Churn Rate

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DEFINITION of 'Churn Rate'

The percentage of subscribers to a service that discontinue their subscription to that service in a given time period.

In order for a company to expand its clientele, its growth rate (i.e. its number of new customers) must exceed its churn rate.

INVESTOPEDIA EXPLAINS 'Churn Rate'

For example, if 1 out of every 20 subscribers to a high-speed Internet connection discontinued his or her connection every year, the churn rate for that Internet provider would be 5%.

Churn rate is an important consideration in the telephone and cell phone services industry. In many geographical areas, several companies are competing for customers, making it easy for people to transfer from one provider to another.

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