What Is Customer Churn Rate, and How Do You Avoid It?

what is customer churn rate and how do you avoid it

Businesses are obsessed with numbers like customer churn rate. They have to be. Performance numbers directly reflect the state of any particular business.

Important numbers about material costs, inventory, logistics and production rates are all used to measure current company conditions. Hidden in among all the numbers, graphs, and charts is the most significant number of all, customer numbers.

A company’s customer database is its most treasured and doted upon statistic. It receives such special interest with good reason. It is the key number to any company’s viability

This number singularly drives all the other company numbers and efforts. Arguably, the most important customer number is a number called the churn rate.

Another general term for it is customer turnover rate or customer attrition rate.

Let’s talk about churn rate and some strategies to keep yours favorable.

Churn Rate Defined

churn rate defined

The simplest definition of churn rate is the number of customers who leave the company and the number who become new customers. This number is calculated on whatever span of time the company chooses.

The formula for this calculation is simple. Count the number of customers who have left for the specified period. Divide that number by the number of customers the company had at the start of the period.

In round numbers for illustration purposes, it would look like this: 100 customers at the start of the measured period; 10 customers lost by the end of the measured period; 10 divided by 100 equals 10% churn rate.

Acceptable rates vary by industry and company structure, but generally, churn rates below 10% are considered to be within the good range. This means that companies with churn rates below 10% should remain financially viable.

The converse of that statement is that companies must retain 90% of their customer base year-to-year to remain profitable. However that is not cast in stone, and many companies do survive with much lower churn rates. Again, it depends on the kind of business and the company’s place within that market.

How to Avoid It

You don’t. Churn rates are embedded as a part of doing business. How does that classic doctor/patient exchange go? Doc, it hurts when I do that. Doctor to patient: then, don’t do that. Not very sound medical advice, is it? Similarly it is not sound business advice. You must have a metric in place, some way to measure functionality or you don’t know where your business stands.

This figure, the customer retention rate, more than any other, tells you where you stand or how successful you are, in relation to other businesses.

Avoiding the calculation does not magically make everything okay. Since avoidance is not an option, the next best way to deal with it is to manage it. Keep it within the less than 10% range.

There are ways to do this. Check them out below to make sure you are keeping your churn rate where it needs to be within your industry.

Overall Strategy

Unleash the hounds. Do everything within your power that is moral, legal and ethical to maintain a viable churn rate. That is the goal. The strategies below will help you reach the goal.

Call Centers Actually Save You Money

Hire A Call Center

If you employ the strategies you are about to read, you will need the extra help to service your new influx of customers. Your professional call center can be put to good use as you implement these churn reduction measures

Do not make the big mistake of increasing your customer base without the personnel on hand to manage the increased workload.

Have a small business answering service in place first. Not doing so invites chaos. You may end up with a damaged reputation if your new customers do not get the service they came to you looking for. In fact, you could actually end up damaging your current churn rate if these new customers leave as quickly as they come in.

Attract New Customers

Meet with your advertising and marketing departments. Put the onus on them. Require them to reach x number of new potential customers within the next 30 days and every 30 days after that.

Use every form of advertising available and within budget. Get the word out. Monitor and track these efforts closely. Demand results.

Have your marketing department work closely with your advertising department. Direct them to come up with creative, interactive incentives to become customers.

Big hint, the public loves the word, FREE. Construct free trial offers and other incentives that will lead to purchases. Your newly hired call center is an invaluable asset in this effort.

Retain Old Customers

Simultaneously with your outreach to new customers, conduct established customer contacts. Use direct email, texting, social media, live advertising-you know, the guys with the placards, balloons, and megaphones.

Begin by organizing a concerted effort to let your customers know how much you appreciate them. Give them free gifts for upgrading what they already receive or have bought from you.

Offer them reduced rates for every new customer who signs up or buys on their recommendation. Solicit testimonials and use them in your outreach efforts. Then get those phones ringing and put that service to work for you.

Work these customer increase strategies equally at both ends, your established customers and the new ones you are trying to attract.

The key to customer retention is to remember that your first obligation is to those who have already placed their confidence in you and your business.

Add to and/or Increase Product Offerings

Consider adding new products or other services to your existing menu. Look for complementary products that fit nicely with your offerings. Generate excitement and enthusiasm about your particular brand.

Diversify, but do so within your niche. Reaching too far afield can confuse the public and damage the brand value you have already built up.

Sponsor Community Events

Put together fun, community events and make sure your company is seen as the sponsor or co-sponsor. Let people know you exist, you are in their communities, and you take interest in their lives.

Not to be redundant, but that call center… They can give your company that added professional image of prompt response and service with every strategy I have mentioned.

Conclusion

The aim is not to avoid customer churn. No one can please everyone all the time. Do not put that impossible standard on yourself or your company. Let the professionals at www.ansafone.com help your company keep churn limited.

They will work diligently to keep your customer churn within manageable limits. Aim for less than 10% churn for every reporting period. Reward everyone within the company every time the company achieves this milestone.

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