Understanding Customer Churn

Customer churn is one of the most important factors to understand when growing your business. It is the percentage of your consumers who have stopped using your products and services during a specific time frame. While it can be discouraging, it will help your company understand where you need to focus more and learn more about customer retention.

To calculate churn, you divide the number of customers you lost during that time frame by the number of customers you had at the beginning of that same time period.

For example, if you start your quarter with 650 customers and then end with 550, your churn rate would be 15% because you lost 15% of your customers in that time frame. 

Your company wants the churn rate to be as low as possible, so knowing that value during each quarter should be your top priority. While it is essential to calculate the churn rate of customers, there are also other factors that you can calculate churn rate for, some of those being: 

The number of customers lost

The value of recurring business lost

The percentage of recurring value lost 

Why is Customer Churn so Important? 

It is natural to lose some of your customers, so you might be wondering why it is essential to calculate precisely how many you lose. It is beneficial for your company to do this because it costs more to acquire new customers than to retain existing ones. So if you can keep churn low, you won't have to spend more to acquire new customers. Returning customers will pay up to 67% more for your products, so it is essential to retain them. In return, your company will be able to allocate funds to other areas rather than customer retention. 

What Causes Churn? 

There are three reasons why customer churn is happening with your company: 

You are attracting the wrong customers. 

There have been plenty of times that a customer signs up for your services without truly understanding what the products do. Once they realize either that it wasn't the service they needed or that it wasn't meeting their needs, they are very likely to leave for a different company. It is essential to ensure that your customers understand the services and know they are the right fit for them, so they become long-term customers rather than short-term. 

Your customers aren't getting what they want from your products/services 

Your customers sign up for your products for a specific reason, so they must achieve their desired outcome from the start. It is much harder to keep a customer when they have to wait for your products to boost their company, which could make it harder for them to stick around. 

Your customers aren't getting the support they need

No matter how experienced a customer is in their field, they will likely have questions and concerns about your products. And if it starts as a small problem, it could easily turn into a larger one if it is not resolved quickly. Having real people there to walk your consumers through these issues, not a bot, will resonate with them and show them that you care about their needs.

Quick Tips For Reducing Customer Churn

• Pay attention to your best customers 
• Analyze churn as it is happening 
• Show your customers that you care 
• Communicate with your customers 
• Offer incentives
  
  
  
  

If you are looking to reduce your customer churn, Brandmovers wants to help you! Reach out to us today and see what the next step is!