Subscription Insights: 2 Types of Churn
In a recent Subscription Insights blog, we discussed Churn and offered three ways to reduce it. But did you know there are different types of Churn you should be tracking for your Subscription business?
Customer churn refers to the rate at which customers cancel their existing subscriptions. While Revenue Churn refers to the rate at which revenue is lost as a result of canceled or downgraded subscriptions. It is important to track both of these metrics separately because one is not always a good predictor of the other.
For example, Customer churn rate may be low, but if you were losing your high paying customers, your Revenue churn would be higher. In this case, you would want to have a deeper look at what's causing those customers to leave. As a result you may change your offering and/or strategy to appeal or better retain that customer segment.
The opposite could also be true – you could be losing customers at a higher rate than your revenue. This could happen if your best customers spent several times more than your low or even average paying customers. Depending on your business model this may or may not be acceptable.
Looking at the examples provided above, you can easily see how tracking both types of churn would provide you with a better view of your subscription business. By tracking both customer and revenue churn you can gain additional insight into your retention, as well as upselling efforts. Analyzing both metrics can lead to more informed and effective decision-making.