Keep your Churn Rate Low

Churn Rate is an annualized percentage at which a business having recurring customer base (customers hooked onto a plan offered by the business such as subscriptions etc.) loses its customer base. For example, a churn of 5% means that the business loses 5% of its customer base during a year.

So why it is important? This is going to happen in any business and we can always get new customers.

This thinking is wrong and can prove expensive for the business. We focus so much on customer acquisition that customer retention tends to get ignored. It is a proven statistic in any business that acquiring a customer is much more expensive than retaining your existing customers. Hence it becomes important to focus on customer churn. Rather than spending all of our marketing budgets in acquiring new customers, we should look at spending a significant amount on retaining the existing ones. A business cannot get onto a sustainable high growth trajectory merely on the basis on new customers.

How do we reduce churn?

To retain customers, we need to look at customer experience and feedback. Customers will keep coming to you if you build trust first and can subsequently offer a service which is equal to/better than your competitors. Focus on how users interact with your product, what they like, what they dislike, and use these metrics to keep enhancing their experience over time.