Churn Rate: What It Is and How to Improve It For Your Business


If you keep on wondering why you’re losing a lot of customers every month, then you have to calculate your churn rate and find ways to lessen it. Churn rate is the percentage of customers who leave your business over a given period. If you have a high churn rate, then you’re losing money every month by not having repeat buyers. Not only that, but it costs more to acquire new customers than it does to keep existing ones. Your business’ churn rate is one of the most important metrics that you need to pay attention to.

What is the Ideal Churn Rate for a Business?

There is no one-size-fits-all answer to this question, as it depends on the type of business and the industry. However, some general guidelines apply to most businesses. According to the American Customer Satisfaction Index (ACSI), companies’ average customer retention rate is about 70%. That means that only 30% of customers leave your company within the first year.

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What Is Your Churn Rate?

Now that you know what churn rate is and how it can affect your business, it’s time to find out your churn rate. There are a number of ways for churn rate computation and you can find the information you need in your customer database or CRM. The most common method is to take the number of customers you had at the beginning of the period and subtract the number of customers you had at the end of the period. Then, you divide that number by the total number of customers you had at the beginning. The churn rate optimization formula looks like this:

Churn Rate = (Number of Customers at Start of Period – Number of Customers at End of Period) / Number of Customers at Start of Period.

For example, if you had 100 customers at the beginning of the month and five of them churned, your churn rate would be five percent.

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How Can You Improve Your Churn Rate?

Churn rate optimization (CRO) is an important part of any marketing strategy. It helps you understand which parts of your customer acquisition funnel are working well and which ones aren’t.

There are a number of reasons why customers may churn, such as poor customer service, high prices, or simply not being satisfied with the product or service. You need to find out first why your customers are leaving in the first place. Are they unhappy with the product or service? Do they feel like they’re not getting value for their money? Once you know the reasons why they’re churning, you can start taking steps to fix the problem.

Here are a few ways you can improve your churn rate:

1. Provide value

Price is a common argument raised by both salesman and customer engagement managers. Customers may churn if they find a better cost-effective solution to the problem they wish to solve. This is why it is critical to establish value and provide client onboarding and education so that customers believe the purchase is worthwhile.

2. Improve customer service

If a customer’s experience connecting with other aspects of your brand — your marketing content, social media channels, customer support team, and account managers — isn’t positive, they may be likely to churn. Customers like to feel welcomed and appreciated by the communities they support, so if they don’t enjoy doing business with you, they won’t want to stay.

3. Offer discounts or incentives

Offering incentives to clients who were predicted to defect, like discounts and special offers, is another smart move. The best strategy for preventing churn is generally considered to be offering incentives and discount offers.

But! Make sure you have thoroughly considered if it would be advantageous for you to provide an incentive. Therefore, you must ensure that the benefits from the clients you want to keep surpass the costs of your retention campaign.

The bottom line is that you shouldn’t waste money on clients that are unlikely to generate significant revenue for you.

4. Get feedback

The larger portion of the issue may be concealed from view, as complaints are like the tips of icebergs. Did you know that 96% of dissatisfied clients don’t complain, and 91% of them just go and never return?

Are you also aware that it just takes one bad encounter for 32% of customers to discontinue using a brand they previously adored? According to Strauss & Seidel, unsatisfied customers who have their complaints addressed are more likely to remain loyal and even become advocates than other ordinary consumers. As a result, you should take complaints seriously and take action on them to reduce customer churn.

5. Make use of social media

While you are not required to give help via social media, you can communicate with your clients and answer inquiries via social media. If your response is too long or too personal to post on social media, give them your email address and promise to follow up as soon as possible.

6. Improve your website experience

During the sign-up process, a consumer will have their first touch with your product or service. As a result, this phase must be kept as simple as feasible. Make it a goal to streamline your onboarding process if it is confusing or overwhelming.

If you don’t, potential consumers may abandon the sign-up process and/or go to another SaaS provider entirely. Consider including a visible progress indicator so they can see how far they’ve come.

7. Strengthen your brand identity

People sign up to work with you for a reason: to get what they want. They will leave your goods if it cannot assist them in achieving their intended result. The consumer may need a specific feature that is missing from your product, or they may have had trouble connecting your product with other goods or systems they use.

Their inability to attain their intended outcome with your product does not always imply that it has a flaw or is a terrible product. It’s possible that your brand and the customer were not a good fit. That is why it is critical to sell to the correct customers. It will be advantageous for you to market to the appropriate target right away. Determine your desired audience and devote time and money to reaching out to them.

This may seem obvious, but it bears repeating: Do not engage in unethical business practices. Always keep your promises. Ensure that your product(s) or service(s) is at or above the level depicted in your advertisement. Customer retention is dependent on customer happiness.

8. Offer high-quality products and solutions

As mentioned above, providing outstanding customer service and products is a terrific strategy to reduce churn. When working on resolving an issue or answering a question, your support representatives should be authorized to solve for the consumer. This could imply spending money to make things right with a consumer, and having quality products means you’ll have less complaints and less lower ratings on your end!

Many of the big firms you think of, such as Zappos or Amazon , are huge because they have always prioritized customer service and high-quality products.

But it’s not just about customer service. Your site should have the best features as well, best images, best animation, best design, best optimization practices, etc. As we all know, if you optimize your website well, you’ll have less negative feedback! One of the best ways to do so is to optimize your images by removing the backgrounds. Do these and reduce client churn.

9. Offer multiple options

By going above and above for your devoted consumers, you can significantly lower your churn rate. Send them a personalized email to express your gratitude, or offer them special discounts or incentives. You might also get in touch with dissatisfied clients and present incentives.

10. Be fair

Rewards like discounts or free upgrades might encourage customers to renew their contracts by making them feel appreciated. Additionally, it may inspire them to recommend you to others. Giving your consumers a reward doesn’t have to be expensive. A brief note written by hand would do.

Some other things you can do to reduce churn include offering discounts or loyalty programs for existing customers, providing excellent customer service, and making it easy for customers to cancel their subscriptions or membership.

By taking these steps, you can start to improve your churn rate and keep more of your customers happy and loyal.

5 Case Studies of Companies Improving Their Churn Rate

There are a number of companies that have successfully reduced their churn rate and improved their business. Here are five case studies of businesses that have done just that:

Airbnb increased its churn rate by 24 percent after introducing a new customer service initiative called “Superhost.” Superhost is a designation given to hosts who provide an exceptional experience and go above and beyond for their guests. This program helped improve customer satisfaction and reduce churn.

Amazon has been successful in reducing churn by offering incentives to customers who stay with the company. For example, they offer discounts to Prime members who renew their subscription. They also make it easy for customers to cancel their membership if they’re not satisfied.

Dropbox was able to reduce churn by 20 percent after introducing a new feature called “Packages.” This feature allowed customers to group their files into different folders, making it easier to organize and find what they need.

HubSpot was able to improve customer satisfaction and reduce churn by implementing a number of changes to their pricing structure. They also created a loyalty program for existing customers and offered discounts for those who stayed with the company.

Zendesk was able to improve customer satisfaction and reduce churn by offering 24/seven customer support. They also implemented a number of changes to their pricing structure and made it easier for customers to cancel their subscription if they were not satisfied.

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The most you can do is minimize customer churn to a low because it is unavoidable. Fortunately, you have a lot of options for increasing customer retention and lowering churn.

The majority of them are covered in this post. You now have to put this into action. Of course, in order to see results, you must be patient with the procedure.

By taking these steps, these companies were able to improve their churn rate and keep more of their customers happy.

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Author's Bio

miguel davao

Miguel Davao, Removal.AI

Miguel Davao is a graduate of literature and linguistics and has been writing content for about 5 years now. He particularly writes content on eCommerce, design, photo-editing tools, and content writing tips.

Currently, he works as a full-time writer at Removal.AI – a fast-growing start-up that offers image processing and AI background remover, web, and app development, and marketing automation.

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