Churn rate

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In its broadest sense, churn rate is a measure of the number of individuals or items moving into or out of a collection over a specific period of time. The phrase is based on the English idiom "to churn up", meaning to agitate or produce violent motion. The term is used in many contexts, but is perhaps most widely applied in business with respect to a contractual customer base.

Churn rate, as applied to a customer base, refers to the proportion of contractual customers or subscribers who leave a supplier during a given time period. It is a possible indicator of customer dissatisfaction, cheaper and/or better offers from the competition, more successful sales and/or marketing by the competition, or reasons having to do with the customer life cycle. The churn rate can be minimized by creating barriers which discourage customers to change suppliers (contractual binding periods, use of proprietary technology, unique business models, etc.), or through retention activities such as loyalty programs. It is possible to overstate the churn rate, as when a consumer drops the service but then restarts it within the same year. Suppliers may find that if they offer a loss-leader "introductory special", it can lead to a higher churn rate and subscriber abuse, as some subscribers will sign on, let the service lapse, then sign on again to take continuous advantage of current specials.

Churn rate is an important factor for any business with a subscriber-based service model, including mobile telephone networks and pay TV operators. The term is also used to refer to participant turnover in peer-to-peer networks.

Within a peer-to-peer network, the churn rate refers to the number of peers leaving the system during a given period—usually an hour, rather than a year. It is a significant problem for large-scale systems, as they must maintain consistent information about peers in the system in order to operate most effectively. For example, with a large churn rate it may be impossible to index file locations, making some files inaccessible even though peers have them available.

In some business contexts, churn rate also refers to high employee turnover within a company. For instance, most fast food restaurants have a routinely high churn rate among employees.

Churn rate is also sometimes called attrition rate. It is one of two primary factors that determine the steady-state level of customers a business will support.