Customer churn—the rate at which customers stop doing business with a company—is a critical metric for companies across all industries. High churn rates can directly impact revenue growth, profitability and long-term sustainability. Tracking and reducing churn requires a deep understanding of how your business compares to industry benchmarks. This helps identify whether your churn is an anomaly or part of broader trends. Additionally, understanding how churn rates are calculated in relation to retention rates is essential.
Churn rate is typically the percentage of customers lost over a given period. Retention rate, by contrast, measures the percentage of customers retained during that same period. The two metrics are inversely related:
In this blog, we’ll explore industry-specific churn rates, examine trends and provide strategies to help improve your churn rate.
Industry-Specific Churn Rates
Here’s a closer look at churn rates by major industries, based on data compiled from a variety of reliable sources.
Energy/Utilities: 11%
The energy and utilities sector experiences moderate churn rates, with an average of 11%. However, regional differences play a role. In the United States, churn rates for energy providers can spike between 30-35% due to competitive markets and customer dissatisfaction with pricing. In Europe, the rate tends to be lower, averaging around 12-15%. Factors like deregulation, pricing fluctuations, and the availability of green energy alternatives contribute to churn in this sector.
IT Services: 12%
IT services enjoy relatively low churn rates, averaging around 12%. This can be attributed to the long-term contracts and the essential nature of IT support for many businesses. IT service providers that offer robust, scalable, and reliable support are likely to maintain high customer retention. The sector’s high customer retention rate, around 81%, reflects the importance of dependable IT solutions for modern business operations.
Computer Software: 14%
The computer software industry sees a churn rate of around 14%, particularly for subscription-based models. This figure varies depending on whether the software is B2B or B2C. B2B SaaS companies typically experience lower rates, averaging between 3.5% and 4.67%, thanks to longer adoption cycles and integration into business processes. B2C software churn rates tend to be higher due to factors like pricing sensitivity and changing user preferences.
Industry Services: 17%
Industry services, which encompass various professional support services like maintenance, logistics, and consulting, experience a churn rate of 17%. This sector’s churn is often influenced by the quality of service delivery, responsiveness, and competitive pricing. Companies that emphasize personalized service, reliability, and quick issue resolution are better positioned to reduce churn.
Financial Services: 19%
The financial services industry, including banking, investment firms, and insurance, has an average churn rate of 19%. While traditional banking services maintain higher retention rates (averaging 75%), fintech disruptors and online services have introduced more competition and customer churn. Factors influencing churn include fees, customer service quality, and digital experience. Commercial insurance providers, with an average retention rate of 83%, demonstrate the importance of trust and reliability in this sector.
Professional Services: 27%
Churn in professional services, such as consulting, legal, and accounting, averages around 27%. This relatively high churn rate can be attributed to project-based engagements and the frequent need for specialized expertise. Maintaining client relationships through consistent communication, delivering measurable results, and offering value-added services are key strategies to mitigate churn in this sector.
Telecommunications: 31%
The telecom industry struggles with a churn rate of 31%, driven by intense competition, pricing wars, and service quality issues. Despite having an average customer retention rate of 78%, many telecom providers lose customers to competitors offering better deals, faster networks, or superior customer service. To combat churn, telecom companies focus on bundling services, offering loyalty incentives, and improving customer support.
Manufacturing: 35%
Manufacturing companies experience a churn rate of 35%. The cyclical nature of supply chains, fluctuating demand, and competitive pricing contribute to this high rate. Building long-term partnerships, offering customized solutions, and maintaining product quality are critical to reducing churn in this sector. The average customer retention rate of 67% underscores the importance of reliable supply chain relationships.
Logistics: 40%
Logistics and transportation services face a significant churn rate of 40%. This sector is heavily influenced by delivery speed, accuracy, and cost-efficiency. Businesses frequently switch logistics providers if they encounter delays, lost shipments, or rising costs. Investing in advanced tracking technology, improving delivery times, and enhancing customer communication are key strategies for reducing churn in logistics.
Consumer Packaged Goods (CPG): 40%
The CPG industry also sees a high churn rate of 40%. The rapid pace of consumer trends, brand loyalty erosion, and pricing sensitivity contribute to this churn. Companies that invest in marketing, product innovation, and personalized customer engagement are better positioned to retain customers. Subscription-based CPG services, like monthly boxes, face additional challenges, with churn rates exceeding 10% in some cases.
Wholesale: 56%
Wholesale businesses have the highest churn rates, averaging 56%. This sector’s high churn is influenced by competitive pricing, supply chain disruptions, and the transactional nature of wholesale relationships. Unlike subscription-based models, wholesale businesses rely on frequent large orders, making customer loyalty harder to sustain. Providing consistent product quality, competitive pricing, and reliable delivery are essential to reducing churn in this industry.
Additional Insights from Broader Data Trends
Other sources highlight additional trends and figures:
- The average churn rate for subscription services typically falls between 6-8%, with some sources reporting monthly churn rates around 4%.
- The hospitality and travel industry has a low customer retention rate of 55%, indicating high churn.
- Streaming services report a churn rate of 37% in the U.S. due to intense competition and customer desire for variety.
- In clothing subscription boxes, monthly churn can reach 10.54%.
- SaaS churn rate benchmarks show voluntary churn around 3.36%, with B2B SaaS platforms averaging between 3.5% to 4.67%.
When considering what industry experiences the highest churn, wholesale stands out with 56%, while professional services and telecommunications also rank high. In terms of what service category experiences the highest churn, sectors like streaming and subscription boxes lead due to low switching costs. Wondering what B2C service category experiences the highest churn? Streaming services and news subscriptions are prime examples.
How to Improve Your Churn Rate
Reducing churn is crucial for business growth and profitability. Here are five strategies to help lower churn and boost retention:
1) Enhance Customer Experience
Why It Matters: Poor customer service is one of the top reasons for churn. Ensuring seamless support and personalized interactions can significantly reduce churn.
How to Do It: Offer 24/7 support, train your staff for customer-first interactions, and use automated tools to streamline issue resolution.
2) Analyze Churn Data
Why It Matters: Understanding why customers leave helps in creating targeted retention strategies.
How to Do It: Use churn analysis tools to identify patterns and common reasons for customer departure. Segment customers by behavior, demographics, or usage.
3) Optimize Pricing Models
Why It Matters: Pricing is a major factor influencing churn, especially in competitive industries.
How to Do It: Introduce flexible pricing plans, offer discounts for long-term commitments, or provide tiered options to meet different customer needs.
4) Engage and Educate Customers
Why It Matters: Customers who understand and use your product’s full potential are less likely to leave.
How to Do It: Implement onboarding programs, offer regular training, and share educational content.
5) Implement Predictive Analytics
Why It Matters: Predictive models help identify customers at risk of churning before they leave.
How to Do It: Use AI-powered analytics tools to monitor customer behavior and proactively engage at-risk accounts.
Take Control of Your Churn Rate with BillingPlatform
Churn rates vary significantly by industry, influenced by factors like competition, pricing and customer experience. Comparing your rate to industry benchmarks helps identify whether your churn levels are typical or problematic. Understanding benchmarks, such as the average churn rate in SaaS or the average churn rate for subscription services, can guide your strategy. For SaaS businesses, knowing what is a good churn rate for SaaS (typically around 3-5%) provides a clear target.
Reducing churn requires a proactive approach. Tools like BillingPlatform’s software can help streamline customer data management, automate billing processes, and improve customer satisfaction—all critical components in retaining customers and boosting revenue.
By understanding churn trends and applying effective retention strategies, businesses can reduce customer loss, improve satisfaction, and drive sustainable growth. Ready to see how BillingPlatform can help reduce your churn? Take a guided tour today.
