If you have an account on social media, you may notice that one day you have ten new followers, and the next day several of them unfollowed. Businesses suffer the same abandonment, and it’s called “Churn.”

Qualtrics.com explains that Churn happens when someone stops using your products or services; in other words, “when a customer ceases to be a customer.”

This commercial divorce affects all companies; however, it is significantly negative for businesses based on membership and subscriptions.

Why Should You Care?

According to marketer Sophia Bernazzani, “if your customer doesn’t stick around long enough for you to at least recoup your average customer acquisition cost (CAC), you’re in trouble.”

You can easily calculate your company’s Churn rate with this formula: Divide the number of customers lost by the number of customers you had at the beginning of a period.

See this example:

If your company had 500 customers at the beginning of January but only 450 at the end of the month, the formula is:

(500-450)/500

 Churn rate = 10%

How to Attack Customer Churn

Hubspot recommends to apply the following tips to reduce Churn:

  • Use the opportunity to improve customer service.
  • Invest in training support and sales representatives. 
  • Ask for feedback, and respond promptly.

Increasing Customer Retention Rate (CRR)

When you have a high percentage of Churn, you need to increase Retention.

Customer Retention is the opposite of Churn. The Retention rate is the percentage of customers that do not leave you. It reveals customer satisfaction because this segment wants to keep doing business with you.  

Why Is Retention Rate Important?

Invesp calculates that if you increase your customer retention by only 5 percent, your profit may increase by up to 95 percent. So, it would help if you aimed to reach the highest retention rate possible.

There are multiple benefits of investing in Customer Retention. Invespcro.com mentions the most important:

• Acquiring a new customer is up to 25x more expensive than retaining one

• Loyal customers are 33% more likely to pay premium prices.

• Customer recommendations are more reliable than advertising channels

• If your customers are familiar with your product, you spend less on customer support

How to Measure CRR

Salesforce.com shows how you can measure your company’s Retention rate by applying this simple formula:

You have 107 customers at the start of the month. During that period, you lost 8 customers, but you gained 21 new customers. This means that at the end of the period, you had your original 107 customers plus 13 new ones, so you now have 120 customers at the end of the period.”

CRR = ((120-21)/107) X 100

CRR = 92.5%

This means that your retention rate for that period was 92.5 percent.

Available Tools and Platforms

There are many free online services that help you track churn and retention rates. Hubspot.com has the Customer Service Metrics Calculator – a free tool that documents and calculates your company’s retention rate. Give them a try and tell me how they performed!

If you would like to share any experience on this matter, please let me know. I’m here to listen.

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Ivanna Planet - 45 posts

Ivanna is a marketing specialist whose passion is traveling to exotic destinations. As a journalist in Latin America, she has reported news on business and politics.

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