Back to blog

What is Churn for Subscription-based APPs?

Churn, as referred to in the dictionary, means “stop buying the products and services of a particular company, especially in order to buy them from a competitor”. It is a crucial metric for all businesses for it is the diametrically opposite of retention, which is the key to a business’s survival and development. A high churn rate means a low retention rate and would handicap the growth of Monthly Recurring Revenue and finally tear the product down. That’s why the business growth model of RARRA is becoming more popular than AARRR in today’s app world. “The REAL key to growth is user retention”. That is to say, the real key to growth, especially for subscription-based apps, is a low churn rate. 


What is Churn for Subscription-based Apps?

There are two dimensions in terms of churn for subscription-based apps. From the perspective of app users, churn refers to the number of users who stop using the app during a specific time period. While from the perspective of subscription, churn shows the number of subscribers who cancel or choose not to renew their subscription. Usually, Churn from the perspective of subscription would be paid more attention to. However, churn in app usage should also be taken into consideration because free users in an app are the most potential ones who are likely to subscribe.


Why do App Subscribers Churn?

There are several reasons why subscribers churn for your reference here:

  • App Functions Can’t Solve Users’ Problems: App users subscribe because they want to fix their problems. So when they subscribe and experience the app, but finally find out that the app can’t meet their needs, they will unsubscribe and find the one that can truly solve their issues.
  • No Need for the Service: Some app subscribers use the product to solve their short-term issues. When they no longer need the service, they would for sure cancel the subscription.
  • Pricing Too Expensive: When subscribers found out that their expenses on the app could not make a balance between their revenue and it even turns out to be a negative ROI, in this case, why should they stay with the app?
  • Switch to an Alternative Solution: This happens when subscribers find another solution that can solve the same problem with low expense and even a free one, they would naturally switch to another alternative, which with a high probability would be one of the app’s competitors.
  • Subscribers Frustrated with App User Experience: When the usability of an app discourages users because their effort is in vain for persistent bugs and performance issues. That would definitely drive a subscriber away.


How to Calculate Churn Rate for Subscription?

Ways to calculate churn rates vary for different businesses and products. The most simplified way to measure churn is to divide the total number of churned subscribers over a specific period by the number of the total subscribers you have during that period. Every subscription-based app can come up with more suitable equations to calculate the churn rate. For example, appflow.ai helps its users directly calculate their apps‘ churn rate with an option of ”adding cancellations to churn or not”. Why not add cancel into churn? That’s because when people cancel, it does not mean they are not using the app, especially for the subscription-based kind. Those users can be in the subscription period and prefer to subscribe to the service manually after its subscription expired. All in all, whatever calculation way you use, the core is to maintain the same equation when comparing the period-to-period churn rates. 

users-churn-and-growth-appflow.ai-screenshotWhy is Churn Important for Product Managers?

The most common reason a subscriber churn is that the app they are using can not solve their problem and fix their pain points, which is closely related to product functionalities and features, so churn is an important metric for product managers. Analysis of why people churn can tell the quality and usability of the app. With this insight, product managers can improve product shortcomings, optimize the user experience and promote new features needed. 


Why is Churn Important for Marketing Teams?

Churn has a disastrous effect on the revenue, which is the main KPI of marketing teams. So the importance of churn for marketing teams is obvious. Marketing teams are responsible for bringing in new users and retent old users. A study of what kind of users are most likely to churn could help them prevent app subscribers from churning. For example, if app marketers use cohort analysis via appflow.ai with the integration of other attribution tools, such as Adjust, Appsflyer, Apple search ads, etc, and find out that people from a certain country would churn after a certain period because they just can’t afford the expensive pricing, then just provide a discount for those people and longer their lifetime value as possible.   

cohort-analysis-screenshot-from-appflow             

How to Reduce Churn for Subscription APPs?

  • Target the right kind of user: Not all apps are right for everyone. Know the app well and understand what kind of problems can be solved by the app. Then analyze the user portrait, and target the most potential leads that are more likely to subscribe.
  • Onboarding Users Carefully: When app users subscribe or when a new feature is released, make sure subscribers can get the most out of the product by providing a flawless onboarding experience, detailed manuals and helpful tutorials, highlighting the app’s actual capabilities and benefits.
  • Understand users’ needs: To stick subscribers in apps, meeting their needs is the first priority. App users subscribe because they see the value to them. But as time goes by, users' need may grow and if the app can not meet their needs, they will turn to another more powerful tool. To prevent this, always understand your users’ needs, then improve the app's existing features and add new needed features.
  • Keep a close relationship with users: Showing care to subscribers about whether your product can help them realize value can give them a sense of importance. So when the app can not meet their new needs, they would ask whether developing a new feature is possible rather than just churning quietly.
  • Investigate why subscribers churn: Do a survey on the real and exact reasons why people churn by running a questionnaire or directly talking to app subscribers who churn. In this way, marketers get to know the reason and together with data analysis from the database or a subscription-based data analysis tool like appflow.ai, they would be able to come up with a great idea to prevent their subscribers from churning.


What is a Good Churn Rate?

A good churn rate would be zero, which means no one cancels subscriptions. But in reality, this would be impossible because subscribers churn for one reason or another. To judge whether your churn rate is acceptable or not, referring to the industry’s average churn rate is a good choice. And there is one thing that can be always right, that is, lowering down churn rate all the time, especially for subscription-based apps.  


Final Thought 

Churn is the most painful element for subscription-based apps. A high churn rate means all the effort and investment put into bringing the new user and convincing them to subscribe would be in vain. Worse still, churn would exist along with the development of the app. But that does not mean we should do nothing, instead, we should focus on reducing subscription churn all the time and gain reflection from the churn data in the database or even, from a subscription-based data analysis tool. In this way, the app would be more perfect and offer more value to the world. 


                                                               Sign Up For Free Analytics        Check The Demo

Back to blog