What do butter and your customers have in common? Both of them churn. Too much of one increases your cholesterol level and the other could kill your business. Easy to guess which is which.
What is a churn rate?
Put simply, customer churn defines the number of customers who leave your business in a given period. It shows you how well your company is doing in retaining current customers and maximizing their revenue opportunities.
How do you calculate churn rate?
Take the number of customers that churned divided by the total number of customers at the beginning of the period measured. And voila, you have your churn rate (calculated in a percentage format).
Why is churn rate Important?
When you talk to most marketers, they'll tell you that it takes a lot to acquire a new customer. Which is exactly why our hearts break if and when we find out all our hard work went to waste.
Try this stat on for size: It’s 5-25X more expensive to acquire a new customer than it is to retain an existing customer. And if that’s not enough, a tiny 5% increase in customer retention can potentially increase revenue by 25-95%. Soooooo yeah. It’s time to listen up.
Here are five spectacular ways to reduce your churn rate:
Finally, it’s important to understand that certain churn isn’t always a bad thing. Sometimes as your business grows, you realize a certain vertical or customer size isn’t always the most profitable or make the most sense for you and/or your customers. As contradictory as it may sound, this can be a positive vs a negative and potentially free your employees up to shift focus on more desirable outcomes.
Losing customers is the perfect way to cause another kind of churn. The one that happens in your stomach.
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