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What is an Attrition Rate or Churn Rate?

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One important piece of information that every business will want to have is how they are performing. One way to get this information is to consider the attrition rate – also known as the churn rate. This is a measure of how many customers leave within a certain time period along with the employee turnover as well. An easier way to describe this would be to say that the churn rate is the number of individuals who leave an enterprise within a certain time frame.

Two Elements of the Attrition Rate

The churn rate can be divided into customer base and employee turnover.

Customer Base

This is the number of contractual customers who will leave during the time period being considered. For instance, if a company offers some type of service that involves a subscription there will be a certain number of people who will drop out. If a lot of people are dropping out then this could be a sign that they are dissatisfied with the service. The more people who are unsubscribing the more the company will have to worry about. Sometimes this type of attrition rate can be confusing because some individuals may subscribe again after a short break. It is therefore helpful to sometimes consider net churn rate and gross churn rate.

Employee turnover

Some businesses can have a very high turnover of employees. This is usually viewed as a negative situation because it can take a lot of time and money to train new people to do the job. In some industries, such as fast food restaurants, there is always going to be a high employee turnover so the fact that the attrition rate is high may not be too much cause for concern. In an industry though, where employee turnover is fairly low it can be a huge warning sign if one company has a particularly high employee attrition rate.

The Importance of Attrition Rates  

Looking at attrition rates can be very useful for any business. If they seem to have a falling customer base they will want to know why this is happening and what can be done to resolve the situation. It could be that there are problems with the marketing strategy or that the product itself if flawed. One way to get the needed information as to why customers are abandoning ship would be to do a customer satisfaction questionnaire. The information provided by this could change the fortunes of the business and ensure an improved customer base in the future.

Employee attrition rates can also be used as a means to spur changes within the company. For most businesses their best assets will be the members of the team. It is therefore vital that these people can be kept as long as possible. A high turnover of staff has a bad effect on the rest of the team because it weakens solidarity and productivity. It is therefore important to investigate the reasons why people are leaving and to remedy the situation.

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Meet the Author

Anthony Carter currently resides in Fife, Scotland with his wife Lisa, and their three wonderful children. As a senior editor for various publications, if he's not reading and writing, you would find him photographing and traveling to some of the most far-flung locations around the world.

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