Churn Rate (also called customer attrition rate) measures the percentage of customers who stop doing business with you over a specific time period. In e-commerce — where there are no subscriptions to cancel — churn is typically defined as customers who haven't made a purchase within a defined window (e.g., 90 or 180 days).
The formula: Churn Rate = (Customers Lost During Period ÷ Customers at Start of Period) × 100
Why it matters:
Acquiring a new customer costs 5-7x more than retaining an existing one. A high churn rate means you're constantly spending to replace customers rather than growing your base. Even a small improvement in churn can dramatically impact profitability.
Reducing churn in e-commerce:
- Use RFM analysis to identify "At-Risk" customers before they fully churn
- Implement targeted re-engagement campaigns with personalized offers
- Analyze which product categories lead to higher repeat rates
- Create bundle offers that encourage multi-product adoption (customers who buy multiple product categories churn less)
Understanding churn in context is crucial — seasonal businesses naturally have different patterns than subscription-like businesses. Cohort analysis helps you separate true churn from expected seasonal dips.
