Customer Churn: How to Measure and Prevent It - Qualtrics

Customer churn is measured using customer churn rate. That's the number of people who stopped being customers during a set period of time, such as a year, a ... Skiptomaincontent Login Support Back English/US Deutsch English/AU&NZ English/UK Français Español/Europa Español/AméricaLatina 繁體中文 Italiano 日本語 한국어 Nederlands Português ไทย Products CUSTOMERXM Decreasechurn.Increasecustomerlifetimevalue.Reducecosttoserve. Overview WatchDemo Products ContactCenter OmnichannelAnalytics NPS DigitalCX SocialConnect SurveySoftware PopularUseCases SocialListening DigitalCustomerService SalesandRetentionIntelligence QualityManagement VoiceoftheCustomer AccountManagement XM+SeehowGMFinancialimprovesbusinessoperationsandpowerscustomerexperienceswithXMforthecontactcenter.Watchnow EMPLOYEEXM Attractandretaintalent.Increaseengagement.Improveproductivity. 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eBook:HandbookofQuestionDesign CaseStudy:Microsoft CXProfessional Back CXProfessional Overview PopularSolutions DigitalCX CustomerCare LocationBased AccountManagement FoundationalCX EducationalResources QualtricsMasterSessions:CustomerExperience eBook:16WaystoCaptureandCapitalizeonCustomerInsights CaseStudy:BMW Report:TheTotalEconomicImpactofQualtricsCustomerXM HumanResources Back HumanResources Overview PopularSolutions EmployeeEngagement TrainingSurveys EmployeePulseSurveys OnboardingFeedback EducationalResources Webinar:HowHRcanHelpEmployeesBlazeTheirOwnTrail CaseStudy:Volkswagen eBook:TheHRLeader'sSuccessKit Digital Back Digital Overview PopularSolutions WebsiteAppFeedbackSurveys OnlineReputationManagement DigitalCustomerExperience AdobeAnalyticsIntegration EducationalResources Webinar:CXinaDigitalAge eBook:RisingtotheTopWithdigitalCustomerExperience eBook:HumanizingDigitalExperience Article:WhatisDigitalCustomerExperienceManagement&HowtoImproveIt ProductManagement Back 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Back WhatisXM? Overview CustomerExperience EmployeeExperience ProductExperience BrandExperience MarketResearch Industry Events Back Events Overview X4Summit XMInnovationEvent XM+ Resources Back Resources Overview XMInstitute Blog OriginalResearch CaseStudies Templates eBooks Support Back Support Overview Community XMBasecamp ProductRoadmap Integrations TrainingandCertification XMMarketplace Login Support Back English/US Deutsch English/AU&NZ English/UK Français Español/Europa Español/AméricaLatina 繁體中文 Italiano 日本語 한국어 Nederlands Português ไทย WatchDemo ExperienceManagement CustomerExperience EmployeeExperience ProductExperience BrandExperience MarketResearch Industry ExperienceManagement CustomerExperienceCustomerChurn SeehowCustomerXMworks WatchOnDemandDemo Customerchurn:Howtomeasure&preventit 17minread It’seasiertokeepanexistingcustomerthantogainanewone.It’salsomucheasiertosaveacustomerbeforetheyleavethantoconvincethemtocomeback.Forthesereasonsandmore,understandingandpreventingcustomerchurniscriticaltoyourlong-termsuccess. Nobodylikeslosingcustomers.Customerchurnisarealproblemacrossindustries,andtheaveragechurnratecanbesurprisinglyhigh.Forgeneralretailers,it’s25%asof2020–andforonline,it’s21%,accordingtoStatista.Otherindustriesfareaboutthesame,meaningbusinessesfromallindustrieshavetroubleholdingontoexistingcustomers. Notonlythat,butcustomerchurncanbeexpensive.Customeracquisitioncosts(CAC)fornewcustomersareoftensignificantlygreaterthanthecostofretaininganexistingcustomerbase. Sohowdoyouknowifyou’reabouttolosecustomers?Andhowdoyoutakeactionbeforeit’stoolate? Thegoodnewsisthatthere’salotyoucandotokeepthem,evenwhenthey’relessengagedthantheyoncewere. Inthispost,we’lldiscusshowtomeasureindicatorsofcustomerchurn,howtousethatdatatopredictthelikelihoodofithappening,andhowtopreventat-riskcustomersfromchurningbeforeit’stoolate. CustomerExperienceStudy:UnderstandingtheROIofCustomerExperience Whatiscustomerchurn? Customerchurn,alsoknownascustomerattrition,iswhensomeonechoosestostopusingyourproductsorservices.Ineffect,it’swhenacustomerceasestobeacustomer. Customerchurnismeasuredusingcustomerchurnrate.That’sthenumberofpeoplewhostoppedbeingcustomersduringasetperiodoftime,suchasayear,amonth,orafinancialquarter. Understandingcustomerchurnrate Here’sanexampleofacustomerchurnrate: BusinessXhaslost200B2Ccustomersoveramonthlyperiod.Ithad4,000customersatthebeginningofthemonthandendedwith3,800. Usingtheformula(LostCustomers÷TotalCustomersatStartofChosenTimePeriod)x100=ChurnRate,wecanseethatBusinessX’smonthlychurnrateis5%. Byexpressingcustomerchurnwithametriclikethis,youcanturnitintolike-for-likedatathathelpyoumeasureprogressovertime.Youcanalsoexpressyourchurnrateintermsofdollarvalueifitmakessensetodoso. Whendefiningchurn,it’simportanttobeclearaboutwhenyouconsidersomebodytohavechurned.Somesalescyclesarelongerthanothers.Forexample,insomeindustries,suchasopticaleyewearorhomefurnishings,it’stypicalforcustomerstogoforlongperiodswithoutpurchasingbecauseofthenatureoftheproduct,notbecausethey’reunder-engagedoratriskofchurn. Foreachproductandserviceyouprovide,fityourchurndefinitiontoyourtypicalsalescycle,otherwise,youmayendupmakingreactivationeffortswithcustomersprematurely. Whydoescustomerchurnmatter? Somecustomerchurnisinevitable.It’snotrealistictothinkthat100%ofthecustomerswhoboughtfromyouonday1ofyourbusinesswillstillbewithyouseveralyearsdowntheline.Butwhenyourcustomerchurnrateisveryhigh,orifit’sshowingatrendofgettinghigherovertime,you’llwanttotakeaction. Generallyspeaking,customerchurnisbadnewsforacoupleofreasons. Dissatisfiedcustomersnegativelyimpactyourbrand Achurnedcustomermaywellbeanunhappycustomer.Beyondthelossoftheirspending,youcouldbeonthereceivingendofnegativeword-of-mouth,badreviews,andadetrimenttoyouroverallbrandvalue.Forthesereasonsalone,itmakessensetoreachouttocustomersindangerofchurningtotryandrepairtheserelationships. Customerchurncostsyoumore It’softensaidthatkeepinganexistingcustomercostslessanddeliversmorevaluethanacquiringanewone.Statsandfiguresonthisvary,andsometaketheviewthatcustomerlifetimevaluemattersmorethanasinglecostdimensionlikeacquisitionorretention. Butwhicheverperspectiveyoulookfrom,itgenerallymakesmoresensetomaintainanexistingrelationshipratherthanwritingitoffandstartingagainfromscratch.Largenumbersofexistingcustomersleavingaffectyourbottomline–meaningaddressingyourcustomerchurnrateisvital. Customerchurncanimpactfuturegrowth Yourchurnratecanbeastrongindicatorforfuturepotentialgrowth–orthelackofit.Ifyou’reconsideringbringingnewproductsandservicestothemarket,thebestaudienceislikelytobeyourexistingcustomerswhoalreadyknowyourbrand.Ifyourcustomerlifetimevalueispoor,however,yournewventuremightsuffer.Ahighcustomerchurnrateworksagainstfuturegrowth–meaningyouneedtotakestepstoreducecustomerchurnforyourfuturesuccess. Causesofcustomerchurn Therearemanyreasonswhyyourcustomerchurnrateishigh,andnarrowingthemdownwillinvolvecustomerchurnanalysisandmeasurement. However,afewcommondriversofhighcustomerchurnratesare: 1.Yourserviceisn’tuptoscratch Ahighlevelofcustomerchurncanbeanindicatorofpoorservice,meaningyouneedtodosomeevaluationofyourfrontlineteams.Goodcustomerserviceshouldn’tbereservedfornewcustomers–yourexistingcustomersdeservegreatservicetoo. 2.Yourproductfitormarketfitmightbelacking Ahighcustomerchurnratemightbeanindicationofabadproductfit.Yourexistingcustomerscouldbefindingbettersolutionselsewhere,orperhapsyou’retargetingthewrongaudience. Ensuringyourproductsareaimedattherightaudienceanddevelopedcorrectlycanhelp.Youshouldalsoconsiderifyou’remissingkeyfeaturesthatyourexistingcustomershavegrowntoneed. 3.Youdon’tunderstandyourtargetaudiencewellenough Thoughyoumighthavehadyourcurrentcustomerbaseforalongtime,thatdoesn’tmeanyoualwaysknowwhattheywant.Asmentioned,yourcustomersmightbelookingfornewfeaturesthatyou’resimplynotproviding–andthatmightbeanewneedthatyou’renotawareof.Theonlywaytounderstandyourtargetaudiencewellenoughistotrackcustomerfeedbackandengagewithyourcustomerbasetoknowwhatthey’relookingforovertime. 4.Yourpricingisn’tright Yourcustomersmighthavebeenwillingtopayacertainamountwhentheyfirststartedusingyourproductsorservices,butthatmightnotbethecasenow.Asthemarketchangesandcompetitorschallengeyouroffering,yourcustomersmightdecidethatyourpriceisn’tright–andtheymightleaveasaresult. 5.Yourcompetitionoffersbetterservicesorproducts Evenifyourpricingiscompetitive,yourcompetitionmightsimplybemoreintouchwithyourtargetcustomerbase.Tryingtoretaincustomersmightmeanevaluatingwhatyou’reofferingtheminthecontextofyourcompetition–notjustatthebeginning,butthroughouttheircustomerjourneyandyourbusinesstrajectory. Afocusonproductiterationandnewconceptsis,therefore,crucial,asyoucanbegintoprovidefeaturesandfunctionsthatyourcustomerswant—andyourcompetitorslack. 6.Yourmarketisseasonal Seasonalmarketscanhaveasignificanteffectonwhetheryourcustomerchurnrateishigh.Forexample,aHalloweenstoreislikelytoseeahugeinfluxofnewcustomersinthemonthscominguptotheholiday,withahighchurnrateafter.Ifthisisthecase,evaluatingyourchurnrateinthecontextofamoresensibletimeperiod–suchasyearly,ratherthanmonthly–mightmakemoresense. Youcanthenstarttocounteractchurnbyexpandingyourproduct/servicelineoraddingtoyourexistingofferingtomakeitmoreapplicableoutofseason. 7.Yourrenewaloffersaren’ttempting Alargepartofreducingcustomerchurncanbegivingcustomerstherightofferattherighttime.Whenthetimecomestorenewaproductorservice,yourcustomersmightsimplybedecidingthatyourrenewaloffersaren’ttemptingenoughwhenfacedwithotherofferselsewhere. CustomerExperienceStudy:UnderstandingtheROIofCustomerExperience Customerchurnanalysisandmeasurement Witheachcustomerwhochurns,thereareusuallyearlyindicatorsthatcouldhavebeenuncoveredwithchurnanalysis.Thereareseveralavenuestoconsiderwhenitcomestodata,andvariousmethodsofanalysistochoosefrom. Operationalandexperienceinsights Lookingatbothoperationalinsights(e.g.decliningrepeatpurchases,reducedpurchaseamounts,andcustomerserviceticketanswerrate),aswellasexperienceinsightsalongthecustomerjourney,isfoundationaltopredictingchurn.Forexample,acustomerwhohasdeclinedinrecentvisitsandgivesaNetPromoterScoreof7aftertheirlatestshoppingexperience,couldhaveanincreasedprobabilityofchurning. Relationalfeedback Tostartunderstandingthecustomer’sjourneyandtheexperiencestheyhavesetuprelationalfeedbackrequeststhathelpyouassessanddiagnosekeydriversofcustomersatisfaction. Transactionalexperiencemeasurement Onceyou’vegatheredrelationalfeedback,youcanmoveintomeasuringtransactionalexperiences,suchasapurchaseorpost-supportfollow-up,soyoucangetabettersenseofwhereyouhavedetractorsandbuildoutaplantofollowupwiththem. Keyexperiencemeasurementthroughoutthecustomerjourney Youcanmapoutthefullcustomerjourneyandmeasurethekeyexperiencesacrossthem,fromthemomentthereisaneed(e.g.topurchaseanitem,togethelp,tofileaclaim)tothemomentitisfulfilled. Touchpointsneedtobehandledcorrectlytoensurecustomersdon’tdecidetolookelsewhere–makesureyoucanresolveissuesatspeedandservicingcustomersthewaytheyprefer. TheQualtricsCustomerExperienceplatformcanhelpyounotonlymeasurethesecriticalexperiencetouchpoints butanalyzeandsurfacekeyinsights,suchaslikelihoodtochurn,soyoucantakeactionanddriveoutcomesforyourbusiness. Competitionanalysis Yourplantoreducecustomerchurnshouldincludeexaminingyourpositionagainstyourcompetitors.Thatcanincludelookingattheir: Pricing Thecurrentinnovationandnewproductofferings Brandexposure Shareofvoice Customerengagement Producteaseofuse Upgradeandrenewaloffers Salestactics Customersupportfacilities Customersegmentanalysis Understandingyourcustomersegmentsmoredeeplycanhelpyoutopredictbehaviorandseepatternsofcustomerchurn.Here,it’ssensibletodoyourresearchonyourcustomerbase,notonlyastheystandnowbutwhotheymightbeinthefuture.Youmightwanttoconsiderhowcustomerchurnchangesbasedon: Industriestheyoccupy Customerlongevity Pricingtiers Productfeatureusage Howtopredictcustomerchurn Onceyou’vebuiltoutaholisticviewofyourcustomer’sexperiencehistorywithyourbrand,youneedtocombineitwithoperationaldata,suchasrepeatvisitsorcreditcardusage,toidentifykeydriversofchurnandbeginmakingpredictions. Therearefourkeyelementsofchurnpredictionandprevention: Understandthedriversofcustomerchurn Automaticallyidentifyat-riskcustomers Definethresholdsfortakingactionbasedonthelikelihoodofchurn Easilycreateticketsandtakeimmediateactionforclosed-loopfollow-up Akeywayofcustomerchurnpredictionistocreateamodel.Thishelpsyoutobuildpatternsbyviewingoperationaldata,likereturnvisitsandcreditcardusage,andcombinethosewithexperiencedata,likesatisfactionorlikelihoodtorecommend.Thismodelcanhelpyoutopredicttheprobabilityofchurnforeachcustomer. Therearetoolstomakethisprocesssimpler.Forexample,usingdeeplearningandneuralnetworks,QualtricsPredictiQcombinesexperiencedataandoperationaldatatohelpyoupredictindividualcustomerbehavior,andtakeactionbeforeitistoolate. Howtoreducecustomerchurnandretainexistingcustomers Reducingcustomerchurnisn’tjustaboutsavingat-riskcustomerrelationshipsfromthepointofnoreturn,althoughthat’sanimportantpartofthepicture.Reducingtheconditionsforchurnissomethingyoucandoateverystageofthecustomerlifecycle,throughinitiativeslike: ImprovingCX Agreatcustomerexperienceisoneofthebestinvestmentsyoucanmakeincustomeracquisitionaswellasretention.GreatCXmakescustomersfeelgoodaboutdoingbusinesswithyou,whetherthey’rebrandneworreturningforthe50thtime. Educatingyourcustomer Partofprovidinggoodserviceisgivingcustomerstheinformationandsupporttheyneedtogetthemostoutofyourproductsandservices.Thatmightmeanofferinghow-toguidesandexplainersonyourwebsite,givingpromptanswersthroughaliveagentorchatbotfeature,orbeingactiveonsocialmediawhencustomersshareopinionsandaskquestions. Rewardingloyalty Loyaltyprogramsanddiscountsgiveyourcustomersanincentivetokeepcomingbacktoyouagainandagain.Theyalsohelpgiveyouanedgeoveryourcompetitors Recognizingyourbestcustomers Dollarfordollar,somecustomersoffermorethanothersacrossthelifetimeofthebusinessrelationship.RecognizingandappreciatingyourMVPs(mostvaluableplayers)willhelpyoumakesurethatthey’renottheoneswhoendupchurning. Closingtheloopandreducingcustomerattrition Onceyou’vepredictedwhetheracustomerisatriskofchurning,closingtheloopwiththoseat-riskcustomersisthecriticalnextstep.PredictiQcanhelpyoucreatealertsandticketsforcustomersinvariousstatesofunhappinesswithyourproductsorservices. Forexample,youcansetatargetthatrequiresallticketsforcustomerswithan80%likelihoodtochurntoberesolvedwithin24hours.Ifyougetalowscoreonanexperiencesurveyandthechurnthresholdistriggeredforaspecificcustomer,Qualtricsautomaticallygeneratesaticketrequiringspecificattentionandimmediateresolution. WithQualtricsandtheaction-planningmodule,youcangobeyondcontinuouslyreactingtocustomerpain,takinginsightsfromtheclosed-loopprocesstodrivesystem-wideimprovementsthatavoidcustomerissuesaltogether.Employeescancollaboratewithothers,tagowners,setdeadlines,andevensupplystep-by-stepguidance. DrivemorevaluefromyourCXprogramtoloweryourcustomerchurnrate Reducingcustomerchurndirectlyimpactsyourcompany’sbottomline,withincreasedrevenueandreducedacquisitioncosts. Wanttolearnmoreabouthowtoincreasecustomerloyaltyandboostcustomerretention?Readourguideonthereturnofinvestmentoncustomerexperience,builtthroughtheconsultationofnearly18,000consumersaroundtheworld.Itwillhelpyoutounderstand: howconsumerexperiencesimpact3loyaltymetrics–trust,advocacy,andlikelihoodtopurchasemore howbadexperiencescansignificantlyraisecustomerchurn howtoimprovecustomerloyaltybyinvestinginthemostimpactfulcustomerexperiences ReadourROIofCXguideforbettercustomerretention AdditionalRelatedResources WhatisCustomerLoyalty? HowtoMeasureCustomerLoyalty TipsforCustomerLoyaltyIncentivePrograms CustomerRetentionPrograms CustomerRetentionSurveys WhatisCustomerLifetimeValue(CLV)andHowtoMeasureIt FindouthowQualtricsPredictiQcanhelpyoureducecustomerchurn RequestDemo Relatedresources CustomerChurn&Retention CustomerRetentionSurveys 6minread CustomerChurn&Retention WhatIsCustomerLifetimeValue 10minread CustomerChurn&Retention CalculateCLV 13minread CustomerChurn&Retention CustomerRetention 21minread SEEMORE CustomerChurn&Retention IncentivePrograms 15minread CustomerChurn&Retention CustomerLoyalty 18minread RequestDemo FirstName* Pleaseenteryourfirstname. LastName* Pleaseenteryourlastname. Company* Pleaseenteryourcompanyname. JobTitle* Pleaseenteryourjobtitle. BusinessEmail* Pleaseenteravalidbusinessemailaddress. Oops!Thatlookslikeapersonalemailaddress.Enteryourbusinessemail. Oops!Thatlookslikeapersonalemailaddress.Enteryourbusinessemail. 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