Dornubari Vizor March 28, 2023
Understanding Membership Churn: Types, Examples, and Strategies for Reducing Churn
Membership churn refers to the rate at which members of a subscription-based service or membership program cancel their memberships or subscriptions over a given period of time.
This metric is important for businesses that offer subscription-based services or products, as it can help them understand how well they are retaining their customers and whether they need to take action to improve retention.
A high churn rate can indicate that customers are not satisfied with the service or product, or that there are issues with pricing, customer service, or the overall value proposition. On the other hand, a low churn rate can indicate that customers are satisfied with the service or product and see value in continuing their subscription.
By monitoring membership churn, businesses can take steps to improve customer retention and loyalty, and ensure the long-term success of their subscription-based service or product.
Voluntary churn: When a customer cancels their subscription or membership on their own, either because they are unhappy with the product or service, their finances have changed, or they are no longer interested.
Involuntary churn: Is when a customer’s subscription or membership is canceled without their permission. This usually happens when a payment transaction fails, a credit card expires, or a system error happens.
Deliberate churn: This occurs when a customer cancels their subscription due to a specific issue with the product or service, such as poor customer service or a technical issue that has not been resolved.
Passive churn: This occurs when a customer stops using the product or service without actively canceling their subscription or membership. This can happen due to a lack of engagement or interest in the product or service.
Credit churn: This occurs when a customer repeatedly signs up for free trials or promotions with the intent of canceling before being charged, with no intention of becoming a long-term customer.
Churn rate: This metric measures the percentage of customers who have canceled their subscription or membership over a given period of time.
Gross churn: This metric measures the total number of customers who have canceled their subscription or membership, regardless of the reason.
Net churn: This metric takes into account new customer acquisition and measures the change in the total number of customers over a given period of time.
Customer lifetime value (CLV): This metric measures the total revenue generated by a customer over the entire time they remain a customer, taking into account their subscription or membership fees and any additional purchases.
Churn prediction: This metric uses predictive analytics to forecast the likelihood of a customer canceling their subscription or membership in the future.
For subscription-based businesses, a typical annual churn rate could range from 20% to as low as 3%.
However, the ideal churn rate may also depend on the pricing and business model of the subscription service.
For example, lower-priced services may have higher churn rates because customers are more likely to cancel if they feel the service does not provide enough value.
On the other hand, high-priced services may have lower churn rates because customers have a higher investment in the service and are more likely to continue their subscription.
To calculate membership churn, you need to divide the number of members who canceled their subscription or membership during a given time period by the total number of members at the beginning of that same time period. The resulting percentage is your churn rate for that time period.
Here’s the formula for calculating membership churn:
Churn rate = (Number of members who canceled during the time period / Total number of members at the beginning of the time period) x 100
For example, if you had 1,000 members at the beginning of the month and 50 members canceled their subscription during that month, the churn rate for that month would be:
Churn rate = (50 / 1,000) x 100 = 5%
This means that 5% of your members canceled their subscriptions during that month.
It’s important to note that churn rates can vary from month to month, and it’s important to monitor your churn rate over time to identify trends and take action to reduce churn and improve customer retention.