The Complete Guide Customer Churn Rate for 2025

One element that holds greater significance for long-term sustainability for any SaaS company is the retention of customers and prevention of customer churn rate. 

While acquiring new customers’ trust and loyalty can be seen as a critical determinant for your business’s success, that excitement can easily be undercut by the time it takes to break even on the acquisition cost. According to Esteban Kolsky, the founder of ThinkJar, it takes 6-7 times more to acquire a customer than to retain an existing one. 

Therefore, knowing which metrics to track is essential for businesses to make data-driven decisions. With inflation impacting disposable income levels, retention is a top priority for companies in 2025.

Customer churn rate is a metric that represents the rate at which customers leave a business. Understanding this metric helps brands make targeted improvements to keep customers happy and costs low.

Here's the complete guide to understanding and improving your customer churn rate for 2024.

What is customer churn?

Customer churn rate is a metric that measures the number or percentage of customers who stop doing business with a company over a specific period.

High churn rates can lead to a loss of revenue, increased customer acquisition costs, and decreased customer loyalty. On the other hand, low churn rates indicate a healthy customer base and can help a company build a solid foundation for future growth. Monitoring and improving churn rates is essential to a customer retention strategy.

Voluntary vs. Involuntary churn

Voluntary churn and involuntary churn are two types of customer churn that companies commonly face.

Voluntary churn is when customers choose to stop doing business with a company. This choice can stem from various reasons, such as finding a better deal or switching to a competitor. Voluntary churn may include canceling a subscription, discontinuing a service, or not renewing a contract.

Involuntary churn occurs when customers can no longer continue business with a company. Reasons outside the customer's control cause this type of churn. For example, a customer's credit card might be declined, suspending their account due to non-payment. Involuntary churn can also happen when a customer moves away from a brick-and-mortar business or in-person service.

Both types of churn can be detrimental to a company's bottom line. However, voluntary churn is generally more challenging to address, as it often reflects underlying issues with customer satisfaction or competition.

Why customers churn

Several factors could lead to losing a customer. In addition to the reasons mentioned above, common reasons why customers churn include:

1. Poor customer service

Customers may leave a company if they have negative experiences with customer service representatives, such as not receiving timely or satisfactory assistance.

2. Lack of personalization

Thanks to advanced technology and data collection tools, personalization has become a significant part of marketing strategies in recent years.

Customers may feel unvalued or appreciated if a company fails to personalize their interactions or offers, such as sending generic marketing messages. As personalization becomes more commonplace, it's becoming an expectation in marketing efforts.

3. Product quality issues

Customers may be dissatisfied with a product or service if it fails to meet their expectations or does not work as advertised. This leads to a one-and-done purchase and can also negatively impact the brand's reputation.

4. Changing needs or preferences

Customers' needs and preferences may change over time, and they may no longer find a company's offerings relevant or useful. Baby-related products and services are a prime example of this transition.

5. Pricing issues

Customers may switch to competitors if they find that a company's prices are too high or if they can get a better deal elsewhere.

Similarly, if the customer's overall budget changes, they may eliminate certain aspects of their spending to cut costs. This issue has impacted many businesses over the past few years and will continue to be a concern in 2024.

6. Brand reputation

Customers are becoming more conscientious about sustainability and social responsibility. Retained customers may choose to stop supporting a business with a poor reputation. For example, fast fashion clothing manufacturers.

Poor customer experiences can significantly impact customer churn, leading to lost revenue and increased customer acquisition costs.

Companies should monitor key performance metrics and note changes in customer behavior or environmental factors. By proactively addressing these warning signs, companies can take steps to retain customers and improve their overall customer experience.

How to measure customer churn rates

Measuring customer churn rates is important for several reasons. It helps companies identify potential issues and proactively address them. Continuous measurements also track the progress of improvements put in place.

The most common metric for this issue is the overall customer churn rate, which can be measured by assessing the percentage of customers who stop transacting over a specified period.

However, other metrics provide deeper insights into why customers churn, including:

• Net promoter score (NPS) - This measures a customer's likelihood of recommending a company to others.
• Customer lifetime value (CLV) - This measures the total revenue a customer is expected to generate for a company over their entire lifetime as a customer.
• Repeat purchase rate - This measures the percentage of repeat customers versus one-time customers.

These metrics can help key stakeholders determine the best approach to improving churn rates.

Customer churn in relation to social media

Social media can have a significant impact on customer churn rates. Customers may use social media to voice complaints or negative experiences, which can be seen by a wide audience and influence others to switch to competitors. On the other hand, positive interactions on social media can increase customer loyalty and retention.

Social media has become one of the biggest drivers of customer engagement in modern marketing for several reasons.

First and foremost, the large user base allows brands to connect with potential customers globally. Additionally, brands can connect in real-time and make personalized experiences. Add in the cost-effectiveness and social proof of user-generated content and the potential of going viral, and you've got a potent customer retention tool.

Social media customer retention strategies

If reducing customer churn is a goal for 2024, working it into the overall social media strategy is a must. A source has revealed that social media marketing is 37% more effective for customer retention. So, here are some overarching elements that contribute to improved retention through social media.

1. Consistent branding

Brand-centric imagery, a clear aesthetic, and brand-friendly messaging across social media channels can help create a consistent and recognizable brand identity. For example, including industry-relevant LinkedIn background pictures.

Improving recognition and brand awareness can help increase customer loyalty and reduce churn.

2. Timely customer support

Responding to customer inquiries and complaints promptly and helpfully can help prevent issues from escalating and potentially leading to customer churn.

Consider incorporating automation to support prompt customer service and responses through social media.

3. Relevant and engaging content

Posting relevant and engaging content will keep customers interested and invested in a company's brand and products, reducing the likelihood of churn.

Consider creating content for every sales funnel stage for a balanced approach between acquisition, transacting, and retention.

By implementing these strategies, companies can use social media to build stronger customer relationships, increase loyalty, and reduce churn.

Brands can use metrics like engagement, reach, share, click-through rate (CTR), and conversion rate to measure the effectiveness of their strategy.

How to reduce customer churn rates

Understanding the importance of customer churn rates is just a small part of the puzzle; developing solutions is where the real work begins.

Here are some focal points to consider when strategizing how to reduce customer churn rates:

1. Improving customer experiences

Start by identifying areas of the customer journey that need improvement. This process may involve gathering customer feedback through surveys or social media, analyzing customer support interactions, or tracking customer behavior and purchase patterns.

Once areas for improvement have been identified, create plans to address them, such as improving product quality, streamlining customer service processes, or personalizing interactions.

2. Improving engagement and personalization

To reduce churn by increasing customer engagement, companies should build strong customer relationships through personalized interactions, exceptional service, and ongoing communication.

Use automation and machine learning to create targeted marketing campaigns. Focus on creating a positive and memorable customer experience at every touchpoint in the customer journey.

3. Leveraging customer feedback

Take a deeper dive into customer feedback to look for specific improvement points. For example, evolutions to your existing products or related offerings.

4. Providing proactive customer support

Proactive customer support means anticipating and addressing customer needs before they become issues.

Companies can start by monitoring customer behavior and interactions to identify potential problems or areas for improvement, then proactively contacting customers to offer assistance or solutions. This approach could involve offering personalized recommendations, providing self-service resources, or delivering targeted messaging.

5. Offering incentives and rewards

Companies can offer incentives such as discounts, free products or services, or exclusive access to content to incentivize customers to reduce customer churn.

Loyalty programs can also be effective, offering rewards and benefits to customers who make repeat purchases or referrals. This approach also presents an opportunity to offer personalized rewards based on customer behavior or preferences to increase engagement.

Brands that successfully reduced customer churn with effective rewards programs

Customer churn is an issue that impacts businesses of all sizes in every industry. Fortunately, with the right strategy, brands can course correct and improve their customer retention.

Here are some well-known brands that effectively executed a churn reduction strategy:

1. Spotify

Spotify has been making waves in the streaming industry over the past six years, with churn rates falling dramatically — some sources claiming as much as 30%.

What's undeniable is that Spotify is leaving other music streaming services like Apple Music in the dust. How? By diversifying and investing.

Spotify has invested heavily in podcasts in recent years, creating a one-stop-shop for listeners. The brand's much anticipated annual Wrapped program also encourages customers to keep listening while capitalizing on personalization.

2. Buffer

Buffer is one of the leading brands in social media automation. This platform schedules and posts social media content while capturing detailed analytics to help marketers create an effective strategy.

One of Buffer's most powerful tools for reducing churn is trigger-based emails. Emails are automatically sent to customers when their posting queue is empty, encouraging them to log back in and continue using the product.

Buffer shared their other effective strategies in a blog post. In addition to email triggers, Buffer relied on personalization, proactive customer support, and putting measures in place to avoid involuntary churn (i.e., email triggers for expired credit cards, etc.)

Final thoughts

Understanding customer churn rates is essential for businesses as it provides insights into the health of the customer base, helps identify areas for improvement in the customer experience, and informs customer retention strategies.

By measuring and monitoring churn rates, companies can take proactive steps to reduce churn, increase customer satisfaction and loyalty, and improve overall business performance.

As such, businesses should prioritize tracking and analyzing customer churn rates to stay competitive and ensure long-term success.

FAQs

Customer churn and retention can be a complex, multi-faceted issue, leading to a lot of questions and confusion. Let's take a look at some of the most commonly asked questions by brands interested in developing a customer retention strategy.

How much customer churn is normal?

The amount of customer churn considered "normal" varies depending on the industry and company in question.

Generally, it's difficult to determine an exact benchmark for "normal" churn rates because a wide range of factors, including product quality, customer service, competitive landscape, and customer demographics, can influence customer churn.

That being said, some industries tend to have higher customer churn rates than others. For example, telecommunications, cable, and internet service providers often have higher churn rates than industries like healthcare or banking.

Conduct some market research to determine the benchmark churn rates in your industry, and strive for continuous improvement.

Is it possible to predict customer churn?

It is possible to predict customer churn by collecting data, monitoring customer behavior, and tracking metrics. Paying attention to environmental factors (like inflation) will also help companies take a proactive approach.

How does customer engagement reduce churn?

Customer engagement is crucial in reducing churn because it helps build stronger relationships between a company and its customers.

When customers feel engaged and invested in a company, they are likelier to remain loyal and less likely to churn. This leads to better customer lifetime value (CLV), helpful feedback, and better social proof. In essence, customer engagement contributes to both churn rates and new customer acquisition.