This presentation tells what churn it and describes how it can be calculated based on transactional data. I've tried to keep it as simple as possible. Please forward any feedback to joolsa@utu.fi.

1. churn
definition and calculations
Joni Salminen
PhD, marketing
joolsa@utu.fi

2. This applies if
• your business has recurring revenue (e.g.,
SaaS, teleoperator, magazine)
• your business has repeat purchases (e.g.,
ecommerce)
• …basically, all businesses should measure
loyalty of their customers

3. Churn rate of customers
=
number of customers lost in period
/
number of customers at beginning of
period

4. Churn rate of revenue
=
Amount of revenue lost in period
/
Amount of revenue at beginning of
period

5. ”Choose a measurement period that
makes sense for your business.”
(Kegler, 2014)
• day
• week
• month
• quarter
• year

6. All people joining, buying or otherwise
starting the relationship with you
belong to the same cohort

7. For example
• day: 5th Sep, 2015 cohort
• week: week 32 cohort
• month: Sep, 2015 cohort
• quarter: 3rd Qrt, 2015 cohort
• year: 2015 cohort

8. Then we examine how long the people
in different cohorts will stay as
customers as time goes by…

9. “Within your data, make sure that you
have the following” (Kegler, 2014)
• customer ID
• date of event
• type of event
• amount of event

10. Event types
• trial = a sample given to the customer
• subscription = the customer starts paying
• renewal = the customer continues paying
• cancellation = the customer stops paying

11. For each period, track each event type
for each customer

12. Events: Example data
Customer ID Date of event Type of event Amount of
event
1 1 1.1.2015 Trial N/A
2 1 14.1.2015 Subscription 9.90
3 2 15.1.2015 Subscription 29.90
4 1 10.2.2015 Cancellation N/A
5 3 30.2.2015 Subscription 9.90
6 3 30.3.2015 Renewal 9.90
7 2 15.4.2015 Renewal 29.90

13. Churn: Example data
Begin of
period
End of
period
Cancellations Renewals Churn rate
1 1/1/2015 31/1/2015 5 55
2 1/2/2015 28/2/2015 10 55
3 1/3/2015 30/3/2015 5 60
4 1/4/2015 31/4/2015 10 50
5 1/5/2015 31/5/2015 1 49
6 1/6/2015 31/6/2015 1 48
7 1/7/2015 31/7/2015 1 47

14. Churn can be calculated like this:
cancellations / (renewals + cancellations)

15. Churn: Example data
Begin of
period
End of
period
Cancellations Renewals Churn rate
1 1/1/2015 31/1/2015 5 55 8,3%
2 1/2/2015 28/2/2015 10 55 15,4%
3 1/3/2015 30/3/2015 5 60 7,7%
4 1/4/2015 31/4/2015 10 50 16,7%
5 1/5/2015 31/5/2015 1 49 2%
6 1/6/2015 31/6/2015 1 48 2%
7 1/7/2015 31/7/2015 1 47 2%

16. Remember to interpret the differences
in churn rate: what did you do
differently? Why did the difference
take place? (It helps to annotate
marketing actions in Google Analytics.)

17. Good luck!

18. References
Kegler (2014):
https://blog.rjmetrics.com/2014/08/20/how-to-
calculate-your-saas-churn-rate/