Glossary definition of Churn

Churn is a term referring to customer turnover. The word churn is used to describe those customers abandoning a service or product, and it is particularly applied to Internet and cell-phone subscribers, who tend to often switch providers as a result of intense competition. Churn rate is calculated as the number of customers lost over a time period, divided by the average total number of customers during that period.

For commercial reasons providers will be anxious to understand why the churn rate is high, and whether it is due to customer dissatisfaction with the price or type of services offered. Some providers even offer special deals of free equipment or an initial charge-free period to attract new customers. Also, to discourage churn, the customer may be asked to sign a service agreement containing penalty clauses, to ensure that they stay with the provider for a minimum period.