Understanding Customer Churn & The Best Remedies To Withstand It
What is Customer Churn?
Customer churn is a metric to understand the volume of customers that stop using a product or service during a certain time frame. It is calculated by dividing the number of customers a business lost during a quarter by the number of customers at the beginning of that quarter.
It is a known fact that it’s tougher but less expensive to retain an existing customer than to acquire a new one. While we’re all trying our best to minimize customer churn rate, its vital for each business to understand the gaps and leaks in customer engagements. Evidently so, a study by Harvard Business School says that on average, a 5% increase in customer retention rate can result in 25-95% increase in profit for an organization.
Customer Churn Rate Calculation
Customer churn rate is the percentage of customers who stop using a product or service over a certain period of time. To calculate the customer churn rate, follow these steps:
Determine the time period: Decide on the time period for which you want to calculate the churn rate (e.g., monthly, quarterly, or annually).
Count the number of customers: Count the number of customers at the beginning of the time period.
Count the number of customers who left: Count the number of customers who stopped using your product or service during the time period.
Calculate the churn rate: Divide the number of customers who left by the number of customers at the beginning of the time period and multiply by 100 to get the percentage.
Here’s the formula for calculating the customer churn rate:
Churn rate = (Number of customers who left during the time period / Number of customers at the beginning of the time period) x 100
For example, if you had 100 customers at the beginning of the month and 10 of them stopped using your product or service during the month, the churn rate would be:
Churn rate = (10 / 100) x 100 = 10%
This means that 10% of your customers churned or stopped using your product or service during the month.
Boost Customer Retention Rate
Here are some of the best practices a business can adopt in order to minimize customer churn and to raise customer retention rate:
Identify why customers turn away from your brand:
It is very important to identify the reasons as to why a customer is put off your product or services. One way to understand the stages where engagement needs improvement is by mapping a customer’s holistic journey.
Enable omnichannel customer service:
Poor customer service is one of the major reasons why customer churn rate increases. When a customer faces an issue with a product or service, they demand immediate support. If a business falls short of a customer’s expectations, it urges the customer to turn to an alternate, in turn pushing customer churn higher. A study done by PwC shows almost 73% of people count on good customer experience as an important factor in their purchasing decision.
Now, to deliver flexible, supportive customer service, businesses must look towards adopting omnichannel support networks. As each channel remains integrated, the customer doesn’t need to repeat themselves every time they establish contact with the support team.
Keep customers engaged to improve brand loyalty:
By being pro-active in keeping in touch with your brand’s target audience, you have already won half the battle. Customers are easily put off a brand due to the mishandling of queries, failure to follow-up amongst an array of reasons.
According to the same report published by PwC as mentioned above, 32% of customers stop doing business with a brand after just one bad experience. Keeping in regular touch with customers can go a long way for a brand to make its way through. Taking post-sale feedback also helps to gauge pain areas and to identify where improvement is needed. Sending personalized emails especially to newly on-boarded customers is the most efficient way to engage the customer base.
Ensure your presence on social media:
With the significant presence of customers on platforms like Facebook, LinkedIn, brands need to have a presence on social media. By handling a customer on a social media platform won’t only satisfy the customer but it’ll also create spectator advocates. This will meet the piquing interest of those individuals who are surfing through the web.
Reduce your churn rate and retain more customers with our proven strategies
The best remedy to fight churn
By focusing on your most loyal customers, you ensure that their needs are taken care of. As mentioned earlier, just one interaction is enough for your customer base to churn. In fact, customers are likely to pay a premium of 14-16% to a brand, if ensured better customer service.
Maxicus, with expertise in Customer Lifecycle Management across industries, has been a seasoned outsourcing partner for numerous leading brands. With customer support solutions crafted by merging human empathy and context with disruptive tech, better customer engagements are ensured. To enhance the power of your brand and minimize churn, contact us.