What Customer Churn is, How to Deal with It, and Why it Matters
It is always a concern when a company’s subscribers or customers stop doing business with them. Some refer to this as customer attrition but most often it is known as customer churn. The ability for a company to measure this is essential. History has shown it is more cost-effective for a company to retain its existing customers than to pay to acquire new ones.
Customer Retention Rate
Knowing customer churn rate will show a company their rate of customer retention. It will also help determine which strategies would be necessary for improvement. Companies utilize various methods to calculate this rate. Some look at the percentage of customers they have lost. Others want to know the percentage of customers they have lost compared to the company’s total number of customers. There are some companies that calculate this rate based on specific periods of time. This could be quarterly, annually and more. One of the most popular methods involves dividing the total number of a company’s customers at the beginning of a determined time period by the number of lost customers during this same period of time.
Companies want to identify any issues that may be the reason for them losing customers. There are a few things that are considered common causes. One is providing ineffective customer service. A study showed approximately 90 percent of customers left a company as a result of their poor customer service experience. The business world is a competitive place and customers now demand the best possible customer service. When they don’t get it, they go to a business that provides it. There is also a good chance that customers who are not satisfied will share their bad experiences on social media and more.
There is a direct connection between the success of a growing business and customer lifetime value. A company’s chances of expanding its customer base will significantly diminish if their churn is too high. A marketing campaign well received in a company’s industry will not be effective if customers are being lost at a high rate. More than one study has shown that customer retention costs are far less than the costs associated with customer acquisition.
Eliminating Customer Churn
It results in a negative impact on a company’s income when this rate is too high. There are strategies a company can utilize to eliminate it. Customer loyalty is something that can be built from personalized service as well as positive experiences. Companies need to take a proactive approach to eliminate their own rate of churn. It is also effective when a business asks its customers who have left to complete a survey. The goal with this will be to discover the reasons these customers left the company.
Many companies have been able to decrease their churn by regularly reminding customers what the company’s goods or services can do for them. They make an effort to keep their customers informed on any improvements and innovations. This has been shown to build customer loyalty.
One of the most essential elements for decreasing and eliminating customer churn rate is a business knowing their customers. With the proper use of Big Data, it is possible to obtain valuable insights into what a company is doing that keeps and drives away its customers. Big Data can make it possible for a business to anticipate the issues and needs of its customers. This will make it possible for a company to work toward retaining their business by meeting the expectations of their customers. This will involve identifying which customers are at the biggest risk for churning. This will give the company information necessary to improve the satisfaction of their customers at risk for leaving.
This is able to provide a platform designed to collect data for a company. It enables them to scale onboarding, accelerate time-to-value. UserIQ is able to provide its users with an increase in their revenue by providing information that will make it possible to provide the most effective customer service experience. It will forever improve the way a company interacts with its customers.
It is very important for a company to make an effort to decrease its churn rate as much as possible. Even a business with the most popular products or services will have a team of employees focused on decreasing its churn rate. This is often done in many different ways. It could involve a company improving its products or services. A company could work hard looking for things specific to its individual operation to deal with its particular churn rate and more.