Churn Rate

Customer churn refers to when your customers stop engaging with your brand, refrain from using your product or service, and choose to leave you for another competitor.

What is customer churn?

Customer churn refers to when your customers stop engaging with your brand, refrain from using your product or service, and choose to leave you for another competitor.

There are two types for customer churn:

Voluntary churn: which is when customers decide to stop using your products or services because they feel dissatisfied as they either don’t receive the expected value and quality, or they find more attractive alternatives that meet their needs and budgets.

Involuntary churn: which is when customers opt to leave you due to circumstances that are not related to your business, such as network failures, payment issues, insufficient funds, relocation… etc.

What is the churn rate?

Customer churn rate refers to the percentage of your customers who no longer purchase or interact with your business during a given period of time.

How to calculate customer churn rate?

To calculate the churn rate, divide the total number of customers churned over a specified period (month, quarter, year.. etc,) by the total number of customers at the start of the period and multiply the result by 100.

Churn Rate (%) = # of customers lost in a specific period of time/ #of customers at the beginning of this time period X 100

For example:

(10,000 customers lost in a specific month/ 200,000 existing customers at the beginning of this month) X 100= 5% churn rate during that period.

What are the benefits of understanding churn rate?

Monitoring churn rate will help you assess your business performance, and improve customer retention. High churn rates pose negative impacts on your company’s bottom line and limit its growth potential. Therefore, you need to track your customer churn rate on a monthly basis and identify the reasons why your customers may choose to opt out. Conduct ongoing customer feedback surveys, keep aware of the fierce competition to win larger market shares, and take every opportunity to perform proactive actions to keep churn rates very low.

How to reduce churn rate?

Deliver frequent customer value

The added value you provide is your competitive advantage. By delivering real customer value that meets your customer needs, you can retain your customers and increase their loyalty to your business, and thus maximize your market share and reduce churn rate.

Build strong customer success program

Design a seamless journey for your customers and make sure they are satisfied with the quality of the product or service you provide, to reduce their chances of churn. Your customer success teams need to work within a detailed framework and roadmap, and with the right resources, to help satisfy your customers with each workflow and operation.

Listen to your customers

Pay careful attention to your customer behaviors and gather real-time feedback. It’s always important to understand what customers really think about the product or service you offer and how they perceive your messages. Conduct accurate measurement to determine if the experience you offer meets your customer expectations, and take instant corrective actions if not.

Act on customer feedback

A successful company adopts a customer-centric approach and takes proactive actions based on the customer feedback. When you act promptly upon your customer reactions, you manage to boost their loyalty to your business and minimize the churn rate.

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