Customer Churn vs Revenue Churn
Customer churn counts how many opening customer accounts leave; revenue churn measures how much recurring revenue the opening cohort loses. A cancellation affects both, but a downgrade affects revenue churn while the account remains. Use both rates to see whether the retention problem is widespread or concentrated in high-value contracts.
Key differences
| Question | Customer Churn | Revenue Churn |
|---|---|---|
| What is counted? | Lost paying accounts from the opening customer group. | Recurring revenue lost through cancellations and downgrades in the opening cohort. |
| What is the denominator? | Paying accounts at the start of the period. | Recurring revenue from those accounts at the start of the period. |
| Does a downgrade count? | No, if the account stays active. | Yes, the reduced recurring spend is contraction revenue. |
| Do larger accounts carry more weight? | No. Each lost account counts once. | Yes. Losing more MRR changes the rate more. |
| Can the rate be negative? | Not under the lost-account definition here. | Gross: no. Net: yes, if expansion from existing customers exceeds losses. |
One scenario, two measures
Hypothetical worked scenario
A fictional SaaS business starts a month with 100 paying accounts and $100,000 MRR. Two accounts cancel: one paid $8,000 MRR and the other $200. Surviving accounts downgrade by $1,800 MRR and upgrade by $12,000 MRR. No new customers enter these churn calculations.
Customer churn = 2 ÷ 100 = 2%. Gross revenue churn = ($8,200 cancelled + $1,800 downgraded) ÷ $100,000 = 10%. Net revenue churn = ($10,000 losses − $12,000 expansion) ÷ $100,000 = −2%.
Only 2% of accounts left, yet the opening cohort lost 10% of its MRR before expansion. The negative net rate reflects upgrades elsewhere; it does not erase the enterprise cancellation or the need to understand it.
Account by account: one cohort, three rates
A second fictional month, where the accounts that leave are small. Every rate below comes from this table.
| Account | Starting MRR | Ending MRR | What happened |
|---|---|---|---|
| Pine Analytics | $3,000 | $3,600 | Upgraded |
| Quartz Media | $1,500 | $1,500 | No change |
| Reed Health | $1,000 | $600 | Downgraded |
| Sage Legal | $800 | $800 | No change |
| Teal Travel | $700 | $700 | No change |
| Umber Games | $500 | $500 | No change |
| Vale Bakery | $300 | $0 | Cancelled |
| Wren Florist | $200 | $0 | Cancelled |
| Starting cohort | $8,000 | 8 accounts |
- Customer churn = 2 cancelled ÷ 8 starting accounts = 25%.
- Gross revenue churn = ($500 cancelled + $400 downgraded) ÷ $8,000 = 11.3%.
- Net revenue churn = ($900 lost − $600 expansion) ÷ $8,000 = 3.8%.
Yarrow Books, a former customer, came back this month at $400. It was not in the starting cohort, so it appears in none of these rates: report it as reactivation, and never subtract it from churn.
Here a quarter of the accounts left, yet only 11.3% of starting revenue did, because the cancellations were small. In the example above the opposite happened. Watching both rates is how you tell the two situations apart.
Which should you use?
- Use customer churn to ask whether a broad group of accounts is leaving. Segment the lost accounts by plan, tenure, and acquisition cohort to find a shared experience problem.
- Use gross revenue churn to quantify recurring revenue at risk. Investigate high-value cancellations and downgrades even when the number of lost accounts is small.
- Use net revenue churn to see whether expansion offsets those losses, then read it alongside the two gross measures. If many low-price accounts leave, customer churn can be high while revenue churn remains relatively low; neither rate tells the full story alone.
Where comparisons can mislead
- Keep the same opening customer cohort and time window for both rates. Adding new sign-ups to either denominator makes the comparison misleading.
- Specify whether “revenue churn” means gross or net. Upgrades can make net revenue churn negative while cancellations and contraction remain substantial.
- Do not interpret a downgrade as a lost customer. Reconcile cancellations, contraction, expansion, and new business as separate movements.
Explore the full guides: Customer Churn and Revenue Churn.
Sources and methodology
The references below explain the underlying methods. Our worked scenarios use hypothetical figures; they are not company results or current market benchmarks.
- ChartMogul: Customer churn rate
Cohort scope and customer counting conventions.
- ChartMogul: Revenue churn (net and gross revenue churn rate)
Gross and net MRR churn formulas, the fixed opening revenue base, and the distinction from customer churn.
- Stripe: How to track, understand, and reduce gross churn
Cancellations and downgrades in gross revenue churn, contrasted with lost customer accounts.
Found an error or a definition that differs from your reporting? Send a correction with the page URL and the method you use.