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What is an Attrition Rate?

By Ken Black
Updated May 16, 2024
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An attrition rate, also known as a churn rate, can be a measure of two things. It can be a measure of how many customers leave over a certain period of time or how many employees leave over a certain period of time. It can also be a combination of these two factors.

This rate is typically used in connection with a subscription service. Whether it is a magazine, cell phone or Internet provider, all depend on stable relationships with current customers in order to protect and grow the bottom line. However, the term can be applied to other types of companies as well.

An attrition rate is a good way to measure growth for subscription services. If the growth rate is more than the rate of attrition, then the company has a net increase in growth. The opposite, of course, is also true and a negative rate of growth could signal some type of change is needed.

Many companies use an attrition rate as a good measure of customer service. Keeping a customer, in many cases, may be just as important as attracting a new one, if not more so. In fact, often a company may cite its rate of attrition as a marketing tool. In such cases, it is not referred to by the technical term, but rather a number of "returning customers."

Companies that routinely use this promotional tactic are automobile manufacturers, cable and satellite television services, and cell phone companies. These industries have a reputation for poor customer satisfaction and a lower number of repeat customers. So if they can cite a good attrition rate, that may be a signal that they are beating the standard set by the rest of the industry.

In addition to customer satisfaction, an attrition rate can be a term used to measure employee satisfaction. In general, many unskilled positions have a high rate of attrition. Companies keep track of this number for a variety of reasons.

While most unskilled positions are relatively easy to replace, a high attrition rate does represent a higher cost of doing business for the company. Recruiting, interviewing and hiring takes a certain amount of time and usually requires the services of higher skilled, and higher paid, employees. Once hired, there are additional costs, or lost efficiencies, while the employee is being trained. These costs can easily run into the thousands of dollars. Attrition rates can often tell company executives just how much money is being spent in this process.

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Discussion Comments

By browncoat — On Feb 16, 2013

I think companies need to keep in mind that having a net increase of subscribers isn't necessarily a good thing if you take all the factors into account. You are much better off looking at the attrition rate alone.

You might increase your subscriptions during a promotion for example, or because of something going viral online, or whatever. But if people aren't keeping the subscription afterwards, you'll eventually run out of potential customers. There's only so many people in the world who are willing to sign up for your particular newsletter/whatever. Once you go through them all, if you don't keep them onside, you've lost your customer base.

By croydon — On Feb 16, 2013

@bythewell - Google definitely knows how to reduce attrition, although I'd be more interested in knowing "tricks" that smaller companies, without unlimited money and power, use to make their employees happy.

To be honest, for me it really comes down to feeling good about the people I work with. If I want to spend time with these people and want to be respected by them I am going to work harder and stay longer in a job.

By bythewell — On Feb 15, 2013

It's really fascinating to look at the research that's been done on some of the larger internet based companies and their search to lower attrition rates for employees. I guess they all want to attract the best of the best and they all have quite rigorous hiring and training processes, so it's much cheaper to spend money on keeping employees than getting new ones.

Google in particular has really tried to make this into a science. I read an article the other day about how they realized that they were losing female employees at a higher rate than males, because the women would have a baby and quit to have more time with it (money is not usually an object for Google employees!). So, Google made serious changes to its parental leave policy, allowing more flexible time off for a longer period and the problem was solved.

By jsw23 — On Jul 12, 2010

Attrition is often viewed as the realization of a company's overall health. Frequent employee turnover is not a positive sign for the business's well-being.

As a means of improving this turnover, many companies strive to find methods to keep workers happy. Skills-development, progress/promotion incentives, and communication are three major ways to improve attrition.

By anon86196 — On May 24, 2010

good, but more information can be given on recent raising of attrition in BPO/KPO sectors with all statistical data so that the article would be a comprehensive one.

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