Financial Terms Glossary

Churn

Formal

A sexy technical term for the rate at which a business loses its customers - so it is a measure of customer loyalty. If there are 100 customers at the start of the year and 10 new ones are won, and 10 disaffected customers leave, then we still have 100 customers. However we have 'churned' 10% (10 out of 100) of our customer base in that year. Reducing 'churn' has a massive exponential impact on customer loyalty and profitability.

Informal

How can a term related to milk mean anything in business? The customer base is 'turned-over' annually - new customers appear, and unhappy ones leave. This constant change is 'churn' - and reducing 'churn' means that customers stay longer. It's a sign the business is providing service that generates loyalty. No need for a calculator here - businesses that reduce churn make lots more money.

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