Customer churn is a measure of the number of people who stop using a company’s services or products. It is usually expressed as a percentage or a monetary amount. Customer churn is natural in any business, but the acceptable level of churn varies from industry to industry.
In marketing, this metric is known as churn rate (CR). It’s especially important for companies that operate on a subscription basis, meaning that monthly payments for using a product or service make up a significant portion of their revenue. It’s most often measured monthly, quarterly, and annually.
The higher the churn rate, the more a company needs to focus on customer loyalty measures. For example, you can personalize customer interactions, regularly collect feedback, and improve the product or service. CRM systems are a key tool in this strategy, as they store a complete history of customer interactions, allow you to analyze their behavior, and predict the possibility of churn before it happens.
How to calculate customer churn rate
Let’s consider the difference in approaches to calculating churn rate.
The first approach is based on comparing the total number of users at the beginning and end of the period.
C1 — number of customers at the beginning of the period;
C2 — number of customers at the end of the period.
Let’s imagine that at the beginning of the month you had 1,000 customers, and at the end of the month there were 800. We calculate CR using the formula:
CR = ((1000 − 800) / 1000) × 100% = 20%
A positive customer churn rate indicates that you have lost 20% of your customer base in a month.
Another formula for calculating customer churn rate:
C1 — number of customers at the beginning of the period;
C2 — number of customers at the end of the period;
C3 — the number of new users per period.
Now let’s add a new metric to the first bulgaria phone number list example. Let’s say we managed to attract 500 people in a month. What would be the customer churn value?
CR = ((1000 + 500 − 800) / 1000) × 100% = 70%
A positive churn rate indicates a fluctuating customer base
Why businesses lose customers: the most common reasons for customer churn
Understanding the reasons for customer what is customer churn? churn is a fundamental step towards solving the problem and reducing this indicator. The NetHunt team has collected five main reasons for customer loss.
You don’t understand your target audience well enough
Even if you’ve been working with clients for a long time, that doesn’t mean you know what they want. A proven way to understand your target audience europe email is to conduct market research, analyze your existing customer base, and create a perfect buyer persona. You’ll identify key needs and tailor your lead generation efforts accordingly.
The value of your product is not obvious
If you don’t provide proper support to customers who are new to your product, they won’t learn how to use all of its features. Your audience will likely stop interacting with you because they won’t see the benefits.
Bad user experience
If the product works perfectly and without interruptions, customers will stay with you. Conversely, if the product has many bugs and is difficult to use, a significant customer churn rate is guaranteed.
You are lagging behind your competitors
Another reason customers lose customers is because your competitors are better than you. You may have an unbeatable product or service, but if your customers decide that your competitors are better at meeting their needs, they will stop doing business with you.
Observe your competitors, identify their weaknesses, and find ways to stand out. For example, check their pricing policies. Understand how your competitors package their offerings and find a way to offer a better deal.
Also, identify competitive advantages. Perhaps the products or services are good value for money, or the business offers excellent customer support.
Support is not working well
Insufficient or slow work of support managers is annoying. If a customer cannot get a quick and high-quality solution to their problems, they will turn to competitors with better service.
In general, an excessive churn rate will create a significant burden on the business and, if not addressed, will lead to deteriorating financial performance and ultimately even the sale or closure of the business.
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Customer churn in the B2B sector: features and reasons
In the B2B sector (where one business provides services to another), the reasons for customer churn are often related to longer and more complex interactions between companies. Here, a long-term partnership built on trust and providing real value plays an important role. Reasons why businesses refuse to cooperate with suppliers or partners:
Mismatch of product with business needs
In the B2B sector, companies have specific requirements and needs. It is important that the product or service meets the real business goals of the client. Failure to adapt to the unique needs of the client often leads to the loss of cooperation.
Lack of after-sales support
Customers need significant after-sales support—training, technical assistance, and regular updates. If a company doesn’t provide this, customers will find a partner with better service.
Opaque or unclear pricing policies
Transparency and predictability of costs are important for business customers. If they notice hidden costs, unclear fees, or unstable pricing, it can cause distrust in the company and cause churn.
Low level of innovation
B2B customers usually look for partners who adapt to new technologies and market changes.
