Voluntary churn occurs when a cancellation or downgrade is done intentionally. For example, the customer switches to a competitor, or no longer has a need for your solution.
In most cases, it would be referred to simply as ‘churn’. The term ‘voluntary churn’ is used to differentiate from involuntary churn.
In contrast, involuntary churn occurs when there is a failed payment. The customer doesn’t explicitly decide to cancel or downgrade, but rather their card expires, or the bank declines payment for another reason. Read more here.
Why does voluntary churn occur?
Voluntary churn is much more difficult to diagnose than involuntary churn. There are more possible reasons for it. Here’s just a few common examples of why churn might occur:
To calculate voluntary churn, you need to calculate your total churn, then find out what percentage of it is voluntary. Here’s the churn formula. Take the number of total cancellations that month, and divide it by the number of total customers you had at the beginning of that month.
Churn = Total Cancellations / Total Customers
Now, check how many of those cancellations were voluntary. A Profitwell study found that 20-40% of churn is involuntary, typically, so you can assume that 60-80% is voluntary.
To investigate further, check if your payment processor offers insights on declined payments. For example, there may be error codes correlating to a reason for failure. If that’s the case, you can find out what your involuntary churn is, and therefore also your voluntary churn.
Reducing churn is a big, ongoing challenge for subscription businesses, so it’s difficult to summarize here in a glossary page.
To start, try reading about churn management, including 7 churn management strategies. Those are:
Read more: churn management.
Voluntary churn is intentional. The customer has a problem, or no longer needs the product, and wishes to cancel. With involuntary churn, that isn’t the case. There’s simply an error with the payment method which prevents the subscription from continuing.
It varies from business to business, but on average, 60-80% of churn is voluntary.
Remind customers that their cards are expiring. Automatically retry failed payments. Set up in-app or email sequences alerting customers that action is required. If all else fails, lock customers out of the software until the issue is resolved.