What is churn rate and everything you need to know to reduce it

All app developers should know what is churn rate, as well as why it’s so important, how to calculate it, and how to reduce it.

What is Churn Rate?

The percentage of users who stop using an app is referred to as churn rate. It’s the opposite of the retention rate.

An app developer should strive for a high retention rate while working to reduce the churn rate.

Why is Churn Rate Important?

Downloads are necessary, but only looking at the number of downloads won’t give the whole picture.

The true test of your app’s success is if users like it after installing it. It’s safe to assume that a high churn rate means users aren’t impressed by the app.

You don’t want a high churn rate because:

  • It can hinder your app’s growth.
  • It will increase costs since it’s more expensive to acquire new users than it is to retain current customers.
  • It’s easier to sell to current customers who already know, like and trust your brand than it is to convert prospects.

Churn Rate Calculation

Monthly Churn Rate

  1. Add the number of new users acquired that month to the number of users you already had at the beginning of the month.
  2. Then take the number of users you lost by the end of the month and divide it by the number you calculated in step one.

Users Lost By End Of Month/(Users At Start Of Month + New Users Added That Month) = Monthly Churn Rate

Annual Churn Rate

  1. Add the number of new users acquired that year to the number of users you already had at the beginning of the year.
  2. Then take the number of users you lost by the end of the year and divide it by the number you calculated in step one.

Users Lost By End Of Year/(Users At Start Of Year+ New Users Added That Year) = Annual Churn Rate

How to Reduce Customer Churn

First, you have to figure out what is causing customer churn. You can use cohort analysis to figure this out.

Cohort Analysis

If you’ve never heard of this, it simply means you divide your users into groups.

Ask the following questions to create the groups:

  • What acquisition channels bring your highest quality users?
  • Which actions in your app do your retained users typically take?
  • What is the average length of time it takes for those users to take those actions?

Discovering the answers to these questions can clue you in on what works and what doesn’t.

This information makes it possible to focus on what increases customer retention and to improve what causes user churn.

Here are some ways you can reduce your app’s churn rate.

Efficient Onboarding Process

  • Make it quick, easy, and hassle-free.
  • Here are some tips:
  • Make it easy to create an account.
  • Don’t include too many steps.
  • Don’t explain everything about the app’s features right from the start, as it can be overwhelming to users.
  • Gradually provide more instructions on how to best utilize the app.

what-is-churn-rate-mobileCarefully Use Push Notifications

Although effective when done the right way, it can be easy to unintentionally irritate users with push notifications. Proceed with caution, but don’t let that stop you from using this effective method of improving your customer retention rate.

You can:

  • Remind users about the app they downloaded.
  • Send messages that encourage them to use your app during the hours that high-value users typically engage. (Use cohort analysis to figure this out.)
  • Also based on cohort analysis, encourage them to take specific actions that you notice your high-value users normally take.

Add a Personalized Touch

  • Use the customer’s name in messages.
  • Show the customer’s name on the screen.
  • Create push notifications that are relevant to a particular customer’s preferences.

Ask for Feedback

Show you care by reaching out to your customers for their opinions on your app. They will appreciate your concern.

As a bonus, any negative feedback will go directly to you, decreasing the chances of unsatisfied customers leaving bad reviews that others can see.

Keep Updating Your App

The constant need for improvement never diminishes in the app world. Your users rightfully expect you to keep tweaking and updating your app with new features.

App downloads are important, but customer retention is even more important. Using the advice given above, work on decreasing your app’s churn rate so that it can keep growing and getting the results you want.

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