Churn

Membership businesses rely on retention, bringing people back time after time and getting them invested in the brand. Understanding your member churn rate, which Memberful tracks on your behalf, is valuable because it has a direct effect on your service’s profitability. In this article, we will explore what churn is, how it’s calculated, and how you can use this metric to improve your membership program.

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What is churn?

Churn is the percentage of your members lost during a timeframe. If you’re looking to grow your business, your rate of member acquisition should exceed your member churn rate. Industry benchmarks for subscription-based businesses show the average churn rate of a healthy business to be around 6.7% annually, the window being between 5-7%. A high member churn rate is an indication that you should implement strategies to make your membership “stickier.”

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How is churn calculated?

The total revenue churn rate is calculated as: (Voluntary churn + Failed payments) / Starting value We look at two numbers: How much were the member’s recurring payments at the beginning of the month and at end of the month? (During the current month, the “end” is yesterday.) If the member’s recurring payment went from $10 to $0, we would look at whether their (last) subscription lapsed because they canceled their subscription (i.e. voluntary churn) or their payment failed.

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What are the activities that impact my churn?

The activities that impact your MRR are separated into the following segments:

MRR churn

• Cancellations: Decrease from members who ended recurring payments by canceling
• Failed payments: Decrease from members whose recurring payments couldn’t be collected within 30 days of a failed charge
• Total revenue churn: Total payments lost during the month
• Cancellation rate: Percentage of recurring payments ended by members canceling
• Failed payments rate: Percentage of recurring payments lost from members whose payments couldn’t be collected within 30 days of a failed charge
• Revenue churn rate: Percentage of recurring payments lost during the month

Paying members churn

• Cancellations: Decrease from members who ended recurring payments by canceling their subscription
• Failed payments: Decrease from members whose recurring payments couldn’t be collected within 30 days of a failed charge
• Total member churn: Total number of members whose recurring payments ended
• Cancellation rate: Percentage of recurring payments ended by members canceling their subscription
• Failed payments rate: Percentage of recurring payments lost from members whose payments couldn’t be collected within 30 days of a failed charge
• Member churn rate: Percentage of members whose recurring payments ended

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How do I learn more about churn?

Navigate to Revenue → Metrics → Churn in your Memberful dashboard. The churn graph will show data across previous months (including the current, partially complete month), defaulting to the last 12 months. You can also show the last 3 months or the last 6 months, and advance or rewind the current view of months. Hover over any column in the chart to see the orders and refunds that make up each month, or view the table for the monthly breakdown. We display the individual data segments by calendar month underneath the graph. Click the value in any cell to view a list of the individual data points (i.e. members) that make up that total for that month. Additionally, you have the option to export the list.

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How should I use this metric?

Churn is a natural byproduct of running any membership. Since all memberships and audiences are unique, there’s no one-size-fits-all approach to reducing churn. But knowing what level of churn requires further attention is critical to maintaining a healthy membership. The most important question to answer is, “Why are my members churning?” The answer to this question can be challenging to find. However, if you can obtain a sufficient amount of direct member feedback, this will often reveal the root cause of your churn. Common reasons why members churn:

• Pricing
• No longer interested
• Not making enough use of the product to justify the cost

Start conversations with members who cancel and ask them what you could have done to keep them in your membership.

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Offer plans with lower renewal frequencies

There are other areas you can explore to gain clues as to why your churn may be increasing. Consider how long the average member stays in your membership and then look for value-added ways to increase that amount of time. This can be done by offering plans that have lower renewal frequencies (such as annual or quarterly plans). As long as you’re delivering great value, offering longer-dated plans is the simplest way to decrease your churn while often raising the lifetime value of your members. Our research suggests that most members are more sensitive to the frequency of renewal rather than the price of the renewal.

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Offer a referral program

Implementing a referral program is another evergreen strategy that can drive down your churn over time. When members are rewarded with recurring membership discounts for their referrals, they’re far less likely to churn. Our referrals feature is an effective and proven way to make your membership “stickier” for paying members.

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Win them back

Everyone loves a discount, especially when it’s unexpected. Consider targeting your churned members with a retention discount to win them back. Don’t be afraid to be aggressive with your discount. Discounts in the range of 30% - 50% (for either a limited time or permanently) will often bring a churned member back to the membership — especially if the churn was related to pricing. If you see great win-back rates for your churned members, this is a great indication that your membership pricing may need to be reconsidered.

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The bottom line

Let your membership “settle in” before you make efforts to reduce churn. Gain a clear understanding of your average churn over time. Member churn rates can be entirely different for memberships in different industries. Your aim should be to reduce your churn to a level that proves to be specific to and healthy for your membership. Often, memberships reach a “floor” when it comes to churn. This is the minimum level of churn that can reasonably be achieved, regardless of the efforts made to reduce it. When all else fails remember that steady churn is healthy churn. Increasing churn warrants further investigation and potential action. Related help docs:

• Get important insights from member cancellation surveys.
• Learn more about how well members convert from trialing to paying.
• Compare plans to see how they’re performing against each other.