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Definition
Churn rate is the share of customers at the start of a period who count as lost by the end of it, under a written rule for inactivity. For ecommerce the number depends heavily on how long a customer may go without ordering before they count as lost.
Churn rate = customers lost in the period / customers at the start of the periodExample with made-up numbers: Made-up scenario: 2,000 customers were active at the start of the quarter. By the end of the quarter, 150 of them had placed no order for 180 days, which is the store's rule for a lost customer. Churn rate = 150 / 2,000 = 7.5 percent.
How to use it
Define a customer as lost after a set number of days without an order, and write that number in the report. A 90-day rule and a 365-day rule give very different churn rates for the same store. The rule should match how often the product is normally bought, so a product bought once a year is not judged by a 30-day rule.
Measure churn over a fixed period, using the same starting group. Customers who join during the period are not in the starting group, so they do not count in the rate. Read churn next to the cohort table. A rising churn rate can come from a new group of weak buyers rather than from older customers leaving.
