What Your Customer Churn Data Can Show You About Your Business? 

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Are you wondering why your business is losing customers? Have you overhauled your product line or your marketing or sales team in a bid to retain customers but still have seen no success?

Let’s face it, it hurts when a customer chooses to cut their relationship with your business. But, while customer churn can sting momentarily, it’s often an indication of something that needs to be fixed or improved within your company. 

You know that you can’t keep 100 percent of your customers, but you should be able to retain some of them: They are the key to success after all. 

So, why are you not able to retain customers? What’s wrong?

This is where a churn analysis comes in. A churn analysis can help you determine why you are losing customers. But before we get into the aspects of a churn analysis, let’s focus on what customer churn is and how it can benefit you. 

What Is Customer Churn? 

To put it simply, churn is the percentage of customers lost over a specific period of time—usually a year. It is calculated by dividing the number of customers lost by the number of customers you had at the beginning of a period of time. 

Let’s put it into a formula:

        Churn = customers at beginning of time period t – customers at end of time period t

Customers at beginning of time period t

Let’s consider an example. A magazine has 40,000 subscribers whose subscriptions are set to expire in July. Let’s say the magazine convinces 26,000 of those customers to renew their subscriptions. By using the formula of churn, we can say that the churn rate for the magazine was 35%. 

Why Is It Important to Analyze Customer Churn? 

Churn also affects businesses everywhere, and its rates vary by sector. According to a Harvard Business School report, mobile phone carriers in Europe have churn rates between 20 to 38 percent, and credit card companies in the U.S. have annual churn rates of 20%. 

Similarly, a study in Asia showed that six countries in the region anticipated mobile phone churn rates of 24%, which represented 169 million customers who were predicted to switch to other carriers within eighteen months.  

Furthermore, according to Invesp, it is five times as costly to attract a new customer than to retain an existing one.  

Businesses often spend 12 to 15 percent of their one-year revenue trying to acquire new customers. So, when all those hard-won customers break ties with the business for whatever reason, the ensuing panic is nothing short of debilitating. 

And what makes this worse is that even putting in extra resources—undercutting your growth budget—still shows nothing but losses.

A churn analysis is a lifesaver at these moments, as not only does it help you identify the reasons behind the churn, but it also reduces the time, cost, and effort that goes into customer retention. 

So, by conducting a customer churn analysis, you: 

  • Become able to analyze when a customer is going to walk away. 
  • Take effective measures to prevent churn from occurring. 
  • Understand that churn comes in many forms, such as canceling subscriptions to switching SaaS service providers to leaving for competition.    

What Does It Show About Your Business?

Most businesses face regular customer churn challenges and are often trying to develop strategies and programs, such as revised marketing communication programs, improved product offerings, better pricing, and more effective customer targeting, that will minimize it. 

This is where a churn analysis comes handy, as it allows you become aware of:

1. The Reasons Behind High Rates of Churn 

A churn analysis provides you with operational (reduced spending and declining repeat purchases) and experience insights (what the customer felt about the product/service), which can help you understand why customers left your company. They also allow us to find the right approach to fix all issues. 

2. Areas of Improvement 

Customers usually purchase products from a company because they think they are either getting a good deal, believe that the company is the best they can get, or are genuinely interested in the product/service. 

However, over time, user expectations can change, and they start to expect updates in the product/service they have been using. A churn analysis helps you become aware of the lifecycle of your service/products and take effective measures to meet customer expectations.

3. Market Competition 

As mentioned before, customers care about receiving the best product/service they can. So, despite your company doing the best it can to meet customer expectations, sometimes customers switch over to your competitors because they feel that the other company can fulfill their needs in a better way. 

A churn analysis is a massive help during these times. It can help you stay in the loop with your customer’s expectations, which can help you improve your product/service and stand out from your competitors. 

4. Customer Transactional Experiences 

Nobody likes it when a payment doesn’t go through, a server gives an error just when you’re going through with the payment, or when your invoice generator produces an inaccurate bill.

However, oftentimes, businesses aren’t aware of these problems, which is why a churn analysis can be so helpful. It allows you to determine where transactional problems occurred and how you can fix them so new customers aren’t deterred from buying your product/service. 

5. Customer Experience Measurements 

It is inevitable that during the customer journey, customers are going to need something. For example, they may need help to understand something or navigate a product feature. Sometimes, these requests slip through, and the customer becomes disgruntled; however, you can avert these problems by conducting a churn analysis. 

A churn analysis can help you identify the touchpoints you need to focus on in order to ensure customers don’t decide to walk away from your business. A few touchpoints are customer service speed and customer satisfaction. 

6. Prominent Customer Segments 

Your customer base can be composed of different types of users with different motivations. Some customers may have chosen your product/service because of its pricing tiers, others for your product/service offerings, and still others for your customer support facilities. This means that all these customers have different patterns of behavior, which makes it difficult to identify why they left in the first place.

A customer churn analysis helps you identify customer segments in your customer base, such as industry representation and product feature usage, which in turn allows you to predict how your customers will behave in the future.   

Remote Tools You Can Use to Conduct a Customer Churn Analysis

An accurate churn analysis is paramount when you’re trying to decrease your customer churn rate—and manually collecting and crunching data to find answers is not the way to go. 

There are many tools on the market that can help you track your churn rates and whether your efforts are making any improvement. Some of these remote tools include: 

  1. TrifactaTrifacta’s wrangling tool offers faster time-to-value, an easy-to-use interface, precise churn analytics, deeper data exploration, and much more. You can gain major insights from even minor customer interactions!
  2. Pabbly – By using Pabbly, you can find out total and new subscriptions, refunds, payment analytics, and keep track of customer matrices that influence customer churn. 
  3. Woopra – Woopra’s subscription analytics software that can help you understand customer activities, track payments with ease, analyze customer retention reports, and increase customer lifetime value. 
  4. Databox – By using Databox, you can assess what services are purchased by your customers, how customers interact with your business, and identify KPIs that influence customer churn rate. But the best thing about this tool is that it’s free!

The Verdict

Customer churn is something that affects all businesses; it is not something that can be avoided. In fact, according to CallMiner, avoidable customer churn is costing U.S. businesses $136 billion per year. 

This is why it is doubly important for businesses to learn how they can reduce churn rates in the future because churn is expensive in time (time invested to attract and retain customers), resources (manpower used to service customers), and money (capital invested on customer service programs).

A churn analysis can help you find areas of improvement, understand market competitors, and gain insights that can help you retain customers and reduce customer churn rates, allowing you to fast track the growth of your business.