It is most commonly known as the percentage of service subscribers who stop renewing their subscriptions within a given time period. In other areas, the term “Churn Rate” is also used to describe the rate at which employees of a firm leave their jobs within a certain period.
For a company to expand its customers, its growth rate regarding the regular the number of new customers must exceed its churn rate.
This rate is also called the rate of attrition.
When there are multiple options with little differentiation in an industry like telecommunication, the churn rate plays a vital role. This includes cable or satellite television providers, telephone service providers, internet providers.
As the majority of customers have multiple options from which to chose, the churn rate helps a company determine how it is measuring up to its competitors. If one out of every 10 subscribers to a high- speed internet service terminated their subscriptions within a year, the annual churn rate for that internet provider would be 10%.