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How to Calculate and Reduce Your Customer Churn Rate

How to Calculate and Reduce Your Customer Churn Rate

By Jyothi Tulasi

January 10, 2024   •   Fact checked by Dumb Little Man

how to reduce customer churn rate

Regardless of what business you are in and by whatever name you call it – attrition, defection, or anything – customer churn is real. Every business has to deal with loss of customers and lose some revenue. Understanding what causes this customer churn is important. When a client or customer chooses to stop doing business with your company or stop using your brand products or services, it is called customer churn.

Customer churn depends on the type and nature of business or company. Some of the various ways it can be called in parlance include:

  • Cancellation of product or service subscription
  • Closure of customer account
  • Non-renewal of service agreement or contract
  • Cancellation of user agreement
  • Switching to a competitor program or offering

How to Measure Customer Churn Rate

Customer churn rate can be measured in these following ways.

  • Total number of customers lost in a specific period of time
  • Total percentage of customers lost in a specific period
  • Percentage of recurring business value lost
  • Business value lost

It is also necessary to note here that churn is inevitable. No matter how amazing your service is or useful your products or how great your marketing strategy is, you will have to face customers who want to leave. But this doesn’t mean you can’t prevent churn. Maintaining a good churn rate is possible and that is what is recommended.

Customer Churn Rates as per Industry basis

  • American card companies churn around 20 percent per annum
  • 5-7 percent customer churn rates are reported for software-as-a-service companies

While some customer churn rates are great for one business, they are terrible for another.

3 Ways to Reduce Customer Churn

Customer Onboarding

how to reduce customer churn rate thru customer onboarding

Customers will look for better options if they do not understand the product too well. Any questions in the initial introduction can blow them away. The most important being the customer’s first experience and when that is good, they will want to continue with the business. A clear onboarding process is necessary to better a customer experience and reduce customer churn. The onboarding is the most important step in the process. Customers think of leaving only when they are unsatisfied from the beginning.

Meet Customers’ Expectations

Promising a lot of things to a customer and failing to deliver is one of the quickest ways to lose one. Close to 35 percent of customers stop doing businesses after a single negative experience. Unmet expectations and dissatisfaction are big reasons for customer churn. Consistently meeting customer expectations is important. Being honest to your customer about what they can expect is necessary.

Listening to what customers have to say about the product is also crucial. If they have any suggestions or improvements, finding out the same from customers is just as essential. 16 percent of customers post on social media when they face a negative interaction with a brand. And close to 60 percent of customers are heavily influenced by social media comments on brands and companies.

Provide Awesome Customer Service

how to reduce customer churn rate thru customer service

A survey by Zendesk revealed that 42 percent of respondents found that they had a major frustration with customer service departments. Customer service is one of the major reasons why customer churn happens. Listening carefully to customers' feedback is one of the best ways to retain customers.

When customers voice their complaints, listen to their exact problems, and find solutions. Even loyal customers can defect if the service is bad and they are being taken for granted. No one likes it when we must wait on a customer desk call for more than 20 minutes to clarify a simple doubt. Sometimes, customers face technical issues which can be sorted through an awesome customer service.

Bottom Line: Maximise Profits by Reducing Churn

A lot of businesses fail because customers are not happy with the customer service. If a customer threatens to close business, then it means the product needs to be explored to the full potential. A call with the customer success manager can make it simpler to resolve issues. Great customer success education should be the beginning of the customer journey.

From customer onboarding, it is important to maintain a great rapport with them. Through the right customer engagement tactics, customers can understand how the product fits into their success strategy.

Jyothi Tulasi

Jyothi Tulasi is tech-savvy and proficient in technical SEO optimization for various SaaS products working @SmartKarrot Inc. She has profound expertise in outreach. She loves connecting to people and singing in her free time.

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