What Does Churn Rate Mean?

A business’s churn rate, which is given in percentages, shows how fast it is losing customers or clients over a certain amount of time. When a customer leaves your business, it could mean they close their account, stop their subscription, shop at another store, or decide not to renew their contract with your business.

How Do You Figure Out the Churn Rate?

You can do the math once you know what losing customers means for your business. It’s better to use the churn rate measure for SaaS businesses, but it can also be used for eCommerce and changed to fit your needs. But it would help if you knew what an “active” customer means to you and when a customer has stopped being active.

The easiest way to figure out the loss rate is to:

(number of churns in a specific time frame): (number of customers at the start of the time) x 100 = churn rate

• As an example: Five people left: 100 new customers times 100 = 5% churn rate.

How High Should the Churn Rate Be?

Every business has a different idea of what a reasonable loss rate is. In the case of a SaaS business, Baremetrics says that a monthly churn rate of 3–5% is good. When your business is more niche, this percentage should be smaller.

Britebill found 2018 that customer turnover rates in the telecoms industry are very high, ranging from 14% to 75% per month. Customers in this business tend to switch suppliers more often, which is a unique situation that only happens sometimes in other fields.

Interestingly, recurring research finds that the customer goods industry has a loss rate of 9.62% per year, while the IoT industry has a lower rate of 5.88%. These average churn rates tell us that we should compare ourselves to leaders in our business instead of leaders in other industries. We can use this to make companies intelligent and ready for the future.

Why Is the Churn Rate Significant?

The churn rate can be one of the critical measures showing how your business is growing. For a business to grow significantly, its purchase rate must be higher than its churn rate.

If a company’s churn rate changes quickly, it can tell how customers feel about new prices, goods, competitors, and policies. This needs constant tracking to keep customers from leaving. Maintaining a current customer is by far the most cost-effective thing to do. This has been shown over and over again. A strong and all-around churn prevention plan will help you ensure that all your efforts are directed at keeping customers and getting new ones.

How to Drop the Rate of Churn?

Getting the loss rate down is a process, not a single action. It will depend on how your business describes “active” and “inactive” customers and what problems you can figure out that cause people to leave and bring back customers. When trying to lower the churn rate for eCommerce companies, the following strategies seem to work best:

• Make your selling skills better. When you look into why your customers are leaving, you will find that there isn’t just one thing to blame. Most of the time, a bunch of different things can add up over time. By constantly promoting to current customers and using the proper merchandising techniques, you can significantly lower the number of customers who leave. This is because you’ll be able to reassure your customers that they are using the best products and getting the best deals.
  
• Use technology for marketing. If a customer interacted with your brand and gave you their email address, it means they liked your goods, brand promise, or style. It would help if you kept building on this competitive advantage. One of the best tools you can use to show off the benefits of your goods, make people want them, and keep them coming back to your store is marketing automation. Welcome emails, onboarding emails, and efforts to get customers to buy again can work well if they try to get the customer interested instead of trying to sell them something hard. It would help if you also used trigger-based email strategies to send emails when a customer leaves an item in their shopping cart or adds it to their wish list.
  
• Learn to love your business. Having a strong brand is essential for keeping customers. To keep your customers from going elsewhere, use stories, marketing messages, and prize programs to build a strong relationship with them.
  
• Give your customers the help they need. It can be risky not to keep an eye on your loss rate. It only takes one bad experience for a person to leave, so why take the chance? An easy and effective way to keep customers from going is to offer excellent customer service 24 hours a day, seven days a week, through an online chat tool, the phone, or email. Helping people on time and to a good standard will not only help you keep their business, but it will also show you problems and ways to make your sales process better.