At SmartCapitalMind, we're committed to delivering accurate, trustworthy information. Our expert-authored content is rigorously fact-checked and sourced from credible authorities. Discover how we uphold the highest standards in providing you with reliable knowledge.
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.