This metric measures the total percentage of customers who have canceled their subscription or not renewed their contract over a specific period, including both voluntary and involuntary churn.
Gross Churn, often referred to as Gross Revenue Churn, is a metric that measures the percentage of revenue lost from existing customers due to churn (customer cancellations or downgrades) over a specific period. It provides insights into the financial impact of customer attrition on a business.
The formula for calculating Gross Churn is as follows:
Gross Churn Rate=(Lost Revenue from Churned CustomersTotal Revenue at the Beginning of the Period)×100Gross Churn Rate=(Total Revenue at the Beginning of the PeriodLost Revenue from Churned Customers)×100
Here's a breakdown of the key components:
1. Lost Revenue from Churned Customers:
Calculate the revenue lost specifically from customers who churned during the defined period. This includes any lost subscription fees, service charges, or other revenue directly tied to those customers.
2. Total Revenue at the Beginning of the Period:
Determine the total revenue generated by all customers at the beginning of the chosen period. This includes both existing and new customers.
3. Calculate Gross Churn Rate:
Plug the values into the formula to determine the Gross Churn Rate as a percentage.
Gross Churn is a valuable metric for subscription-based businesses, as it helps assess the overall impact of customer churn on the company's revenue. It is essential to distinguish between gross churn and net churn. Gross Churn only considers lost revenue from customers who churned, while net churn takes into account any expansion revenue (upsells, cross-sells, or upgrades) from existing customers during the same period.
Understanding Gross Churn can guide businesses in refining customer retention strategies, improving product offerings, and addressing issues that may contribute to customer attrition. Lowering the Gross Churn rate is generally a positive sign for a business, indicating stronger customer retention and revenue stability.