Calculating and understanding your churn rain is crucial for your revenue and growth. Many things can impact your churn, for example, Forrester found from a survey that 69% of customers choose to shop more frequently at retailers that offer a consistent customer service. In this article, we will look at what a churn rate is, and how you are able to have a good churn rate.
A churn rate is a measurement that shows the percentage of a business’s customers who take their business elsewhere. In most cases, it references the number of customers that will cancel a subscription or choose not to renew their account. This means that the lower your churn rate is, the better, as fewer customers will be cancelling their subscriptions with you.
Knowing your churn rate is relevant and important for every business to know as it is a prime indicator of how satisfied your customers are. However, in some businesses this is more important than others. For example, a gym’s churn rate would be very important as it would generate most of its revenue from a subscription-based model. This means the gym must ensure it has a low churn rate and high customer retention rate to continue to grow.
To calculate your business’s churn rate, you should divide the number of customers that you have lost by the number of customers you have started with, and then times it by 100. See the clear formula below:
The two main reasons why calculating your churn rate is essential are:
Understand your customer retention rate – You will gain useful insights into how your business is performing with its customer retention and subscriptions to help forecast for the future.
Identify the risk factors to your customers – See how many customers are leaving over a period of time to help you identify and better understand their needs, requirements and risks that will cause them to take their business elsewhere.
The main disadvantage businesses will have when they calculate their churn rate is that it does not show the context behind the statistic. For example, if your business runs a promotion it may draw in new customers, and once that promotion ends those customers may not shop at your business again.
Your customer service will go a long way when you are trying to get a healthy churn rate. Offer friendly, informative, and helpful customer service to build long-term relationships with your customers.
If your onboarding process is too complicated for customers, that may be a reason for high churn rates. Include a support team that can help customers with any queries that may arise during their onboarding process. Providing a great seamless onboarding process can include:
You should invest in training for your sales representatives to improve your sales process. This will allow them to connect with customers, show the value in what you are offering and build great relationships with them. Discover how you can use
Asking for feedback is key for every business to evolve and progress in its market. If a customer cancels a subscription or stops buying from your business, be sure to ask for feedback. This will give you insight into how you can evolve your business so you can increase your customer retention in the future. For example, include a questionnaire or survey in your cancellation process to find out why that customer has cancelled.
Providing perks for existing customers, like introducing customer loyalty schemes, is a great way to increase your customer retention. For example discounts and bonuses to loyal customers will greatly improve your customer retention and improve your churn rate.
An example of this is Starbucks having loyalty points for customers. When a customer makes a purchase at Starbucks, they get loyalty points. When a customer has accumulated enough of these points, they can get access to unique deals and discounts.
Identify where you can cross-sell and up-sell to your customers to offer them complimentary and upgraded products that will bring them more value. This extra value will lead to more satisfied customers that are likely to make repeat purchases from your business.
Follow-ups are a great way to keep your customers engaged. This will demonstrate to them that you are interested in helping them get the most out of the purchase they have made. Following up with clients through emails is a great way to offer them guidance with your product or service, new deals and more. SlideShare highlights following up through emails has an ROI that is double cold calling and networking.
Three examples of businesses that have good churn rates are:
Adobe has a churn rate of 10%, meaning that its customer retention rate is 90%. Adobe’s high churn rate is due to the advantage that its programmes will give customers. They provide excellent customer service and clients will get access to some of the leading programs for design, video editing and more.
Netflix has the lowest churn rate in the video streaming industry at 2.5%, meaning that they retain 97.5% of their customers. Netflix has this good churn rate because of the personalisation it brings to the customers. They invest heavily in the latest technologies such as AI/ML to provide relevant and personalised recommendations. The algorithm on Netflix will reset for the users every 24 hours to always keep them engaged and discovering new things.
Spotify has a churn rate of 4.8%, which is one of the best in the music streaming services, suggesting 95.2% of their customers are retained. Spotify has a fantastic onboarding process that helps with its churn rate. They will provide customers with easy access to finding the music they want while up-selling to them by showing the benefits of Spotify premium.
TEB will completely transform your data visibility to give you useful insights into your churn rate, and the factors that may be affecting it. TEBs game-changing benefits include:
Drill down on your data – Generate custom reports to drill down on the data you need, such as your churn rates and conversion rates.
Understand your customers’ needs – Use TEBs customer storyboard to view your client’s buyer journey and better understand their needs to help you lower your churn rate.
Schedule your follow-ups – Improve your churn rate by making sure you never miss a follow-up.
Improve team collaboration – Leave notes on customers with important information to improve your collaboration and offer customers a better experience.
With just 30-minutes of your time, you can see how TEB can change the future of your business by helping you reach your full potential. Book a free demo
