Churn is the share of customers who stop buying in a given period. For a subscription business it is the most important number in the company. For a D2C brand or a service business it is usually unmeasured, which is a problem, because churn rate decides how much a customer is really worth and therefore how much you can afford to pay to acquire one.
How to calculate churn rate
Customer churn rate = customers lost during the period ÷ customers at the start of the period.
Count only customers who were active at the start. New customers acquired during the month are excluded from both sides, or the figure is diluted by fresh sign-ups and looks better than it is.
Revenue churn measures the same thing in money: recurring revenue lost from existing customers, divided by recurring revenue at the start. It can be very different from customer churn if your largest customers behave differently from your smallest.
A worked example
Say a subscription business starts October with 2,000 active customers. During the month 140 cancel and 300 new customers sign up. Churn rate is 140 ÷ 2,000 = 7%. The 300 new sign-ups stay out of the sum; counting them would give 140 ÷ 2,300, about 6.1%, which flatters the business.
At 7% a month, about 93% of customers remain after each month, so roughly 42% are left after a year (0.93 multiplied by itself twelve times). The average customer lasts around 1 ÷ 0.07, about 14 months, and that figure feeds straight into customer lifetime value.
Churn for businesses without subscriptions
A D2C brand has no cancellation event, so define churn by repurchase window. Look at how long your repeat customers typically take between orders. A customer who has gone well past that window without buying is, for practical purposes, churned.
A service business defines it by contract: the renewal that did not happen, the client who did not book again.
Use cohorts, not a single number
A blended monthly churn rate hides what matters. Group customers by the month they were acquired and track what share is still active one, three, six and twelve months later. The cohort table shows whether retention is improving, whether customers from a particular campaign leave faster, and how long a customer really lasts, which feeds directly into customer lifetime value.
| Cohort | Month 1 | Month 3 | Month 6 |
|---|---|---|---|
| July (full price) | 88% | 71% | 58% |
| Aug (40% off) | 79% | 52% | 34% |
The percentages are the share of each cohort still active. In this hypothetical table the discounted August cohort was cheaper to acquire and leaves far faster: after six months it has kept 34% of its customers against July's 58%.
The campaign view is the one marketers usually miss. Customers acquired with a deep discount often churn faster than customers acquired at full price. A campaign with a low cost per customer and high churn can be worse than a pricier one whose customers stay.
What marketing can do about churn
Acquire the right people. Optimise campaigns for customers who come back, not just first orders. Feeding repeat purchases back to the ad platform as a conversion signal shifts who it finds.
Onboarding and the second order. The biggest drop happens between first and second purchase. A sequence of useful messages on WhatsApp and email in the first weeks does more for retention than any later campaign; our WhatsApp follow-up sequence adapts well to it.
Win-back before it is too late. Trigger a message when a customer passes their usual repurchase window, not months later.
Stop paying to reacquire existing customers. Exclude current customers from acquisition campaigns and give them their own retention budget, measured separately.
Connect churn to acquisition spend
If churn rises, lifetime value falls, and the cost per customer you can afford falls with it. Review the two together each quarter. The CAC payback calculator shows how quickly a change in churn changes the month in which a customer pays back.
To see how a change in monthly churn changes how many customers you keep, use the churn and retention calculator. If you want acquisition campaigns optimised for customers who stay, that is how our performance marketing team sets up D2C and subscription accounts.
Questions people ask before hiring
What is a simple formula for churn rate?
Customers lost during the period divided by customers active at the start of the period. Exclude customers acquired during the period from both numbers.
What is the difference between customer churn and revenue churn?
Customer churn counts people; revenue churn counts money. If large customers leave less often than small ones, revenue churn will be lower than customer churn, and the reverse is also possible.
How do I measure churn without subscriptions?
Define it by repurchase window. Work out how long repeat customers usually take between orders, and treat a customer who has gone well past that window as churned.
Can advertising reduce churn?
Indirectly. Optimising for customers who repurchase, excluding existing customers from acquisition campaigns, and running onboarding and win-back messages all reduce churn more than discount-led campaigns do.
What is the churn rate formula?
Customers lost during a period divided by customers at the start of that period. Leave out customers acquired during the period.
What is a good churn rate?
It depends on the business model and price point, so compare against your own earlier cohorts rather than an industry figure. The trend matters more than the level.