This is one of the most scary numbers in marketing that a company can see: “churn rate.”
High churn rates can cost you money, hurt your brand’s image, and put your business model at risk. But what is the loss rate, why is it important, and how can you lower it? So that churn is less of a scary unknown and more of a challenge you’re ready to take on, let’s break it all down.
The churn rate is the number of people who stop using a product or service over a certain amount of time. It’s a common measure for subscription-based businesses like streaming services, SaaS platforms, and more, but it can be used in a lot of different fields. The churn rate shows how well a brand keeps customers over time and can be a very good way to measure how satisfied customers are overall.
The churn rate tells you a lot about how loyal your customers are from a business point of view. If your customer loss rate is high, it could mean that they aren’t finding your product or service to be valuable over time, or even worse, they are leaving for a competitor. This metric tells marketers they need to take a closer look at the customer experience, methods for keeping customers, and even where the brand stands in the market.
Companies that sell things should pay attention to change for the following reasons:
- Cost-effectiveness: Getting new customers usually costs more than keeping the ones you already have. A low loss rate lowers the cost of getting new customers, which helps your marketing budget go further.
- Customer Lifetime Value (CLV): A customer’s lifetime value goes up as long as they stay with you. In marketing, CLV is very important because it shows the return on investment for each customer. When you have a high churn rate, your CLV goes down, which means your campaigns are less efficient.
- Brand Health: A lot of customers leaving a business can be a sign of bigger problems, like bad customer service, unmet expectations, or better deals from rivals. As a marketer, keeping an eye on churn means you’re always checking on the health of your business.
- Marketing ROI: You won’t get much out of your marketing efforts if your customers don’t stay long enough to become valuable accounts. Getting the best return on investment (ROI) from all of your efforts means reducing churn.
To find the churn rate, divide the number of customers who left during a certain time period by the total number of customers who were there at the beginning of that time period. To get a percentage, multiply this number by 100. This is how it works:
The churn rate is found by dividing the number of customers at the beginning of the period by the number of customers at the end of the period.
Your churn rate would be ((1000 – 950) / 1000) × 100, which is 5% if you had 1,000 people at the beginning of the month and 950 at the end.
If the churn rate is 5%, that means that 5 out of every 100 people left that month. Different industries have different standards for a good loss rate, so it’s important to compare your rate to those standards.
Now let’s talk about how things work in real life. Here are some of the best ways to keep customers and make your marketing work harder.
- Find Out Why Customers Leave: To stop loss, you must first figure out why customers leave. Do exit interviews, surveys, and an analysis of user statistics. Do people often complain? Do people leave after a certain amount of time or after using certain features? You can use these ideas to move forward before more people leave.
- Improve the onboarding process: A good onboarding process helps new users see how valuable your product is. Customers are more likely to stay with you if you “wow” them during the hiring process. Personalized email campaigns, step-by-step guides, and follow-up messages can really help customers feel involved and important.
- Always Offer Value: If your customers don’t see the value in your product or service, they are more likely to leave. This means that marketers need to use the material to keep customers interested. Newsletters, special tools, and perks that are only available to customers can make the reasons to stay stronger.
- Make a group: People like to feel like they belong to something. Making a community around your offering makes people feel like they belong and keeps them coming back. Groups on social media, private discussions, and events for users all help them feel more connected to your brand.
- Customer Service as a Way to Keep Customers: One big reason why customers leave is bad customer service. People are more likely to leave if they don’t feel like they are being heard. Customers will be more likely to stick with you if you offer great customer service and make sure your marketing team is on board with support efforts.
As with any marketing plan, lowering churn needs to be tested and watched over time. As you start new programs, keep an eye on how your churn rate changes, and don’t be afraid to change how you do things based on what the data tells you. Testing retention tactics on different groups of customers based on their likelihood to leave can help you figure out what’s working.
At first glance, the churn rate might seem like something that only your finance team or management needs to think about. However, it’s actually a very important marketing metric. Churn can be turned into a growth chance by figuring out why customers leave and meeting their needs before they leave.
Marketers can play a big part in lowering customer turnover and boosting long-term growth by focusing on creating value, making the customer experience better, and building brand loyalty.
