Keeping Count Why You Should Focus on Churn
management tools can help with this task.) Further, you should always ask questions whenever one of your customers cancels. The process can be automated on your website or verbally requested. Determining why your customers are most likely to leave will give you clues to keeping them in the future. Once you know your churn and retention rates, you can look deeper for insights into why and when your customers are leaving. After how many months do customers most frequently cancel? What is their most common reason for opting out of your service? The answers to these questions will determine your best response. Say, for example, that a customer states they’re canceling your service because it’s too expensive. You might then offer them a discount before processing the cancellation to see if you can retain the business. Reminding your customers of lower subscription tiers can also be helpful. Meanwhile, if your subscribers are most likely to cancel after their third month, you’ll know this is an excellent time to engage them with reminders of your product’s value. Being proactive in your approach to churn is much more effective than waiting until a customer tries to pull their business. Happy customers don’t leave, so find ways to leave them satisfied. Invest in customer service, provide customization options to suit your customers’ needs, and remain engaged throughout their experience. Further, take customer feedback seriously. Addressing problems upfront will likely reduce your churn rate, save your business money, and promote continued growth.
“There are always more fish in the sea” is an adage better applied to dating than business. When business is growing, many entrepreneurs think they don’t need to worry about their churn rate. But retention will remain crucial to your success throughout the entire life of your business — whether or not you choose to admit it. Churn is a metric best used for subscription-based businesses and tracks how many clients who sign up for your service cancel over time. Its inverse is retention, or how many customers stay with your business throughout the same period. The most basic way to calculate retention is by dividing your current customers by the number of customers you had at the beginning of the period. No one likes losing customers, so the benefits of tracking churn and retention are self-evident. But these numbers matter even more than you might realize. Bain & Company reports that increasing customer retention rates by 5% can increase profits anywhere from 25%–95%. Meanwhile, the Harvard Business Review estimates that it costs five times more to acquire a new customer than to retain an existing one. Reducing churn will allow you to grow your business faster while spending less money. But it’s worth noting that you can simultaneously have a high rate of new customers and a high rate of churn. Therefore, it’s best to track customers by their sign-up date rather than determining whether your total number of customers has grown. Gaining 20 net customers in a month is great, but it still matters if you lost five existing ones during that period. You may already have this type of data on hand, but it’s time to start compiling it if you don’t. (Many business
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