Tracking ‘Revenue Churn’ To Improve Your Customer Retention!

Originally published on WebEngage.

Once you’ve understood the significant impact Customer Lifetime Value (CLTV) can cause on the retention rate, it’s now time to unfold yet another super metric — Revenue Churn Rate, that is crucial to calculate to boost customer retention numbers and eventually your sales!

What is Revenue Churn Rate?

If your business provides various products/services at different prices, your revenue churn rate may be different from your customer churn rate. Revenue churn rate is a metric to identify which of your products/services are performing poorly and helps in making strategic improvements in the retention plan. The basic formula for calculating revenue churn is similar to calculating customer churn. However, the insights derived from revenue churn are completely different from customer churn. Let’s learn how to calculate Revenue Churn Rate

How to calculate Revenue Churn Rate?

The period of consideration is usually a quarter as monthly revenue numbers may not always portray the best picture due to the smaller data size.

Example:

For FY 18–19, your revenue was $20mn whereas for FY 19–20 it was $18.5mn. Plugging these values in the above equation gives the Revenue Churn Rate as (20mn-18.5mn)/20mn = 7.5%

This method of calculation is excellent if you have a single product offering. However, for multiple offerings, it is advised to calculate revenue churn for each product individually.

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