Customer churn is a never-ending concern for customer success and sales teams. Losing customers directly impacts revenue, customer lifetime value (CLV), and growth potential.
That said, customers don’t churn without a reason—they send signals long before they leave. The real question is: are you catching those signals, like a spike in support tickets or declining product usage, in time?
Read this article to discover how to calculate churn, predict it using customer behavior, and implement strategies to prevent it before it impacts your bottom line.
What is Customer Churn?
Customer churn happens when a customer stops using your product or service—whether by canceling their subscription, not renewing, or simply disengaging. For customer success teams, churn is a key metric that shows how effective your retention efforts are.
Customer Churn Examples
Customer churn can occur in various ways, each impacting a business differently. The most common scenarios include when a customer:
- Fully cancels their subscription or service plan
- Downgrades to a lower-tier service or product
- Stops using the product or significantly reduces usage
- Fails to renew their contract or subscription term
- Opts to move to a competitor’s solution.
Customer Churn Calculation
To analyze how many customers you’re losing, you need to do more than track the raw number lost. Use the customer churn formula to understand it fully:
Customer Churn Rate = (Customers Lost ÷ Total Customers at Start of Period) × 100
For example, let’s say you start the quarter with 500 customers and lose 60. Your customer churn rate would be 12% (60 ÷ 500 × 100). A churn rate like this means that 12% of your customers have left over that period—pointing to possible issues like dissatisfaction or unmet needs.
Monthly vs. Annual Customer Churn
You can also calculate churn monthly or annually. In SaaS, companies often prefer to focus on annual churn because contracts tend to be longer-term. Monthly churn can be a bit misleading because it’s more volatile, while annual churn gives you a more stable, long-term view of how well you retain customers.
Customer Churn Analysis: What It Is and Why It’s Important
Churn analysis is all about understanding why customers leave. Knowing how many customers churn is not enough—you need to understand why. That requires you to look into customer behaviors, interactions, and usage patterns to identify red flags early.
One of the best ways to analyze customer churn is by keeping an eye on metrics such as:
- Customer Lifetime Value (CLV): If CLV drops, it’s a strong signal that something’s off with the relationship.
- Net Promoter Score (NPS): A dip in NPS often means your customers aren’t as happy or loyal as they should be.
- Customer Satisfaction Score (CSAT): Low CSAT scores are one of the earliest signs of churn risk.
Analyzing customer churn is crucial because it lets you be proactive. Churn doesn’t just happen because of a single issue. It’s often the result of a series of smaller problems that add up over time. These could be product usability issues, poor onboarding, or unmet customer expectations.
5 Customer Churn Prediction Methods
There are several ways to predict customer attrition. Let’s unpack the most common ones.
1. Watch Product Usage
If customers aren’t using your product, that’s a big red flag. It’s especially concerning when they stop engaging with key features that are supposed to solve their main pain points. If they’re ignoring major parts of the product, they’re probably not seeing enough value or are unaware of the feature and how to use it, both of which put them at risk of leaving.
2. Keep an Eye on Support Tickets
Statistically, 47% of B2B buyers continue engaging with software vendors through support chats and emails after making a purchase. This is expected, as it’s only natural for new users to encounter some teething issues while getting familiar with the product.
That said, if you notice an uptick in support tickets from one or several of your customers, usually, it’s a sign that something’s not right. If you see the same customer reaching out frequently, especially about recurring issues, they’re likely getting frustrated. Repeated problems that go unresolved can push them to look for alternatives.
3. Look at Contract Renewals
How customers handle renewals can tell you a lot.
If they’re delaying or switching from an annual to a monthly plan, it’s a sign they’re unsure about sticking around. This gives you a window to engage them and discover what’s holding them back before it’s too late.
4. Pay Attention to Feedback (or Lack of It)
One effective way to identify dissatisfied customers is by using customer surveys. Negative feedback through NPS or CSAT scores is an obvious indicator of churn risk.
For example, an aggregate CSAT score above 70% is generally seen as positive, while a score below 50% signals serious concern. Similarly, a low NPS score (indicating customers are unlikely to recommend your product or service) indicates dissatisfaction and a higher churn risk.
But silence can be just as telling. If a customer who used to be vocal suddenly stops responding to surveys or sharing feedback, they may be disengaging. It’s essential to follow up and re-engage those silent customers.
5. Leverage AI for Deeper Insights
Tools like Momentum’s AI Signals are great for spotting trends you might otherwise miss. Momentum analyzes customer calls to capture signs that a customer may be at risk of churning, such as mentioning product issues or asking questions about reducing seat count, and delivers them to the relevant teams via Slack DM or channel, allowing teams to take action.
However, as you predict your customer churn, be mindful of the context and the stage of your business.
For example, in the early stages of a SaaS company’s growth, it’s common to see retention metrics that look stronger than they actually are. This is because most of the customer base is still in the honeymoon phase—new customers haven’t had the chance to churn yet.
This phenomenon is called the “false positive” in churn data. It can create the illusion that retention is solid, but the true churn rate becomes more apparent as the business matures and customers begin to hit renewal cycles. This is particularly relevant for companies under five years old or those scaling rapidly, where the sheer volume of new customer acquisition might mask the churn challenge.
Tips to Reduce Customer Churn
Once you’ve spotted the signs of churn, the next step is taking action to keep your customers happy and engaged.
Here are some practical, straightforward ways to reduce churn and strengthen those relationships.
Use Analytics to Spot Churn Early
Don’t wait until renewal time to check in with your customers. By then, you’re playing catch-up. As a customer success leader, you have plenty of data at your fingertips—product usage, support tickets, or NPS scores. These data points tell a story; if you read between the lines, you’ll spot churn risks well before they become problems.
The key is to act early. If you notice a customer using your product less or logging more support requests, that’s your cue to step in. A quick check-in, offering extra guidance, or solving an overlooked issue can turn things around before frustration builds.
Create Resources to Help Customers Get the Most Out of Your Product
If your customers aren’t fully leveraging your product, the risk of churn increases. They might feel stuck with a clunky interface or struggle to sync key data across their workflow. Gartner’s 2022 Global Software Buyer Trends Survey found that 15% of buyers switch software because it’s incompatible with their existing business systems or they find something better.
The solution? Invest in customer education. Whether through webinars, how-to guides, or personalized training, helping customers unlock the full value of your product makes them far more likely to stick around.
Proactively Reach Out to Customers Who Are Underutilizing the Product
Don’t wait for your customers to come to you with problems. If you notice someone’s usage has dropped, reach out and ask how things are going. Often, a simple check-in can make all the difference. Show them you’re invested in their success and ready to help them get back on track.
Offer Flexible Solutions
Not all customers have the same needs, and sometimes they need flexibility. Offering customized solutions, such as adjusting their plan, adding features, or providing more support, can go a long way toward keeping them engaged. The more you meet customers where they are, the less likely they are to churn.
Build a 360-degree View of the Customer
Lastly, having a complete view of your customers—across all interactions, from sales to support—helps you understand what’s really going on. Centralize your customer data so you can spot potential issues faster and tailor your approach to each customer’s needs.
Conclusion: Reducing Churn Starts with Action
Customer churn is inevitable, but you can take steps to minimize it. By keeping tabs on customer behavior, addressing issues early, and offering flexible support, you can keep more customers happy and engaged.
Remember to leverage smart tools like Momentum, which can automatically share insights from customer calls—such as product feedback, churn alerts, and competitive intelligence—with cross-functional teams to foster collaboration, drive product strategy, and enable proactive customer retention efforts.
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