Retention and churn measure whether customers stay, which drives the value of most subscription and app businesses.
Winning customers is expensive, so keeping them is often the cheapest growth available.
Small differences in churn grow into large differences in customers over time.
Retention after n days is the share of a cohort still active on day n.
Churn rate over a period is the customers lost divided by the customers at the start.
Customers who join and leave within the same period complicate the count, so definitions must say how they are treated.
Subscription businesses usually define churn by cancellation, while apps usually define it by inactivity.
Inactivity needs a window, such as 30 days without opening the app, which is a judgement call.
Revenue churn counts lost revenue rather than lost customers, since large customers matter more.
Net revenue retention adds upgrades from the customers who stay, and can exceed 100% when they grow.
Monthly churn compounds, so 3% a month loses about 31% of customers in a year.
Average customer lifetime is roughly 1 divided by the churn rate, so 5% monthly churn implies about 20 months.
Churn is usually highest in the first weeks, which is why early retention gets so much attention.
In practice retention is reported by cohort, so improvements in new cohorts are visible.
The usual mistake is comparing churn figures that use different definitions, such as cancellations against inactivity.