Customer Churn: How to Measure and Reduce It?

Upshot.ai
7 min readJul 6, 2022

Regardless of what industry you’re in or what kinds of products and services you sell, your customer is the most important part of your business. Customers hold the power to direct your business either toward success or failure.

If customers aren’t happy, they won’t stay with your brand. And, customers today have an easy path to walk away from brands they love and are not afraid to do so. One remotely bad experience and customers don’t hesitate to say “see you never!” to a business. Companies today face the challenge of not only convincing customers to choose them in the first place but also retaining their existing customers once they get them.

According to Forbes, it is easier and more cost-effective (up to five times more) to keep a customer than acquire a new one. This alone shows why tracking and managing customer churn is so important. Churn is a good indicator of growth potential as it tells you how many existing customers are leaving your business, so lowering churn has a big positive impact on your revenue streams.

At Upshot.ai, we are no strangers to the customer churn battlefield.

Using Upshot.ai’s platform, our team has developed (and continues developing) weapons and tactics to help businesses reduce customer churn to a minimum.

And so, in this article, we are sharing a bit of our knowledge to help you understand customer churn in-depth and suggest strategies to reduce customers from leaving your business.

What is Customer Churn?

Customer churn, also known as customer attrition, is when a customer stops purchasing your business’s products or services during a certain period of time. It is the end of the relationship between a customer and your company.

Churn rate is a critical metric of customer satisfaction. Low churn rates mean happy customers; high churn rates mean a large percentage of your customers no longer want to purchase your products or services for various reasons, which can be a sign that your business is lacking in certain departments.

Why is it important to predict customer churn?

Customer churn prediction involves ways in which customers that are likely to stop using certain products and services of a company are predicted based on how they use the products or services.

Predicting churn is a good way to create proactive engagement or marketing campaigns targeted at customers that are about to churn. Not to forget, the ability to predict that a customer is at high risk of churning while there is still time to do something about it represents a huge additional potential revenue source for every business.

As a result, understanding what keeps customers engaged is extremely valuable, as it can help you to develop your retention strategies, and to roll out operational practices aimed at keeping customers from walking out the door.

How do you measure customer churn rate?

In reality, every business will lose customers, and it’s important to track, measure, and analyze these losses closely.

Customer Churn Rate is simply calculated by dividing the number of customers you lose during a certain time period by the number of customers you had at the beginning of that time period and then multiplying to find the percentage.

Customer Churn Rate = No. of customers lost/ Total no. of customers X 100

For example, say you had 200 customers at the start of the quarter and by the end of the quarter, you have 150. That means you lost 50 customers during that time period, so you’ll divide 50 by 200, and your customer churn rate will be 25%.

Your business would experience perfect customer retention with a 0% churn rate in an ideal world. However, a customer churn rate of 0% is very hard to achieve, as losing customers is inevitable for any business.

What makes a good churn rate varies across different business types. SaaS companies with small or midsize businesses can aim for a monthly churn of 3 to 5%. The size of a company can also affect churn averages, with larger companies tending to see 15–30% lower churn.

It’s a good idea to look at your industry’s average churn rate so you can see how your rate compares. If your customer churn rate is close to the industry average, that means you’re doing something right.

How to reduce customer churn?

Even the most successful of businesses will experience customer churn from time to time. Hence, carefully identifying customer issues will give you a better idea of what you need to fix to ensure a long-term relationship with your customers.

So what steps can you take to begin actively reducing your customer churn rate and act before the customers leave?

#1. Engage your customers with proactive communication

The best way to improve communication with your customers is to check up on them; how they are using the product and how you can help them. An in-app message or push notification could be a useful way of showing them how to find what they’re after. You can provide content to inform them about the functional benefits of using the products or news updates like announcements, special offers, or updates on new products/services.

Alternatively, you could send a reminder email, pointing out all the helpful features they haven’t used yet or if they’ve been inactive for a certain amount of time.

Proactive communication can help create a better customer experience by providing them with an immediate solution. You can reach out to initiate communication with customers who are at risk of leaving and ultimately reduce customer churn.

#2. Avoid feature blindness

Your product may have several features, with customers only using one or two of them. This doesn’t necessarily mean trouble. But it can help to show users how they can build habits around other features that can be useful to them. Your customers will appreciate you showing them how they can get extra value out of your service, as they’ll feel like they’re getting more for their money.

#3. Identify at-risk customers

Keep an eye on customer activity to try and identify those who are at risk of churning: Has a customer been in touch to complain? Is their usage declining? Where are customers stalling in the product lifecycle? Was there a problem with the onboarding process, are they using your service less and less, or are there parts of your product that are going unused? Zoom in on where issues are coming up, and offer to resolve them as quickly as you can.

How customer insights can drive engagement

Keeping an eye on changes in customer behavior can also help you predict if any customer is likely to leave the company in the future.

Upshot.ai’s powerful customer engagement and analytics tools enable you to get an in-depth overview of your customer accounts and identify early indications of risk.

#4. Ask to know what makes your customers happy

Net Promoter Score (NPS) is an important metric for many businesses. It helps to measure customer satisfaction. Use surveys to gather valuable customer feedback on what your customers like about your product, as well as what they don’t. Listen to what they have to say. What are they having trouble with? And respond to as much feedback as you can — positive and negative — as soon as you can. Responding and acting on customers’ feedback is the fastest way to ensure that they are satisfied with their experience and also to prevent them from churning.

#5. Segment customer feedback

No two customers are the same. Each will have his/her own unique set of challenges and preferred approaches for overcoming them. And they can sniff out a copied-and-pasted answer from a mile away. Just one of these missteps could be enough to encourage customers to churn. So segment your customers based on the challenges they tell you about and how they use your product. Show them you’re paying attention.

#6. Appreciate and show gratitude to your customers

Why should your customers stick with you? You can’t just expect them to stay around because you’re doing a good job. Reward them for their loyalty and show them how much they mean to you. Making a customer feel appreciated and special is a simple way to stop them from leaving. Offering exclusive content, rewards, discounts, badges, etc., are solid ways to remind customers of their importance.

#7. Improve your customer service

This shouldn’t come as a surprise. Poor customer service is the top-most reason why customers leave a company.

Humans prefer interacting with other humans, and blending channels of assistance is an effective way to serve all your customers. So make your customer service exceptional and memorable. This may help you discover problems you were unaware of before. When you do, act on them promptly. Swift and stellar customer service often ensures loyalty and creates brand advocates.

Final Thoughts

Your customers are the reason your business exists- so you need to put them first and ensure their needs are adequately met by what you offer. Preventing customer churn and promoting customer retention is an important part of the health of a business. So ensure you’re always proving to customers how much you value their loyalty. Whether you use one or all of our suggestions for reducing churn, listen to what your customers have to say. Focusing on customer retention and engagement ultimately increases your company’s profits and creates devoted users who engage with your brand loyally.

The Upshot.ai Advantage

If you need help with customer retention and managing your relationships with your current customers, consider using Upshot.ai.

Upshot.ai is an omnichannel, customer engagement, and gamification platform. It offers product teams a powerful behavioral analytics platform that automatically captures everything that users are doing in your product. You can look at multiple metrics, iterate on them over time, and run experiments to improve different parts of your business.

Armed with this information, you can make intelligent product decisions, create effective campaigns across the customer journey and build strong relationships with your customers.

Interested in a demo of the Upshot.ai platform? We’d love to chat with you!

Follow @upshot_ai

Originally published at https://www.upshot.ai

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Upshot.ai

Upshot.ai is an omnichannel, customer engagement and gamification platform that helps businesses to create amazing experiences to deepen customer relationships.