2023-07-14 11:55:13
Do you know how many customers you lose each year? And every month? Customer churn is the number of customers you are losing in a predetermined period of time. Abandonment rate is a scary metric and also incredibly important.
If you don’t know how many customers are turning away from your business, then you won’t know how it’s affecting your revenue, and you won’t be able to create improvement plans to reduce churn.
Calculating and remedying customer churn is difficult, so here’s everything you need to know about churn.
What is the customer churn rate?
Customer churn rate is the percentage of your customers or subscribers who cancel or don’t renew their subscriptions during a given period of time, such as a month or a year.
Abandonment rate is a critically important metric for businesses whose customers pay on a recurring basis, such as SaaS or other subscription-based businesses. Regardless of your monthly income, if your typical customer doesn’t stick around long enough for you to recoup your average customer acquisition cost (CAC), you’re in trouble.
Using a CRM can help you determine the abandonment rate of your customers. The software you sell may also have a built-in subscriber count that shows you how many users you had at the beginning of a period of time and how many users you had at the end.
How to Calculate Abandonment Rate
The dropout rate formula is:
(Lost Customers ÷ Total Customers at the beginning of the time period) x 100
To calculate your churn rate, you need to know the number of customers you had at the start of a given time period, such as monthly or yearly, and the number of customers you lost during that time period.
Divide the number of customers lost by the total number of customers you had at the beginning of the time period. Then multiply this number by 100 to get your abandon rate as a percentage.
For example, if your business had 250 customers at the beginning of the month and lost 10 customers at the end, you would divide 10 by 250. The answer is 0.04. You then multiply 0.04 by 100, resulting in a 4% monthly churn rate.
Now that you’ve figured out what your churn rate is, you’re probably wondering what to do next, especially if your churn rate is high.
Steps to follow after calculating the abandonment rate
Is your abandonment rate high? There are several strategies you could implement to decrease it. If you don’t actively work to reduce the churn rate, your company could suffer in the long run.
Analyze turnover to improve your customer service team
Despite your best efforts, customer churn will happen, and when it does, use it as an opportunity to dig deeper into what led the customer to leave and what you can do to prevent a similar customer from leaving for the same reason.
One crucial step is to track your churn and retention rates. You can do it with a customer service metrics calculator; is a free tool to calculate and document your retention rate over time that you will find on the Internet.
You can use churn instances to dig deeper into individual customer service manager or representative performance, analyze your product or service against the competition, or identify customer experience challenges you want to remedy with the help of your product and customer teams. development.
Renew your onboarding plan for new clients
You can work to prevent customer churn from the moment someone becomes a customer by creating a robust new onboarding process. Use a new customer welcome email and offer personalized online customer onboarding. You can also create educational content on your blog, social media, and video channels to educate customers and show them how to get the most value from your product or service.
Invest in more training for sales and support reps
Sales reps need to sell the true value of your product or service so customers don’t feel ripped off. Additionally, customer service employees must be well-equipped to handle any issues that arise to ensure customer satisfaction. Investing in processes and resources for these two departments can have a drastic impact on the abandonment rate.
Ask for feedback at key moments and respond promptly
Make sure to consistently ask for customer feedback at key moments in the customer experience. If you’ve already identified that customers are likely to churn if they don’t log into your tool every 15 days, ask for feedback around day 10 and try to re-engage them.
If they reach a milestone with your product or service, ask for feedback after that point. Find out the key moments that make or break a happy customer and solicit feedback at those touchpoints to strengthen the relationship.
Sometimes customer feedback comes in the form of negative feedback, in which case you’ll need to respond quickly and appropriately.
Communicate proactively with customers
Build rapport with your customers by proactively communicating with them so they see you as a trusted partner. Reach out regularly with content that you think they’ll find interesting or useful, connect and engage with them on social media, and reach out to them if there are issues or outages on the product side so they know they can trust you.
Offer exclusive benefits to existing customers
To avoid further churn, you can offer perks to your existing customers. While you could institute a rewards program, it’s best suited for retail businesses. Instead, you can opt for personalized touch points from time to time, such as a personal visit to your office.
If your business is small, you can also ask the CEO to contact existing customers personally to find out how they’re doing. This is also a great opportunity for feedback. A busy customer may not respond to a survey, but if the CEO asks if he has any feedback, the customer is more likely to respond.
Leverage Free Trial Customer Feedback
Churn doesn’t happen until you lose revenue after a customer leaves your business. But if someone doesn’t buy your product after a free trial, that can count as abandonment, metaphorically speaking.
Conduct a survey among those who did not buy your product after a free trial. A customer who has already left the business is not likely to answer many questions about your product or why it didn’t work for them. Someone who took a free trial and ultimately didn’t finish making a purchase will expect a survey. He’s had little interaction with your business, so he’s more likely to be candid.
Use this feedback to improve your product and learn what makes customers “churn” even before they become paying subscribers.
Combine these tips with customer retention strategies to reduce your churn rate.
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