Churn is the rate at which subscribers disconnect service over a period of time, expressed as a percentage of the total subscriber base. It considers both voluntary disconnections and involuntary ones due to non-payment. Churn is a key metric that telecommunications companies closely monitor, though rates vary widely between 10-67% annually. Reducing churn through customer retention initiatives can have significant financial benefits as it costs much more to acquire new customers than retain existing ones.

1. March 25, 2011
A Brief Discussion of Churn
Prepared by Joya L. Martin

2. What is Churn?
Churn is the number of subscribers
disconnecting their service over a given
time period expressed as a percent of the
provider’s total subscriber base.

3. When you think of churn think of
customer attrition.
Churn takes into consideration both voluntary
disconnections (at the customer’s request) and
involuntary disconnections (through non-
payment).
Churn is a key metric in the telecommunications
industry and is usually measured on a monthly,
quarterly or annual basis.

4. There are slight variations in the way companies
in the telecommunications industry compute
churn. This can have a negative impact on the
comparability of reported churn rates between
different companies.
Annual churn rates in the telecoms
industry, although closely guarded, are estimated
to average between 10% and 67%.

5. 2 Simple Churn Formulas
Very simply, churn can be computed by calculating the
net movement in the existing subscriber base in a given
period divided by the subscriber base at the beginning of
the period:
S1 = subscriber base at beginning of period
S2 = subscriber base at end of period
CON = new installations
NPD = non-pay disconnections
VOL = voluntary disconnections
REC = total reconnections
Churn = S2 – S1 – CON Churn = REC – NPD – VOL
S1 S1

6. Non-Controllable Churn Factors
- customer has moved to a non-service area
- customer has passed away
- customer has gone out of business

7. Controllable Churn Factors
- poor service
- price
- economic factors
- loss to competition
- customer dissatisfaction
- theft of service

8. Why Track Churn ?
Monitoring churn is important because churn
rates may be possible indicators of:
- customer dissatisfaction,
- cheaper and/or better offers from the
competition,
- more successful sales and/or marketing by the
competition

9. Minimizing Churn Rate
One of the traditional ways to keep churn rates
down is to create barriers which discourage
customers from switching service providers (e.g.
time-bound contracts and restrictive clauses and
penalties).
As the marketplace becomes more competitive
and subscribers become more savvy, the need to
find more creative ways of increasing customer
retention is imperative.

10. Seven Great Ways to Reduce
Subscriber Churn

11. 1. Include Customer Retention in Marketing
Budgets and Operational Incentives
Budget a percentage of sales & marketing
spending on subscriber retention initiatives.
Make provisions for customer retention as a part
of operational performance metrics and incentive
programs.

12. 2. Develop Good Customer Relationships
Find ways to interact with subscribers
frequently, providing them with the latest
information on services, rate specials and
customer service tips. Encourage subscribers to
interact: outspoken subscribers are easier to
keep than the quiet ones. Taking advantage of
social networking sites is a less expensive and
more interactive way to do this than bulk mail or
telemarketing.

13. 3. Find Out What Subscribers Want
Surveys may be helpful in identifying customers’
likes and dislikes. Keep track of responses and
make changes to take advantage of customer
desires. Exceed customer expectations.

14. 4. Up Sell
Up sell premium services. Customers with
multiple service subscriptions are less likely to
switch providers.

15. 5. Invest in Customer Service Training
Train staff to better handle customer service
issues. How you handle customer
problems establishes the path for customer
loyalty.

16. 6. Create Greater Value
In tough economic times, many will decrease service
subscriptions or look for cheaper alternatives in order
to compensate for reduced income. To offset
this, continually look for ways to increase the perceived
value of your service in as many ways as you can. Focus
on creating value in everything you do.

17. 7. Reduce Theft
Customers who value your service may be willing
to try to obtain it for free. Reduce theft by
conducting audits particularly in high/low
populated areas. Pay close attention to service
down-graders and train technical personnel to be
on the constant lookout for theft of service.

18. Fact: It may cost five to ten times as much
to acquire a new customer as to retain an
existing one.
Focusing on reining-in churn and achieving even
small decreases in churn rates can create savings that
have a huge positive impact on profitability and
operating cash flow.

19. Conclusion
A customer saved is money earned!
End