It is important to assess the failure metrics in any business. However, evaluating those metrics helps businesses detect the problem that hinders the growth process. One of those metrics is customer churn or customer attrition.

What is Customer Churn?

Customer churn is the same as customer defection or customer loss. It calculates the percentage of customers your business has lost during a certain period. The churn rate is a mathematical calculation that reflects the rate of the customers who no longer purchase your product or service.

Customer defection occurs when customers break their association with certain businesses and stop purchasing from them. This can act as a roadblock for a company’s growth since the cost of acquiring a new customer is way more than retaining an existing one.

Customized retention strategies should be done to deal with high customer defection rates. Moreover, this includes complete analyses of the situation and understanding the reasons behind what provokes customers to detach their connection with a certain business.

Voluntary Churn Vs. Involuntary Churn

Voluntary churn happens when a customer switches to another company, while an involuntary churn happens when particular circumstances occur, such as death.

The analysis process doesn’t usually include involuntary factors. Instead, it is advised to involve voluntary factors in the analyses since it is connected to factors that a company, such as after-purchase services, can control.

The Importance of Customer Churn:

Calculating the churn rate is essential to keep track of your customers’ relationships. However, as said before, the cost of acquiring new customers is too high. Since additional operating costs will be added, more time will be spent trying to gain new customers.

The key point here is to know the percentage of customers who detached from your company or switched to using other products/services, indicating whether your approach to customer retention is effective or not.

Important Steps to Reduce Customer Churn:

• Follow up with your customers

Keep track of how happy your customers are about your products and services. Ask for feedback and always improve your services and the offered quality. Conduct surveys and questionnaires but be careful of asking the right questions to give you insights about how satisfied your customers are.

• Analyze and understand factors behind defections

Make sure you understand your churning customers and why they are detaching and switching to other products. Study the voluntary factors and consider when and why churn can be high in the customers’ funnel.

• Care more about your customers

It is important to show your customers that you care for them and are keen to maintain a strong relationship. This can be seen through giving incentives to loyal customers, offering discounts, etc.