2 Measuring churn

 

This chapter covers

  • Identifying churned accounts and calculating the churn rate
  • Calculating the net retention rate and churn rates based on monthly recurring revenue
  • Converting churn rates between monthly and annual measurements

You have already learned that the churn rate is a measurement of the proportion of customers who quit every month or year. If you don’t measure churn correctly, it’s that much harder to do anything about it. This chapter teaches you multiple definitions of churn that are suitable for different business scenarios and how to calculate them efficiently from a subscription database. Recalling the overall book scenario introduced in chapter 1, this chapter focuses on the process highlighted in figure 2.1.

Figure 2.1 The subjects of this chapter in the process of fighting churn with data

Calculating the churn rate really is not rocket science, but you do need to know some intermediate SQL and a couple of algebraic equations. There are a few things that make calculating churn rates nontrivial. Part of the challenge is complexity, and another is logistical. The complexity in calculating churn is that an account can have multiple subscriptions over its lifetime, including the following:

2.1 Definition of the churn rate

2.1.1 Calculating the churn rate and retention rate

2.1.2 The relationship between churn rate and retention rate

2.2 Subscription databases

2.3 Basic churn calculation: Net retention

2.3.1 Net retention calculation

2.3.2 SQL net retention calculation

2.3.3 Interpreting net retention

2.4 Standard account-based churn

2.4.1 Standard churn rate definition

2.4.2 Outer joins for churn calculation

2.4.3 Standard churn calculation with SQL

2.4.4 When to use the standard churn rate