Inside KPIs : The Churn Rate
The churn rate is a metric used to measure the rate at which customers or users drop out of a business or service, such as a gym. In other words, the churn rate represents the percentage of customers who stop using a service or making purchases from a business during a certain period of time.
To calculate the churn rate of a gym, it is necessary to consider the number of customers who cancelled their membership or did not renew their membership during a specific time period (e.g. a month or a quarter). The churn rate is then calculated by dividing the number of customers who have left the gym by the total number of active customers during the same time period and multiplying the result by 100.
For example, if a gym has 500 active customers in January and 50 of them decide to leave the gym during that month, the churn rate will be 10% [(50/500) x 100].
The churn rate can be an important metric for gyms, as the churn rate can affect the growth of the business and its ability to maintain revenue. Furthermore, the churn rate can provide important information on why customers leave the gym and help the gym develop strategies to improve retention, i.e. the ability to keep customers.
The churn rate can be used as a KPI, or key performance indicator, to monitor the health and growth of a gym, but it is important to set a reasonable target for the churn rate and monitor it regularly. For example, if the gym's current churn rate is 15%, the goal could be to reduce it to 10% within six months.
By monitoring the churn rate regularly, e.g. on a monthly or quarterly basis, the gym can identify trends and fluctuations in the churn rate and develop strategies to prevent or limit it. For example, if the churn rate suddenly increased in a given month, the gym could investigate the reasons and take corrective action, such as improving service quality, offering loyalty programmes or discounts.
The churn rate can also be used as a KPI to compare the gym's performance against that of other gyms or the industry in general. For example, if the gym's churn rate is significantly higher than the industry average, it may be necessary to adopt more aggressive strategies to improve customer retention.