The Difference Between Customer Retention and Customer Churn

In this clip from Resilience, An eLearning Series For Ecommerce Brands In 2021, Allison dives into the formulas behind customer retention and churn rate. You'll learn why brands should be focusing on retention rather than churn. Allison also shares her thoughts about why it's not realistic for brands to expect a 0% churn rate.

The customer retention formula

The formula to calculate customer retention rate (CRR) is customers who are still paying you at the end of a period (one year, one month, etc.) minus new customers acquired. That total is then divided by how many customers you had at the beginning of your period and multiplied by 100 to get your CRR. The customer retention formula is shown below.

customer retention rate

Churn rate

Churn rate is the customers who are paying you at the start of the period minus the customers who are paying you at the end of the period, divided by the customers at the start of the period multiplied by 100.

churn rate

What's the difference between customer retention and customer churn?

You can see that the two formulas are the inverse of each other. Brands want their customer retention rate to be high, and consistently going up. It follows that they would also want churn to be low and consistently going down. 

The big question for many is whether or not you can prevent churn. In practicality, it's impossible to have 0% churn. At some point, customers are going to leave your brand depending on the stage of life they're in. Focusing on retention and what you can do to get customers to stay rather than focusing on what you can do to get them not to leave might seem like the same thing, but in actuality your marketing initiatives for the two are very different. In conclusion, you'll be better off to try to serve customers who are likely to stay rather than throw a Hail Mary in the form of marketing communications to those who are already out the door.