Customer Attrition: Definition, Churn Rate Analysis, and Prediction


For most businesses, accurately forecasting customer attrition rate and proactively preventing it represents a significant additional potential revenue source. A healthy relationship with customers is important for several reasons. First, when customers feel valued and appreciated, they are more likely to continue doing business with a company. Additionally, happy customers are often willing to refer others to a business, which can help to generate new leads and grow a company’s customer base. Finally, maintaining good customer relations can help build brand loyalty, further solidifying a company’s position in the marketplace.   

For an average company, the customer attrition rate is between 10 and 25 percent each year, according to Marketing at Work. Thus, proactive marketing and product improvements are a must if a business wants to succeed in the long run. 

What Is Customer Attrition Rate?  

The customer attrition rate is the percentage of customers who stop doing business with a company over some time. The rate is usually calculated over 12 months. There are several reasons why customers may stop doing business with a company, including poor customer service, high prices, and competition from other companies.  

Customer attrition can significantly impact a company’s bottom line, as it can cost more to acquire new customers than it does to keep existing customers. Many ways to reduce customer attrition include improving customer service, offering discounts and promotions, and increasing customer communication.  

Why is It Important To Consider Customer Attrition Rate?  

There are a few reasons why customer attrition rate is considered important.

  • The first is that it can help businesses see where they may have issues with customer satisfaction.   
  • Secondly, it can help businesses better target their marketing and sales efforts to those who are most likely to remain customers.   
  • Lastly, by understanding the customer attrition rate, businesses can make changes to their products or services to try and reduce the number of customers leaving.  

How To Calculate Customer Attrition Rate?

To calculate the customer attrition rate, divide the number of customers who have stopped doing business with a company by the total number of customers the company had at the beginning of the period. For example, if a company started the year with 1,000 customers and ended with 900 customers, its customer attrition rate would be 10%.   

 The customer attrition rate is an important metric for companies to track, as it can give them insights into where they may be losing customers and what they can do to improve retention rates.  

What Is Customer Churn Rate?

Customer churn rate is the percentage of customers who stop doing business with a company over a given period. It’s the same as the customer attrition rate or customer turnover rate.

 There are a few different ways to calculate the churn rate. The most common is to take the number of customers who cancel their service in a given time, divided by the total number of customers at the beginning of that period. Another way to calculate the churn rate is to take the number of customers who don’t renew their service in a given period, divided by the total number of customers at the beginning of that period.

No matter which method you use to calculate it, customer churn rate is valuable for companies to track. Companies can make changes to improve customer satisfaction and loyalty by understanding why customers are leaving.  

Importance and Benefits of Churn Analysis  

There are several benefits of churn analysis, including:   

Improved customer retention: By understanding when customers are likely to churn, businesses can take steps to prevent them from leaving. This can lead to improved customer retention and loyalty.   

Increased revenue: Increased customer retention can lead to increased revenue as customers continue to use and pay for a product or service.   

Improved customer satisfaction: Businesses can improve customer satisfaction by reducing churn as more customers can stick with a product or service.   

Better insights: Churn analysis can provide businesses with better insights into customer behavior, which is used to improve marketing and product development strategies.  

Reduced costs: Churn can be costly for businesses in terms of lost revenue and the costs associated with acquiring new customers. By reducing churn, businesses can save money. 


Many factors contribute to customer attrition or churn. The churn rate is the percentage of customers who discontinue using a company’s products or services within a given period. Companies must first identify the causes of attrition to analyze and predict churn properly. These causes can be internal, such as poor customer service, or external, such as a competitor’s superior offerings. By understanding the reasons behind customer attrition, companies can take steps to reduce their churn rate and improve customer retention. 

We hope that now you have a better understanding of customer attrition, how it is related to churn rate, and how we can analyze churn rate. Also, you are now aware of why it is important to consider the customer attrition rate. UNext Jigsaw’s PG Certificate Program in Product Management is the best in the market today to help you master the nuances of Product Management. With a robust curriculum designed and delivered by the minds of IIM Indore, it provides a complete hands-on learning experience with its 5iframwork.  

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