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What is Net Churn?
Net Churn measures the total loss of customers or revenue in a given period after accounting for customer gains or expansions. It provides a clearer picture of true customer retention by combining both churn (losses) and growth (new or expanded accounts).
Definition
Net Churn is the percentage of customers or revenue lost during a period after subtracting any gains from upgrades, expansions, or reactivations.
Key takeaways
- Holistic churn metric: Includes both losses and expansions.
- Indicates retention health: Lower net churn = stronger customer loyalty.
- Revenue-focused industries rely on it: Especially SaaS, fintech, telecoms.
- Can be negative: When expansions exceed losses.
Types of net churn
1. Net customer churn
Measures the percentage change in customer count.
2. Net revenue churn
Measures the percentage change in recurring revenue from existing customers.
Formula
Net Revenue Churn
Net Revenue Churn = (Revenue Lost from Churn – Expansion Revenue) / Starting Revenue
Example:
- Starting revenue: P100,000
- Lost revenue: P15,000
- Expansion revenue: P10,000
Net Revenue Churn = (15,000 – 10,000) / 100,000 = 5%
Why net churn matters
- Shows true retention performance
- Helps forecast long-term revenue
- Indicates product value and customer satisfaction
- Drives customer success strategies
Causes of high net churn
- Poor product-market fit
- Weak onboarding or customer support
- High competition
- Pricing challenges
- Lack of ongoing value delivery
How companies reduce net churn
- Improving onboarding
- Offering loyalty or retention programs
- Enhancing customer support
- Regular product updates or feature releases
- Customer success outreach
Net churn vs. gross churn
| Metric | What it Measures | Includes Expansions? |
|---|---|---|
| Gross churn | Total losses | No |
| Net churn | Losses minus expansions | Yes |
Related concepts
- Customer churn
- Net Revenue Retention (NRR)
- Customer lifetime value (CLV)
- SaaS metrics
- Retention strategies
Sources
- SaaS Metrics Guide – OpenView Partners
- HubSpot SaaS Analytics: https://www.hubspot.com/
- McKinsey – Subscription Metrics Research: https://www.mckinsey.com/
Frequently Asked Questions (FAQ)
Can net churn be negative?
Yes. If expansion revenue exceeds churn, net churn becomes negative.
What is a good net churn rate?
Zero or negative is ideal, especially in SaaS.
Does net churn include new customers?
No. It only measures existing customer behavior.
Is net churn better than gross churn?
Yes, for understanding overall retention and revenue health.
What drives negative net churn?
Strong upsells, cross-sells, and account expansions.
