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What are voluntary and involuntary churns?
Difference between Voluntary and Involuntary churn
Churn is when a customer stops paying for your product/service, i.e., at which customers cancel their recurring subscriptions, measured as a percentage. For example,. If you have a churn rate of 5%, then you can expect that in a given period, 5% of your customers will cancel their subscriptions with your company.
Voluntary churn is the purposeful cancellation of a subscription. And unlike involuntary churn, voluntary churn indicates an underlying problem. Your customer experience could be subpar; your pricing strategy could be off, or maybe you’re attracting the wrong customers.
Neglecting this type of churn could push your customer acquisition cost to unreasonable levels. In comparison, retention of customers would cost you five times less.
Involuntary churn occurs when a customer undergoes a payment failure, leading to their subscription being canceled. Not only do you lose your customers, but a part of the monthly recurring revenue is lost, too. It can happen for any of the following reasons:
Not updating their subscription billing information/credit card information (using expired cards)
Hard declines when a card is lost or stolen
Soft declines when a credit card has maxed out its limit≥
Banks can decline the card for other reasons
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