. 
• Downgrades: When customers switch to a lower-tier plan, their pay is reduced. 

Example: A SaaS company loses $5,000 in revenue in one month because ten users canceled their $500/month plan. 

2.2 Net revenue churn 

Net revenue churn tells the "full story" by including revenue growth from existing customers. It's calculated as: 

(Revenue lost - Revenue from expansions) / Total revenue 

Here's the magic: You can have negative churn. Your net churn is negative if you lose $5,000 from cancellations but make $8,000 from upsells. And that's every SaaS company's dream. 

Example: A SaaS company loses $2,000 from cancellations but gains $3,500 from upselling existing users to higher-tier plans. This gives them a net negative churn rate, meaning they're growing despite customer losses. 

Moving on to understanding the churn rate calculation.

How do you calculate churn rate (With formulas) 

With just a few simple formulas and calculations, you can track churn and understand how it impacts your business.

Below, we'll cover the core methods for calculating:

• Customer churn 
• Revenue churn (including gross and net churn) 

1. Customer churn rate 

Customer churn tracks how many customers leave your business over a specific time period (like a month or quarter). It tells you how "sticky" your product or service is — the lower the churn rate, the better.

Customer churn rate formula: 

Customer churn rate = (Lost customers/Total customers at the start) x 100 

Here is an example of the customer churn calculation: 

• Total customers at the start of the month = 1,000 
• Customers lost by the end of the month = 50 

Let's calculate customer churn rate = (50 / 1,000) × 100 = 5%

This means 5% of your customer base is left during the month. 

When to use this? 

Use this churn rate to evaluate the effectiveness of your customer retention strategy. If you run a subscription-based business (like SaaS or eCommerce subscriptions), keeping customer churn low ensures your business is stable or growing. 

2. Revenue churn rate 

There are two types of revenue churn, Gross and Net, which are calculated using the following formula:

Gross revenue churn 

Gross revenue churn measures how much recurring revenue is lost due to cancellations and downgrades. It only considers revenue loss, not any revenue you might gain from upsells or cross-sells.

Formula: 

Gross revenue churn = (Lost MRR / MRR at the start) × 100

Here is an example of the gross revenue churn calculation: 

• Monthly recurring revenue (MRR) at the start = $100,000
• Revenue lost from cancellations and downgrades = $5,000

Gross revenue churn = (5,000 / 100,000) × 100 = 5%

This means 5% of your recurring revenue was lost during the month.

When to use this? 

Gross revenue churn helps you understand how much total revenue you're losing. If it's too high, it signals a problem with your product, pricing, or customer experience. 

Net revenue churn 

Net revenue churn considers both revenue lost and revenue gained. If your upsells and cross-selling exceed the revenue lost from cancellations and downgrades, you'll have negative churn, which means your revenue is growing — even if some customers leave.

Formula: 

Net revenue churn = ((Lost MRR - Expansion MRR) / MRR at the Start) × 100  

Here is an example of the net revenue churn calculation:

• Monthly recurring revenue (MRR) at the start = $100,000
• Revenue lost from cancellations and downgrades = $5,000
• Revenue from upsells and cross-sells = $6,000

Net Revenue Churn = ((5,000 - 6,000) / 100,000) × 100 = -1%

• This means you have a negative churn of -1%, which indicates that you're growing your revenue even if you lost a few customers.

When to use this? 

Net revenue churn gives you a more realistic view of business health. If your net churn is negative, your business grows, even if some customers leave. 

Step-by-step process to calculate churn rate 

Here's a simple guide to calculate customer churn, gross revenue churn, or net revenue churn.

1️⃣ Choose the time frame

• Decide if you're calculating churn rate monthly, quarterly, or annually.
• Most subscription-based businesses track churn every month for better insight and quicker actions.

2️⃣ Identify starting values

• For customer churn, note how many customers you had at the start of the period and how many you lost by the end.
• For revenue churn, identify:

1. MRR at the start
2. MRR lost from cancellations/downgrades
3. MRR gained from upsells/cross-sells

3️⃣ Apply the churn formulas

• Use the relevant churn formula for:

4️⃣ Interpret the results

• Are you losing too many customers or too much revenue?
• Is your net revenue churn negative (which is good) or positive (which is bad)?
• If churn is high, focus on customer experience, support, and onboarding to reduce it.

Average churn rate benchmarks by industry

Below, we provide average churn rates by industry and discuss what constitutes a good churn rate for different business types.

Note: This data is sourced from industry reports and can differ based on market conditions. 

If you are looking for an answer to the question of what is a good churn rate, the below discussion would be insightful to uncover the real aspects of looking into it:

A good churn rate depends on your industry and customer type (B2B vs. B2C). A good saas churn rate is to be in the range:

• Monthly churn rate: < 1% is considered excellent.
• Annual churn rate: 5-7% is healthy.
• Net negative churn rate: This is the dream scenario, where upsells/cross-sells outpace lost revenue.

For B2C subscription businesses (like eCommerce or subscription boxes), churn rates are much higher because customers have more choices and switching costs are low.

A 20-40% monthly churn is considered normal, but businesses aim to reduce it.

Reducing churn – 8 Proven strategies for retaining customers  

Using the right strategy, you can keep your customers and turn them loyal advocates. Here's how you can do it.

1. Personalize the customer experience

Customers want to feel seen, heard, and valued. Personalization achieves exactly that. 

In fact, 81% prefer personalized experiences, and 70% expect companies to remember their history, like past purchases or support interactions.

Brands like Netflix and Amazon thrive on this strategy by offering personalized content recommendations based on viewing history, ensuring every customer feels like the experience is designed just for them.

Personalization builds emotional connections with customers. When they feel valued, they stay. It also increases the likelihood of cross-selling, upselling, and repeat purchases.

How to do it:

• Use customer data to recommend relevant products, content, or services.
• Personalize customer interactions like support chats and email responses.
• Automate customized outreach using tools that track user behavior and engagement.

2. Improve onboarding

For a higher churn rate, onboarding is one of the key experiences to be on point if you aim to build trust with a customer. 

If this process is clunky or confusing, customers will likely leave early. On the contrary, customers who see value in the early stages of their journey are less likely to leave. 

SaaS and subscription-based brands must consider this for good relationship building.

How to do it:

• Create interactive product tours or step-by-step guides to get users started fast.
• Offer 1:1 onboarding support for high-value customers.
• Use milestone-based onboarding to show clear progress points as customers engage with key features.

3. Proactive customer support

Proactive support shows customers you care about their experience. By solving issues before they escalate, you increase customer satisfaction and retention.

Companies like Intercom and Salesmate set the standard by using in-app prompts and automated messages that trigger when users face common problems. This proactive approach reduces frustration and churn.

How to do it:

• Deploy proactive in-app messages to help users with known pain points.
• Set up alerts to monitor user inactivity or usage drops, then reach out.
• Use AI tools to predict customer issues and pre-emptively offer solutions.

Also read: 21 Top AI sales tools you must check to boost sales [Reviewed & tested]

4. Offer a subscription pause option

Not every customer who wants to leave wants to leave. Sometimes, they just need a break. Offering a "pause subscription" option gives them the breathing space they need without forcing them to cancel. 

How to do it:

• Enable a subscription pause option as part of your cancellation flow.
• Provide customers with simple instructions on how to resume their subscription.
• Communicate the pause period (30, 60, or 90 days).

5. Ask for feedback often

Listening to customer feedback lets you fix issues before they become deal-breakers. This process makes customers feel heard and valued, increasing loyalty and reducing churn.

When actively listening to your customers, you're better equipped to meet their expectations and reduce churn rate.

How to do it:

• Use NPS (Net Promoter Score) surveys to track customer sentiment.
• Ask for feedback at key moments, like after onboarding or support interactions.
• Analyze patterns in your customer feedback to identify common pain points.

6. Analyze churn when it happens

Churn rate analysis shows you where to focus your retention efforts. By tackling the most common issues, you can prevent future customers from leaving for the same reason.

For instance, if users consistently cite "poor onboarding" as their reason for leaving, you know where to focus your energy. 

How to do it:

• Send exit surveys to customers who cancel their subscriptions.
• Track support tickets of users who leave — what issues were unresolved?
• Look for behavioral patterns in churned customers, such as a drop in activity.

7. Dedicate CSMs to high-value customers

High-value customers are your most important accounts, as they are responsible for generating the most revenue, so losing them hits hard. 

Customer Success Managers (CSMs) act as personal guides, helping customers maximize the value of their subscriptions, resolve issues, and achieve their business goals.

A recent report reveals that CSMs seeking to understand why customers leave through exit interviews, feedback forms, and direct calls experience a 5.1% lower monthly churn rate than those without.

How to do it:

• Identify your high-value customers based on revenue and usage.
• Assign dedicated CSMs to your most valuable accounts.
• Schedule regular check-ins with these customers to discuss goals and issues.

Insightful read: Sales and customer service: Working together for success!

8. Focus on attracting the right customers

Churn becomes inevitable if you're attracting people who aren't a good fit. 

Instead, focus on targeting customers who match your product perfectly. Successful SaaS companies define their Ideal Customer Profile (ICP) and tailor their marketing accordingly.

How to do it:

• Define your ICP and buyer persona through market research and competition analysis. Click to get the free persona template.
• Align your sales and marketing messaging to target best-fit customers.
• Set clear expectations during the sales process — no overpromising.

How do we identify churn before it happens? 

To overcome churn, first, you need to learn how to identify churn. The below discussion will be a roadmap to identifying the churn:

Step 1: Define what churn looks like for your business 

Every business defines churn differently.

• For SaaS: Customers canceling or downgrading plans.
• eCommerce: Buyers who stop making repeat purchases.
• For service-based: Clients reduce engagement or cancel contracts.

Note that a clear understanding of what churn means in your business helps set the foundation for monitoring and prevention strategies. 

Step 2: Set up key churn indicators 

Addressing the root causes of customer churn is the first step to improving customer retention.

Look for early signs that a customer might leave. Here are the ten major factors responsible for customer churn:

• Poor onboarding experience: If getting started with your product feels like solving a puzzle, customers will lose patience and leave.
• Lack of customer support: Customers expect timely, helpful support. If support is slow or unresponsive, customers feel neglected and are more likely to leave.
• Lack of perceived value: When customers fail to see the product's value, especially if the benefits aren't clear, they quickly lose interest and churn.
• Pricing issues: Customers often leave when they find a cheaper alternative or feel the pricing doesn't match the product's value.
• Customer disengagement: Customers who stop using the product or have low engagement are more likely to churn due to a lack of ongoing interest.
• Payment failures: Failed payments, often due to expired credit cards or insufficient funds, cause unintentional churn, especially for subscription businesses.
• Unmet customer expectations: If the product doesn't meet customer expectations during sales, disappointment sets in, leading to churn.
• Technical issues and product glitches: Frequent bugs, technical glitches, or downtime frustrate customers, pushing them to search for more reliable alternatives.
• Poor product-market fit: If the product doesn't address the customer's needs or use case, they are more likely to switch to a solution that does.
• Competitor pressure: When competitors offer better features, better support, or lower prices, customers are tempted to switch, leading to higher churn rates.

Step 3: Leverage analytics to spot patterns 

Find trends that predict churn before it happens:

• Track logins, product usage, and purchase frequency.
• Segment customers by activity levels (active, disengaged, dormant).
• Use predictive analytics to detect risk patterns.

Investing in a CRM like Salesmate helps reduce churn by tracking customer engagement, identifying at-risk customers, and automating proactive outreach. 

With real-time activity tracking, personalized support, and predictive insights, Salesmate empowers businesses to engage customers before they leave, boost retention, and drive long-term revenue growth.

Step 4: Act on churn signals early 

Once you identify at-risk customers, act quickly to prevent churn: 

• Send proactive messages to disengaged users via automated follow-up workflows, such as "We miss you" emails or texts.
• Share tutorials, guides, or personalized walkthroughs.
• Offer discounts or exclusive upgrades.

Suppose your CRM flags a customer who hasn't logged in for 15 days. Automate an email offering assistance or highlighting features they've missed. 

Step 5: Collect and act on customer feedback 

Try to understand frustrations before they become cancellations:

• Run short post-interaction surveys to measure satisfaction. 
• Use NPS surveys to identify unhappy customers early. 
• Follow up on negative feedback with personalized support. 

Step 6: Track churn trends over time 

Review historical churn data to find common triggers and improve processes: 

• Identify the most common churn reasons (e.g., poor onboarding, pricing issues). 
• Spot lifecycle stages where churn is highest (e.g., during onboarding or renewals). 
• Adjust your strategy based on these insights. 

Step 7: Automate churn prevention workflows 

Don't do it manually — automate your churn prevention strategy:

• Churn alerts: Get notified when a customer's activity drops.
• Automated emails: Re-engage customers after periods of inactivity.
• Task assignments: Assign customer success reps to at-risk customers.

Must read: How to write a follow-up email to win replies in 2025? [Guide]

Step 8: Evaluate and refine your approach regularly 

Churn prevention is an ongoing process. Periodically evaluate your strategies and refine them based on results. 

• Track retention rates after implementing churn prevention measures. 
• Experiment with different engagement campaigns or offers. 
• Ensure your CRM and analytics tools are set up for maximum efficiency. 

Conclusion 

The churn rate reveals more than customer loss — it exposes growth opportunities. 

Businesses can turn customer exits into retention wins by addressing its root causes like poor onboarding or disengagement. 

Reducing churn isn't about perfection; it's about progress. Every improvement in customer experience, support, and personalization strengthens loyalty.

Ultimately, it's not just about keeping customers but more about building a business that people want to stay with.