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Glossary

Churn

The share of customers who stop buying over a given period, the flip side of retention, usually given as a percentage per month or per year.

Churn is the rate at which customers stop coming. Divide the number of customers lost during a period by the number you had at the start, and you have the churn rate for that period. It is the opposite of retention: a shop that keeps 80 percent of its regulars over a year has churned the other 20 percent.

Subscription businesses can measure churn exactly, because a customer cancels and the cancellation is recorded. A shop has no such moment. A regular does not announce they are leaving; they just stop appearing, and nobody notices for weeks. So a shop's churn is always estimated, usually by counting the familiar faces that have not been seen for a while, or the loyalty members whose stamp counts have stopped moving.

In practice

A greengrocer starts the year with about 300 regulars. By December, staff reckon around 75 of them no longer come in. That is annual churn of 75 divided by 300, or 25 percent. Put another way, the shop has to win 75 new regulars a year just to stay the same size, before it can grow at all.

The money makes the point clearer. If an average regular at this shop spends $1,000 a year, those 75 people took $75,000 of yearly sales with them. Some of that loss was beyond the shop's control: people move house, change jobs or start working from home on different days. Some of it was not. When the owner asks around, a handful mention the same things: the Saturday queue got too long, and the good tomatoes kept selling out before ten.

Churn is worth tracking even roughly, once or twice a year, because it shows whether a problem is growing. A shop at 25 percent that slips to 35 percent the following year has something to fix, and the repeat rate of recent loyalty members is often where the first sign appears.

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