Since it is 6 to 7 times more expensive to acquire a new customer than to keep an existing one , knowing how to calculate churn rate and knowing different strategies to reduce it is essential for any company.
Also, discover the platform that will list of congo consumer email help you manage your business's churn rate and reduce it like never before.
Shall we begin?
What is customer churn rate?
The churn rate, customer loss or churn rate, is a metric that represents the percentage of consumers that your company lost in a given time . Its result has a direct influence on your business's income: the bigger it is, the less income you get.
Please note that calculating the churn rate does not specifically reveal the reason why customers are churning, but it is an indicator that there is something to improve. Thus, this metric serves to alert you about the state of your business and the satisfaction of your customers .
How to calculate the abandonment rate?
If you want to know how Churn Rate is measured exactly, you need to know the formula used to determine this metric.
The calculation is quite simple : it is obtained by dividing the total number of customers who cancelled their contracts by the number of active customers, both within the same time interval.
The formula is :
CR = (Total number of customers who cancelled in the period / total number of active customers at the beginning of the period) x 100.
For example, if your company had 50 cancellations in a month and had 1,000 active customers at the beginning of the same time period, your churn rate is 5%.
What is the ideal churn rate?
The ideal churn rate depends on the segment and several factors specific to each business.
However, it is important to ensure that churn is always as low as possible . This indicates that your company is able to retain and build customer loyalty, as well as maintain significant revenues.
Want to learn more about customer retention and loyalty strategies? Check out: Customer retention: 10 loyalty strategies
What reasons lead to cancellation of services?
There are several factors that motivate a customer to discontinue their relationship with a company. Among the most common ones that contribute to increasing the churn rate are :
financial problems;
the contracted product and/or service lost value for the customer;
perception that the offer is of poor quality;
the solution no longer meets your needs ;
the solution was not effective in solving the customer's problem;
After learning how Churn Rate is measured and the impact of high abandonment rates on your business, the next step is to learn how to improve this metric .
There are 6 steps you can take to reduce your company's churn rate :
Present your product or service as something indispensable for your customer’s daily life . This is part of the value proposition — it tells the customer how your solution will improve their life.
Align customer expectations with your company's offering . Find out the reasons why your customer chooses you and enhance them. Apply satisfaction surveys and offer significant improvements to these aspects.
Improve your audience's experience at all stages of the Customer Journey . To do this, it is important that you yourself create the customer journey you offer and identify which aspects can be improved.
Take customer feedback into account , as it will give you the necessary input to improve your products and services. Every comment or criticism that you ignore is equivalent to 26 lost customers , so it's time for you to start listening to what they say.
Review your strategies and make adjustments whenever you notice that the results obtained are no longer within the expected range. That is what growing as a company is all about: looking at what you do, improving it, and repeating the cycle again.
Offer excellent customer service across all your communication channels and stages of the process , including post-sale . Many people are tempted to close a customer relationship after they make a purchase, when the fact is that repeat customers buy 33% more than new ones . That's why you should work on your acquired customers as much as you do on leads.
