As a small business owner, your loyal customers are by far your most important asset. Every loyal customer that you can secure for your business is a guaranteed source of revenue and profit, one that should be nurtured for life. This is where customer churn comes in.
Customer churn is an increasingly popular sales analysis metric that gives your business the cold, hard truth about customer retention and can help inform the decisions you need to make to keep your customers coming back. If you are new to this essential sales term and are not sure why it matters to you, read on to find out everything you need to know about customer churn rate.
- What is Customer Churn?
So, what is customer churn? Essentially, it is the number of customers that are “dropping out” and choosing to no longer use your product or service. Customer churn is a fact of life, and even the very best business cannot expect to keep 100% of their customers on-board forever. However, understanding customer churn rates is essential to reducing them and learning how it affects your profits.
For example, let’s say you put in a strategy to reduce customer churn by 5%, which means that over a period of, say, 6 months, you wish to lose 5% fewer customers than you lost in the previous six months. As this growth calculator shows, a reduction in customer churn of 5% can translate to increased profits of as much as 25% over the period. This is why customer churn matters.
- Why Does It Matter?
While we have already established why customer churn analysis can help you improve profitability, it is worth going into why it matters in more detail. Using a customer churn prediction system will help you identify not just how many customers you are losing, but why you are losing them. Customers will typically drop-off for a reason.
High churn rates might coincide with a product launch or a marketing campaign that did not work as well as you wanted it to. It may be cyclical, implying that customers are more likely to leave at a certain point in the calendar year. Having this information can help you tailor your strategy to keep those customers on–board.
- How to Reduce Customer Churn
If you are wondering how to reduce customer churn, there are plenty of easy ways to go about it. These include:
Approach Customers Most Likely to Churn
With customer churn analysis, you will be able to quickly identify which customers are most likely to leave. This will allow you to put in place pre-emptive measures to stop them from leaving and persuade them to stay on-board.
Redirect Resources to Loyal Customers
This approach is two-fold; as well as keeping unsure customers on-board, you should also use your churn metrics to redirect resources such as freebies and offers to your most loyal customers, as you know these resources will not go to waste.
Factor Churn Into Your Marketing Spend
By knowing who you need to target to keep on-board, you can ensure that every single penny of your marketing budget is used in the most efficient way possible. This will make your operation leaner and more effective.
Essential Growth Hacks for Your Business
Now that you know the essential basics of customer churn, it is time to learn more about the simple growth hacks that can help your small business thrive in 2021. For this, we have got you covered. Simply consult our insider Business guides to learn more about how to hack your way to growth in the year ahead.
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