Chapter 1

What is Customer Churn?

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Customer Churn: The Ultimate Guide

What is customer churn? The answer directly relates to your success at retaining customers and maintaining revenue levels. Read on to learn what you need to know about what customer churn is and how to calculate it.

Customer churn is the percentage of customers lost over a given time frame, typically a month. It is sometimes called customer attrition, customer turnover or customer defection.

Customer churn also goes by terms such as customer attrition, customer turnover and customer defection. 

It refers to the net percentage of customers you lose over the course of a month or another selected time frame.

Customer Churn Vs Customer Retention

Customer churn rate is the opposite of customer retention rate. 

Customer retention is the net percentage of customers you keep over the course of a given period. The net customers you don’t keep are equivalent to your customer churn. 

Together, the customers who are retained and those who churn add up to your total number of customers. 

In this way, customer churn rate and customer retention rate go together. The higher your retention rate, the lower your churn rate, and vice versa. Likewise, a higher churn rate means a lower retention rate.

What Causes a High Churn Rate?

A high churn rate can tarnish your enterprise’s otherwise good reputation. And it’s nearly always more expensive to acquire new customers than to retain those you have. 

When a customer leaves, not only do you lose the recurring revenue they once provided, you also lose potential upsales. 

Your team will also have to spend extra time, money, and resources finding and converting more new leads, all while still making an effort to bring valuable lost customers back.

The first step to fixing a high churn rate is to learn its causes and how to address them.

Different customers leave for different reasons. It’s not possible to predict every cause of churn, but knowing the main types helps in fighting it. 

Common Causes of Customer Churn:

Slow setup, slow TTV:
Especially in the digital age, patience can be limited. The longer it takes, and the more effort it takes, for your customers to move through the onboarding process, the greater the risk of early abandonment. Even those who do not leave right away will have a slower time-to-value (TTV). They’ll also remember that first critical experience, and it may increase their inclination to leave later on when other issues arise

Poor onboarding:
This is a crucial step that sets up the customer to succeed—and sets their expectations—by ensuring that their desired goals will be achievable with the proper configuration and use of the solution.

Lack of standardized processes and automations:
If your organization lacks a process to handle different customer segmentation situations such as tech-touch vs. high-touch, you can miss early warning signs of churn. Priority and Alerting Systems and other automations help get customers the right interaction at the right time.

Poor or negative engagement:
Negative interactions, bad experiences with products or services, and cookie-cutter engagement strategies are the quickest path to customer churn. Customer engagement and retention are inextricably linked. It only makes sense that happier customers are more likely to stay. Ensuring that their experiences with your staff and services are valuable is the key to maintaining that happiness.

Any one of these issues alone, if severe enough, could cause churn. However, it is often a combination of two or more that are to blame, and that can make remedying a high churn rate a little more complicated.

Implementing just a few best practices can go a long way towards resolving the issue for good.