The Subscription Economy
Churn: The Leaky Bucket
Churn is the rate at which customers cancel, and even small monthly churn can shrink a subscription business quickly.
Keeping customers matters as much as winning them.
What churn is
The share of customers who cancel in a period.
Compounding
A 5 per cent monthly churn means losing about half of customers in a year.
Causes
Poor value, better alternatives, price rises or forgotten interest.
Fixes
Better onboarding, useful features, discounts and annual plans.
A leaky bucket
A firm adds 1,000 customers a month but loses 800, so growth is slow.
Ignoring existing customers
Retention is cheaper than new acquisition.
Key takeaways
- Churn is cancellation rate.
- Small monthly churn compounds.
- Poor value causes cancellations.
- Retention tools help.
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