Churn Analytics – Why You Should Track User Churn Rate

When to Do Churn Analysis. Why do clients leave? We all would like to know it for sure. The reasons for the outflow of users from a service or ... ChurnAnalytics–WhyYouShouldTrackUserChurnRate TableofContents WhatIsCustomerChurnRateWhentoDoChurnAnalysisBenefitsofaCustomerChurnAnalyticsHowtoProceedwithChurnAnalysisChurnAnalysisExamplesCustomerChurnAnalysis–NextSteps Whatcausescustomerretention?Weallaskourselvesthisquestion,regardlessoftheindustry.Wewillnottellyouwhytheyareabandoningyourcompany,butwewillshowyouthetoolsthatwillallowyoutoanalyzecustomerchurn.Reducingcustomerchurnisanimpactfulfactorinkeepingexistingcustomers,andattractingnewcustomersinthefuture. WhatIsCustomerChurnRate Letmestartbyexplainingthechurnmeaning.Thesimplestdefinitionsaysthisisthepercentageofexistingcustomerswhohavewithdrawnfromyourproductsorservicesinagivenperiod. It’simpossibletokeepthesamecustomersforalongtime(we’llconcentrateonthereasonslater),sochurnisnatural.However,weneedtokeepourfingeronthepulseandanalyzecustomerturnoverratetomonitortrendsanddiagnosewhencustomerchurnistoorapid. Itbringsustoanimportantquestion:whatdoeschurnmeaninbusiness? Firstofall,itisexpensive,asitmeanslostrevenue.Acquiringnewcustomersinmanyindustriesismuchmoretime-consumingthanworkingtokeepthecurrentoneswithyou.Thehighchurnturnoverratealsoshowsthatsomethinginyouroffer(productquality,service,pricingpolicy)isgrosslyoutoflinewiththecompetition. You’dlovetofindoutwhatitistodowngradechurnandkeepmorecustomers. Tryoneofthebestcustomerfeedbacksurveytoolsforfree! Starttrialperiodwithoutanycreditcardorsubscriptionandeasilygathercustomerfeedbackvialink,socialmedia,email,andmore. Createfirstsurvey Nocreditcardrequired·Cancelanytime·GDRPCompilant WhentoDoChurnAnalysis Whydoclientsleave?Weallwouldliketoknowitforsure.Thereasonsfortheoutflowofusersfromaserviceorproductcanbevarious.Herearethemostpopularkeyperformanceindicators: Subscriptionexpiration/accountclosingChangingthesupplierofaproductorserviceTerminationoftheserviceuseagreementBadfitfortheclient/poorproductadoptionMissingfunctionalities(features)RepeatingtechnicalbugsPoorcustomerserviceFailingtoachieveanoutcomebytheclientSwitchingtoacompetitorToolongshoppingpath Customerscomeandgoalmosteveryday. Thehigherthecompetitioninyourmarketis,themoreeffortittakestokeepcustomerslonger.Fromabusinesspointofview,itisusuallybettertohavemorecustomersthanfewer,right?Itiscrucialtoanalyzecustomerchurnandmeasuretheirsatisfactiontorealizetheimpactofhighbusinesschurnonyourorganization.  It’sworthaddingthatnotallchurnsarenegativebecausenoteverycustomerisagoodmatchforyourbusinessmodel. There’salsogoodchurn.Thepointisnottomaintaineachuseratallcostsbuttocultivaterelationshipsthatbringmutualbenefits.Therearealsoseasonalorone-timecustomers.  Inourindustry,customersoftenuseonlinesurveysonlyforoccasionalresearch.Theyhavenootherresearchneeds,soit’snormalforthemtoleaveaftertheirshort-termprojectisfulfilledandcomebackovertime. Dochurnanalysestounderstandyourcustomers,stopimpendingcustomerchurn,andgetthemostoftheresultstomakeyourbusinessshinelikeadiamondagainstthecompetition. BenefitsofaCustomerChurnAnalytics Beforewedigintotheanalytics,let’stakeaquicklookatthevaluethatitmaybringtothetable.Asalreadymentioned,churnisacostlybeast.Therefore,thebenefitsassociatedwithitsanalysisarestrictlyrelatedtofinances. WithCustomerChurnAnalyticsyoumay: UnderstandcustomerbehaviorMinimizerevenuelossesIncreasethecustomerlifetimevalueReducenewcustomeracquisitioncostsStrengthencustomerengagementLowersalesandmarketingexpensesMakeyourcustomerservicegreatagainIdentifytheclient’sneedsandyourweeksidesGetalowernumberofcustomerschurningIncreasepayingcustomersintime Andmuchmore. HowtoProceedwithChurnAnalysis Ok,then.Enoughtheory.Timeforpurepracticeandchurnmetrics.  Inthissection,wewilltakealookathowtodoacustomerchurnanalysisstepbystep.Themethodologyiscrucialtoproperlyselectthedataforthestudyandobtainreliableresultsthattranslateintoready-to-implementinstructionstominimizecustomerchurnrate. Let’sbeginandmeasuresomecustomerchurn! DecideWhatKindofChurnDataYouWanttoAnalyze Beforechoosingthedata,considerwhatkindofcustomerchurnyouwanttoanalyze.Thenumbersyouwillhavetosubstituteforthefollowingsimpleformulasdependonit.Takealookathowtocalculatecustomerchurn,dependingontheanalyzeddata. Subscriptionchurnanalysis Thisoneappliestosubscription-basedbusinessmodels.Wecompilethenumberofcustomerswhounsubscribedinagiventimetothetotalnumberofcustomersintheanalyzedperiod. Subscriptionchurnformula. Non-subscriptionchurnanalysis Inthecaseofsubscriptionchurn,wehaveallthenecessarydatainoursystem.Thenon-subscriptionmodelisnotthateasytomeasurechurn,butitisstillpossible. Forwebsites/onlinestores,wecantrackusers’visitsand,onthisbasis,counthowmanyofthemremainedinactive.Therefore,thenon-subscriptionchurnratewillbethequotientofinactivecustomersandthetotalnumberofusers(customers)intheanalyzedtime. Non-subscriptionchurnformula. Revenuechurnanalysis Theincreaseordecreaseinthenumberofcustomersdoesnotalwaystelluswhatthefinancialconditionofthecompanyis.NoteveryagreementbringsthesameMRR.  Thisgapisbridgedbyrevenuechurnanalysis.Thisindicatormeasuresthepercentageofrevenuelostduringtheperiodunderexamination.Itisthequotientoftheamountofrecurringrevenuelostandthetotalamountofrecurringrevenueintheanalyzedperiod. Revenuechurnformula. Youmayconductcustomerattritionanalysisonyourown,substitutingtheabove-mentioneddata,orusededicatedchurnmanagementsoftwarelikeChartMogul. IdentifyChurnReasons  Churnanalysisallowsyoutominimizeit.Ifyouwanttoknowthereasonsforspecificcustomerbehavior,takeacloselookatthecustomerjourneyandclients’touchpointswiththeorganization.Thankstothis,wewillnotonlytakecareofimprovingcustomersatisfactionbutalso–significantlyaffectthechurnrate. Let’sstartfromthebeginningofourjourneywiththeclient.Wesignedthecontract,launchedthesubscription,andlefttheuseralone.Acommonreasonforchurnispooronboarding.Ifthenewuserquicklybecomesdisaffectedwithaprogramorsystem,itmayabandonitovertime.Itiswhygoodonboardingandcustomercarefromtheverybeginningaresoimportant. Fewthingsirritatecustomers,likepoorsupportservices.Researchshowsthatmanyofthemarereadytoleaveforthecompetitionafterjustoneunpleasantexperience.Moreover,suchchurnisnotlimitedtothelossofasingleclient.Disappointed,hewillsharehisfrustrationonsocialmediaandtellhisfriendsaboutit.Therefore,it’sworthconstantlymonitoringcustomersatisfactionandensuringthatcustomerserviceisatthehighestlevel. Nothinglastsforever.Eventhebestcustomerrelationshipwillexpire,andnewcustomerswillreplacethecurrentones.Theendofthecooperation,regardlessofthereasons,isagreatopportunitytogetfeedbacktoanalyzechurn.Withananonymousonlinesurveyoracandidcustomerconversation,youcanlearnaboutexperiencesandinsightsthatwillhelpyouimproveyourofferandbuildbettercustomerrelationshipsinthefuture. Protip:Askclientstounderstandtheirpointofview.Don’twaituntilit’stoolate.Weall,ascustomers,wanttofeelthatsomeoneislisteningtoourneeds.Keepyourclientssatisfied,andtheywillnotsolikelybebrowsingforyourcompetition. It’sgoodtocontrolthelevelofloyalty&satisfactionofcustomers. FindOutWhenIsOccurring Justonemorepit-stopbeforewe’lltakeacloselookatthechurnanalysisexamples.Aswealreadymentionedwhilediscussingthecustomerjourney,it’snecessarytounderstandwhenchurnoccurs. Analyzeyourpurchasingpathtofindoutweakpoints.Whatpartoftheprocessyourcustomersdon’tlikeandwhy?Doyouobserveahighearly-stagechurn?Isthereanythingyoucandotomakeitmoreuser-friendly?Onemorething.Whilefindingoutthetimeandreasonsforthechurn,trytoanalyzetheclient’smotivation.Isitvoluntaryactivechurn(peopledoitwhentheyornotsatisfiedwithyourserviceorperformance)orinvoluntarypassivechurn? Foreachscenario,prepareanactionplan(e.g.,createalertsforcustomerscanceling),suitedforyourindustryandcompany,andstartanalyzingcustomerchurnrightawaytohelpyourrevenuestreamgrow. ChurnAnalysisExamples Churnanalysiscanbemeaningfulinalmostanyeconomicactivity,fromSaaScompaniestosmallones.Whetheryourbusinessisforanarrowgroupofhigh-endcustomersoryouhavemanybuyers/users,youcertainlywanttoknowwhyyoulosecustomerstothecompetition. Herearesomeexamplesofanalyzingchurnforcompaniesrepresentingvariousindustries. Telecomunicationsector Monitorthenumberofyourcustomers.Trytofindoutnotonlyiftheychooseadifferenttelecomprovider,butwhytheydoit. Retail&e-commerce Churnanalysisinretailande-commerceisahelpfultooltofigureoutwhenshoppersleaveyourstoreandwhatmadethemdoso. Bankingindustry Inthecaseofbanking,itisimportanttoidentifyat-riskcustomers,i.e.,thosewhointendtocloseanaccountandopenonewithcompetitors.Churnpredictioncanalsobehelpfulintrackingcustomerswhoareabouttoexpire,e.g.forapolicyorotherbankingproducts. Entertainment Weprobablyallusepopularonlinemusicormoviestreamingplatforms.Churnanalysisallowsthesecompaniestomeasurecustomerattritionrateandtakestepswhentheoutflowofsubscribersexceedstheadoptedstandardsorhistoricaldata. Privatehealthcare Theprivatehealthcareindustryoperatessimilarlytotheentertainmentone.Wepayformembershipandaccesstospecialists.Churnanalysismeasuresthevalueofpatientslosttootherprovidersorthosewhohavestoppedpayingpremiumsfordifferentreasons. Whateveryoudo,keepinmindcustomerengagementandlistentotheirvoicestogatheractionableinsights.They’llrewardyouwithoneword.Loyalty. Soundsmuchbetterthanlosingcustomers,right? Usesurveysoftwaretomeasurecustomersatisfactionandfilterthoseunhappy. CustomerChurnAnalysis–NextSteps Wealreadyknowwhatarethetypesofchurn,whyitisworthmeasuringchurnrates,andhowtostarttheprocess.What’snext?Cooperationtoreducecustomerchurn.  Furtherstepsrequirestrongcollaborationbetweenseveraldepartmentstoperformchurnanalysis.Theorganizationmustspeakwithonevoiceoncustomersatisfactionandworktogethertominimizecustomerchurnrates. Collectthedatacollectedduringchurnanalysisandinviterepresentativesofthemarketingandsalessupportdepartmenttobrainstorm.Workonacoherentstrategyandonecleargoaltominimizecustomerretention.WithprofessionalsurveysoftwaresuchasStartquestion,youmayprovidereports,data,analytics,andotherhelpfultoolstoreducechurn. Goodluck! Readytotrackuserchurnrate? Tryonlinesurveystogatherpricelessfeedback! DariuszJarońDariuszisacontentwriter&non-fictionbooksauthorwithyearsofexperienceinB2Bwriting,journalism,andtranslating.He’salong-distancerunnerandmountainhiker.Whenhe’snotwritingorrunning,he’stryingtolearnItalian. Doyoulikethisarticle?Shareittoyourfriends! Latestposts All CreatingaQRCodeSurvey–EasyGuide Collectingfeedbackshouldbequick,intuitiveandconvenientfortherespondent.Italsorequiresappropriatetiming.Alltheseconditionsaremetby... All 8BestSurveyEmailSubjectLinesTipsThatGetaResponse Youcancreatethebestsurvey,butifyouemailittorespondents,thereisariskthatyourmessagewillgetlostinthemazeofothernotifications... All Double-BarreledQuestionsExamples–LearnHowtoAvoidThem! Double-barreledquestionsmaydiscouragenotonlyrespondentsbutalsodistortthesurveyresults.Badlyaskedquestionscandestroyeventhebestque... Research HowtoWriteGenderQuestionsforaSurvey Genderandsexualorientationareintimatemattersforeachofus.However,injustifiedcases,suchdemographicquestionsareapartofstudiesando... 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