Churn rate

What is churn rate?

Churn rate measures how many customers you "lose" over time. The calculation is:

Churn rate = (Customers lost during the period / Customers at the start of the period) × 100

If you start the month with 1,000 active customers and 50 of them have not purchased again or have unsubscribed, your churn rate is 5%.

Churn rate for online stores

Churn is traditionally associated with subscription-based businesses, but is just as relevant for online stores:

• Subscription-based: The customer cancels their subscription (e.g. monthly delivery of coffee, vitamins, cosmetics).
• Traditional webshops: The customer stops buying. Here you typically define churn as "no order within X months" depending on your industry.
• Newsletter: The percentage who unsubscribe from your email list.

Why is churn rate important?

• Retention is cheaper than acquisition: It typically costs 5-7x more to acquire a new customer than to retain an existing one.
• Profitability: Loyal customers have higher average order value and lower marketing costs.
• Growth: Even with good customer acquisition, high churn can prevent real growth - you're filling water into a hole in the bucket.
• CLV impact: Lower churn = longer customer relationships = higher Customer Lifetime Value.

Causes of churn

• Poor product quality: The customer was disappointed with the product and shops elsewhere.
• Poor customer experience: Slow delivery, poor customer service, complicated returns.
• Price increases: The customer finds cheaper alternatives with the competitor.
• Lack of engagement: The customer forgets about you because you don't communicate with them.
• Better alternative: A competitor offers a better product or experience.

How to reduce churn

• Email marketing: Stay in touch with customers through newsletters, personalized recommendations and reorder reminders.
• Loyalty programs: Rewards for repeat purchases motivate customers to return.
• Excellent customer service: Fast, helpful customer service reduces frustration-based churn.
• Win-back campaigns: Send targeted offers to customers who haven't purchased in a long time.
• Feedback: Ask customers who leave you why - and use the insights to improve.

Churn rate and your online store

To measure churn in your online store, you need to define when a customer is considered "lost" (e.g. no purchases for 6 or 12 months). Use Shoporama's newsletter system to send automatic follow-up emails and win-back campaigns to inactive customers. Combine this with segmentation so you can target messages to customers based on their purchase history and activity level.