Understanding how to apply churn to your users.
The Churn factor lets you define a percentage amount of churn on a monthly basis. The way to interpret churn is to think of a total number of users using your product. Each month, some of those users decide to stop using it for any number of reasons. This cohort of users that leave your product each month, that’s the churn.
Let’s use an example. Let’s simulate churn using buckets that have holes in the bottom. The water in the bucket are users of your product. Now imagine every month, water leaks out of the holes. As long as the bucket has holes, the same amount of water will leak out of the bucket.
Now, imagine that above the bucket you have a water spigot that can turn on. Imagine that you leave this spigot on so that every month water keeps pouring into the bucket. You still have the holes, so the same amount of water keeps pouring out.
The water pouring out at the bottom of the bucket would be the users leaving your product. This is the churn. In month one, let’s imagine that 45% of those users leave your product. In this case, the churn would be the 45% that left the product that month.
Now what if you plug some of the hole in the buckets? Technically, less water would leave and more would stay in the bucket and your bucket would fill up higher. Plugging holes in the bucket is like fixing issues in your product that are causing people to stop using it. In theory, as you improve your product each month, more users stay in the product and less users “churn out.” In theory, the lifecycle of a successful product should have greater churn in the beginning and less churn at the end.