When calculating Gross Churn, are you not incorporating all added subs in your Subscriber number in the cancels / Subscribers math?
Therefore, when you do (cancels - Re-subscribers) / Subscribers aren't you double counting the re-subs on both sides of the equation?
I understand the impetus to factor in returning subs into this metric. But regardless of how many of the "new" subs who join in a month are returning subs, the cancellation rate is still the same.
I think I follow your line of reasoning... you are (correctly) noting that the resubscribers are added back to the denominator in Gross Churn? The two counterarguments would be
1. that adding them back in the denominator has an extremely muted effect (as opposed to netting them from the numerator) and
All that said, in my experience, the visualization of Survival vs. Retention curves is much more intuitive. If you look at Survival vs. Retention, there is a clear & undebatable difference between the two metrics.
That was exactly my question. So, I would beg to differ... I think Net Churn is therefore a bit misleading as it is calculating using a smaller base of cancellations than are the reality.
Point taken, I can see the argument that this would be included in "new revenue" but not "churn" metrics. That said, I do believe that the current way of looking at churn is not really in line with user behavior...
I agree it's not in line with user behavior, BUT it is in line with current business practices. IF the businesses actually leaned more heavily into pausing vs cancelling, then I think we'd get a far more accurate view of churn. But they don't. For the most part they present it as a binary choice. And they literally pay the price for it.
As a researcher who has been involved with many subscription businesses (e.g. Time, AOL, iHeartRadio, Prodigy, CompuServe, DailyCandy, "cable TV," The Movie Channel, USAToday, and many others) over a fairly long career, I start with an "unaided" question, asked of those who recently dropped a service, which is "why did you drop ______?"
When calculating Gross Churn, are you not incorporating all added subs in your Subscriber number in the cancels / Subscribers math?
Therefore, when you do (cancels - Re-subscribers) / Subscribers aren't you double counting the re-subs on both sides of the equation?
I understand the impetus to factor in returning subs into this metric. But regardless of how many of the "new" subs who join in a month are returning subs, the cancellation rate is still the same.
No? Am I reading this incorrectly?
Thanks!
I think I follow your line of reasoning... you are (correctly) noting that the resubscribers are added back to the denominator in Gross Churn? The two counterarguments would be
1. that adding them back in the denominator has an extremely muted effect (as opposed to netting them from the numerator) and
2. that this is an (admittedly imperfect) recreation of a widely accepted gross vs. net revenue churn metric: https://baremetrics.com/blog/gross-churn-vs-net-churn
All that said, in my experience, the visualization of Survival vs. Retention curves is much more intuitive. If you look at Survival vs. Retention, there is a clear & undebatable difference between the two metrics.
That was exactly my question. So, I would beg to differ... I think Net Churn is therefore a bit misleading as it is calculating using a smaller base of cancellations than are the reality.
Point taken, I can see the argument that this would be included in "new revenue" but not "churn" metrics. That said, I do believe that the current way of looking at churn is not really in line with user behavior...
I agree it's not in line with user behavior, BUT it is in line with current business practices. IF the businesses actually leaned more heavily into pausing vs cancelling, then I think we'd get a far more accurate view of churn. But they don't. For the most part they present it as a binary choice. And they literally pay the price for it.
BTW, we should take this convo public!
As a researcher who has been involved with many subscription businesses (e.g. Time, AOL, iHeartRadio, Prodigy, CompuServe, DailyCandy, "cable TV," The Movie Channel, USAToday, and many others) over a fairly long career, I start with an "unaided" question, asked of those who recently dropped a service, which is "why did you drop ______?"